The gin bubble
Gin sales are booming – and so are distillery openings, but some suppliers are warning the market is close to saturation.
“The rate of increase must slow,” says James Clark of Ely gin in Cambridgeshire. “The industry will start to enter a period of consolidation next year – many smaller players will cease production or be bought out.”
Bob Fowkes, marketing director and founder of Brockmans gin, says he is already seeing the number of distilleries drop in bigger gin markets, such as Spain. He says: “In the short term the demand for new craft-distilled gins and new tastes will expand, but in the longer term there will be a reduction in the number on offer. Those brands that build a successful consumer connection will remain.”
Karl Mason, founder of Masons Yorkshire gin, says: “A bit of a bubble is being created and all bubbles must burst. We might find there are some mergers and some people start diversifying – it is not sustainable for people to open a distillery to make one product then make a big living from it, unless the market grows considerably.
“But the top three brands have about 80% of the market, so there is a lot of market that can be taken off them.”
Jacob Ehrenkrona, chief executive of the Reformed Spirits Company, which makes Martin Miller’s gin, says: “Entrepreneurs opening new distilleries seem to overestimate the reliance on consumers looking for products that are locally produced. I believe the quality of the content and the flavour profile are the most important factors to gain consumer loyalty.
“I find it hard to believe that we will continue to experience distilleries opening up at the same rate as now, given the saturation of gin offerings already available. It is very hard to come up with something innovative that consumers are missing in the current gin landscape.”
Michael Vachon, head of brand development at Bathtub gin firm Maverick Drinks, sees a good future for local distilleries.
“You’re going to see increasing fragmentation where there are plenty of great local gins, and what people don’t realise is that you can make a successful business of being the best-selling gin in your local area,” he says.
“Retailers can benefit from having a mix of products, including local and regional spirits, premium craft spirits, and mainstream brands.”
Phil Smith, sales director for Liverpool Distillery, is positive for at least the coming year. “Gin is enjoying a well-earned renaissance and we have by no means reached a tipping point. I expect further brand launches in 2015,” he says, adding: “The bandwagon jumpers will very quickly fall by the wayside.”
“We’re optimistic long term but there’ll inevitably be some casualties as the market levels out,” says Pinkster director Will Holt. “Opening a distillery is a major capital outlay and small-batch brands, ourselves included, need to innovate to survive. Having a decent product is just one part of the jigsaw, as discerning drinkers are increasingly swayed by branding, marketing and provenance.”
Alex Wolpert, founder of the East London Liquor Company, believes the market still has room to grow.
He says: “With fewer than 10 distilleries in London there’s still an appetite for boutique distilleries. As new ventures slowly emerge, and established small distillers expand their portfolios, the news of new small ventures is steady.”
Big hitters: premium gin
Forget the race to the bottom – Britain’s gin producers are in a race to the top, with suppliers finding a growing consumer appetite for premium and super-premium brands.
“Demand for high-quality gin will continue to grow,” predicts Bob Fowkes, marketing director and founder of Brockmans gin, who has seen growing interest in top-end spirits at gin festivals and says the market is now moving beyond early adopters and gin aficionados.
“Super-premium gin offers the right blend of elegance, quality, taste and discovery to continue to attract new consumers,” he says. “It’s a trend that we are seeing in most developed spirits markets and it looks as though it will be around for a while. Over the past year in the UK we have seen a shift from trade push to consumer pull.”
Pinkster director Will Holt says: “We remain bullish about off-trade sales and consumer spending as the economy lifts. Drinkmonger in Pitlochry reports customers spending £150 on several premium gins without batting an eyelid, and is having to reorganise the store layout to accommodate more gins. And that’s the Highlands, not Hoxton. The trick for the trade will be to stay one step ahead of consumer demand and keep surprising customers.”
Phil Smith, sales director for Liverpool gin, agrees: “I can see there being further dramatic growth of premium and super-premium gin in off-licences and independents. Supermarkets will catch up as well. Customers will continue to seek out more expensive gins with a story to tell.”
Jacob Ehrenkrona, chief executive of The Reformed Spirits Company, predicts a “dramatic increase” in off- trade gin sales as more consumers buy gin to make cocktails at home.
He says: “Retailers should adjust the highest priced gins to be in line with what their customers are willing to pay for a white spirit.”
“We’re already seeing the average price for gins rise and that trend will certainly continue,” says Michael Vachon, head of brand development at Maverick Drinks. “Many retailers are looking at how their selections are priced and realising the race to the bottom is over – slashing prices doesn’t guarantee the volumes it used to, the margins get squeezed, and consumers are simply choosing more premium gins — so retailers are introducing a number of new premium products which they can make money from and which get their customers excited.”
“Gin will always be a bartenders’ favourite, particularly if it’s made locally, something a rum or tequila can never be in London,” says Alex Wolpert, founder of the East London Liquor Company. “Retail consumers are usually a couple of steps behind the on-trade, and judging by the ever-growing increase in craft brands in large supermarkets, the appetite is certainly there.”