Spirits in South Africa

PROSPECTS

Competition to intensify between local and international manufacturers

Craft spirits are expected to gain momentum (albeit from a low base) during the forecast period, as local manufacturers expand their portfolios to attract a smaller niche. The trend will boost opportunities in categories like tequila, with microdistilleries benefiting from expansion of the local agave industry.

Other blended Scotch whisky to remain the leading category in spirits

Despite a gradual shift to categories like single malt Scotch whisky, other blended Scotch whisky is expected to remain the dominant type of product in whiskies in South Africa. This is thanks to the equity of mainstream brands like J&B, as well as extended distribution channels enjoyed by leading players like Diageo.

Premiumisation to drive demand from millennials

With millennials increasingly being exposed to international trends, manufacturers are expected to restructure their portfolios in response to demand for lifestyle products. Hence, mainstream categories like cane and other distilled beverages might go out of fashion, whereas variants like cognac will continue to gain momentum.

COMPETITIVE LANDSCAPE

Brandy re-emerges after years of stagnation

Brandy posted remarkable growth in 2017, after the stagnation recorded over the past five years. This performance was partly attributed to the combined effects of economic constraints and the brand depreciation witnessed during the first quarter of the year, with imported whiskies becoming increasingly expensive, whereas locally produced brandy continued to offer better value for money.

Diageo maintains leadership in 2017

Diageo South Africa continued to dominate spirits, despite intensified competition. The company was mostly challenged in vodka, with Smirnoff 1818, which saw its cost leadership driving sales during the economic contraction in 2016, steadily suffering from consumers’ interest in more premium ranges during the review period.

Craft gin boosts awareness in mainstream products

Gin recorded the strongest performance in 2017, as product innovation in craft variants triggered attention in the category. Newly introduced products were often positioned as premium, with flora and botanical ranges gaining shelf space.

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