Low or no alcohol spirits boom
The local drinks industry is at the crossroads amid the rise of low or zero alcohol beverages and super-premium offerings, reports Aimee Shaw
The rise in popularity of low and no alcohol beers has paved the way for a new emerging category — low and no alcoholic spirits, says one of the country’s largest brewers.
One in three millennials are choosing not to drink alcohol.
As the consumption of alcohol in New Zealand falls, sales of no and low alcohol drinks are growing. Changing drinking habits and the favouring of quality over quantity are reshaping the global alcohol industry.
Low alcoholic beer has over the past couple of years been shaking up the traditional beer category, forcing alcohol giants to diversify their businesses. The phenomenon is now edging into the spirits market.
Data from one of the country’s largest supermarkets, Countdown,
One in three millennials are choosing not to drink alcohol.
shows the number of zero and low alcohol products coming to market is growing at double-digit rates.
Sales of low and no alcohol drinks at Countdown have increased more than 30 per cent in the last nine months, while sales of light or zero beer have increased 15 per cent, and sales of low or zero wine have grown 12 per cent.
The supermarket chain recently introduced its first non-alcoholic spirits, Seedlip and Lyre’s, into 30 of its 180 stores, and sales of both have exceeded expectation. Countdown expects the non-alcoholic spirits category to continue to grow in the next 12 months, particularly as we move into the warmer months.
Seedlip first launched in New Zealand at the beginning of last year.
Auckland-based brewer DB Breweries has also noticed a steep increase in the sale of low and no alcohol drinks.
Managing director Peter Simons says sales in the zero to 1 per cent beer category had increased 140 per cent industry-wide on the same period a year earlier.
“We’ve noticed a real spike in the last 12 to 18 months,” says Simons. “People are more aware than ever of how they are drinking, and what they are drinking. I believe that the success of low and no alcohol beer has paved the way for spirits to start playing in this category too.”
Simons says the introduction of the DB Breweries’ Heineken 0.0 product had driven sales in the low and no alcohol category, a space it had been operating in for more than a decade.
Countdown alcohol manager Paul Radich says the supermarket continued to see new no and low alcohol spirits come to market in New Zealand.
“It would have been unheard of to introduce this many low or no alcohol options even just a few years ago,” says Radich.
“There’s no doubt, however, that this trend towards low and no alcohol products is growing, and millennials are one of the core reasons as they’re buying less alcohol than previous generations, and have a really big focus on health and wellness.”
Low and no alcohol spirits are popular throughout Europe, and increasingly in the United States.
High-end spirits manufacturer Beam Suntory — the result of a merger between the founding company of Jim Beam whiskey and Japan’s Suntory Holdings — says it is looking into the possibility of creating a low or no alcohol spirit to tap into the emerging market.
“We definitely have a range of innovation programmes looking at that,” says Trent Chapman, Beam Suntory’s oceania marketing manager.
He says the rise in popularity of low and no alcohol drinks had not hit traditional sales for Beam Suntory, but acknowledged the market was emerging as the result of changing consumption globally. Asked when the market would see a no, or low, alcohol spirit from the company: “Currently there are a lot of companies jumping head first into this space.
“Suntory has this ‘hurry slowly’ mindset — we want to make sure we do it the right way and it’s a timeless approach.”
The company was unwilling to discuss further, but has hinted previously that it was ready to play in the space. Meanwhile, Beam Suntory, which produces Canadian Club, Teacher’s, Midori and Horntons tequila, has released its first its “superpremium” whiskey, Legent, five years after its merger with the founding company of Jim Beam.
Suntory acquired Beam Inc, formerly listed on the New York Stock Exchange, for US$16 billion ($25b) in 2014 in a deal that saw the company rebrand to Beam Suntory. The acquisition created the world’s third-largest spirits manufacturer.
Rise in super-premium spirits
Beam Suntory has high hopes for the premium bourbon market. It wants the category to surpass scotch as “the world’s favourite whiskey” — an achievable ambition, says Chapman.
“No one would have forecast that five to 10 years ago 18 to 20-odd yearolds would moderate their alcohol intake; they’re doing that, and they are looking for better taste, better experiences and brands, and bourbon has been able to do that.
“Over the last three years [bourbon] has moved towards small batches, premiumised the category and moved bourbon into a whole new space.”
He says, globally, whiskey was moving into premium, top-shelf space.
“New Zealand has been a really interesting case study over the last few years around premiumisation, and people moving from local gems like Woodstocks of the world to premium international brands in the whisky/bourbon space.”
The whiskey market in New Zealand is growing at rate of about 5 per cent each year, driven by consumers who have adopted a less-is-more attitude towards drinking, opting for higher-priced alcohol.
According to Nielsen, the premium and super-premium segments of the market are growing at 18 per cent and 36 per cent respectively, driving growth in the bourbon category.
Robert Brewer, chief executive of Spirits New Zealand, says New Zealand’s alcohol industry had been reshaped by the rise of low or no, and super-premium, spirits.
“The trend is two-fold. Consumers are looking for spirits and spirit-based products that still have that lovely caramel flavour you get from a distilled product that has been in the barrel, but they want something that has lower alcohol content in it, and producers are responding by making more available,” says Brewer.
“But what’s also happening is that consumers are drinking less but going up the premium tree in the spirits area.
“They are becoming more discerning and discretionary in their spending, and that’s right in New Zealand’s sweet spot.”
Ten years ago there were between 10 and 15 New Zealand-based distilled spirits companies.
Today, that’s well over 100 — most of which are nestled at the premium end of the market, Brewer says.
“New Zealand is reflecting global trends; people are drinking less, choosing either low or no alcohol products or spending more on a more premium product.”
As a result all major global companies were looking to operate in both spaces, says Brewer.
“The big guys are looking at both,” he says.