SPIRITS

Industry overview

Consumption of spirits in the UK increased by 10.5% between 1999 and 2003, and further growth of 7.3% is anticipated between 2003 and 2008. The table below shows the growth of each spirit category for the period 1999 to 2003, and forecast growth to 2008.

Over the last 10 years consumer preferences have shifted from dark to white spirits as consumers have come to regard dark spirits as old-fashioned and un-trendy. Consumption of Scotch whisky has declined over recent years and this pattern is predicted to continue. Vodka is now the most popular spirit, fuelled by the demand from young adults.

With the exception of gin, which is predicted to show a small decline in overall consumption between 1999 and 2008, most major spirits are expected to have seen growth during this period.

Sales of spirits typically account for 5% of the total wet sales of a public house (this excludes RTDs).

Spirit consumption in the UK: Volume growth
Spirit category	Growth (%) 1999 to 2003	Forecast growth (%) 1999 to 2008	Forecast volume at 2008 (in millions of 9ltr cases)
Bourbon	+45.2%	+68.9%	1,231
Vodka	+28.3%	+26.5%	7,680
Liqueurs	+23.0%	+4.1%	3,717
Brandy	+10.3%	+4.8%	1,605
Rum	+3.7%	+8.7%	2,185
Cognac/Armagnac	+2.4%	+7.1%	0,866
Tequila	+2.3%	+17.0%	0,103
Gin/Genever	+1.4%	–0.2%	2,365
Scotch whisky	–1.9%	–8.1%	7,137
Other spirits	+19.1%	–5.8%	0,899
Total	+10.5%	+7.3%	27,790
[Source: Vinexpo/International Wine and Spirit Record (IWSR) 2005]

Vodka

It is commonly thought that the term ‘vodka’ originates from the Slavic word ‘voda’ for water. Vodka is usually distilled from fermented grain or potato. The 4 main ingredients used today are potato, rye, barley and wheat (but molasses, grapes and soya beans are also used); and these give each vodka its unique flavour.

AC Nielsen (Market Researchers) reported in 2005 that vodka sales were worth over £ 1 billion in the on-trade. Vodka, being a very mixable spirit, is used as the base spirit in many RTDs; and its combination with ‘energy drinks’ in the late 1990s increased its popularity with the young adult market. The 18–24 year-old age group accounts for 40% of the vodka drinking market and the 35–45 age group makes up a further 25%.

The UK vodka market is dominated by one big brand, which enjoys almost 70% market share; other brands fight it out in a very competitive market place. Vodka is now offered in a variety of styles, flavours and strengths, from Russia, Scandinavia, Poland and even New Zealand!

Gin

Gin is made from the distillation of white grain spirit and juniper berries, which provide its distinctive flavour. (The name ‘gin’ is derived from its Dutch origins – the Dutch word for juniper being ‘genever’.) In addition to juniper, it is usually made with a small amount of citrus ‘botanicals’ like lemon and orange peel. Other botanicals that may be used include anise, angelica root, orris root, cinnamon, coriander, and cassia bark.

Consumption of gin declined from 9.9% of the total UK spirits market in 1999 to 9.1% in 2003, and is estimated to fall to 8.5% by 2008. Gin remains the fourth most popular spirit category behind vodka, whisky and liqueurs.

Gin drinkers are typically older, female and middle class. Despite recent moves to make gin ‘trendier’ it has not been successful at appealing to the young adult market.

Scotch whisky

Scotch whisky accounted for almost 30% of the total UK consumption of spirits in 2003 (from 34% in 1999) and is predicted to fall to 26% by 2008. Despite its fall in popularity, Scotch whisky still outsells all other spirits with the exception of vodka.

There are two main types of Scotch whisky: malt and grain whisky. The malt whiskies can be divided into 4 groups, according to the location of their distillery:

• Lowland Malt Whiskies: made south of an imaginary line drawn from Dundee in the east to Greenock in the west.
• Highland Malt Whiskies: made north of that line.
• Speyside Malt Whiskies: from the valley of the River Spey.
• Islay Malt Whiskies: from the island of Islay.

Each distillery produces malt whiskies with distinct flavours and aromas. A single malt whisky is made from malts produced by the same distillery. Once produced, malts may be aged in barrels for 10, 12, 15 years or more.

Grain whisky is normally made from 10–20% malted barley together with other unmalted cereals such as maize or wheat. The distilled spirit is lighter in character and aroma than most malt whiskies and requires less time to mature. The production of grain whisky is not so influenced by geographical factors and it may be distilled anywhere in Scotland. The bulk of matured grain whisky is used for blending.

The majority of Scotch whisky sold in the on-trade is blended whisky, known as ‘scotch’ in the UK. Blended whisky is a combination of up to 15 or 20 malt and grain whiskies. Blending is an ‘art form’ carried out by experienced blenders using secret recipes.

Here are some other interesting facts about blended whisky:

• Whisky can only be described as ‘Scotch whisky’ if it has been wholly distilled and matured in Scotland for a minimum of 3 years.
• The law requires that when the age is declared on a label, it must refer to the youngest whisky in the blend.
• De luxe blended Scotch whisky is a blend which contains a higher proportion of carefully selected older, more expensive whiskies.

Rum

Rum is made from sugar cane by-products such as molasses and sugar cane juice by a process of fermentation and distillation. The clear liquid, is then usually aged in oak and other casks. The most popular rums can be divided into 3 main types:

• White rums, also referred to as ‘light’ rums are sometimes filtered after ageing to remove any colour. They are typically light flavoured and sweet.
• Gold rums, also called amber rums, are medium-bodied rums which are generally aged. The rum can be flavoured through the addition of spices or caramel. (A variation is often sold as ‘Spiced Rum’.) Its darker colour comes from its ageing in wooden casks.
• Dark rum, also known as ‘black rum’, is darker than gold rum. It is generally aged longer in heavily charred barrels, and has a much stronger flavour than either white or gold rum. Spice flavours can be detected along with strong molasses or caramel overtones.

White rum substantially outsells dark rum in the UK and is responsible for the overall growth of the rum category (growth between 1999 and 2008 is anticipated as being 8.7%.) White rum has been succesfully promoted to the young adult market, whilst dark rum has suffered the same ‘dark spirit’ decline as whisky. The UK rum sector is dominated by one brand which has grown through strong marketing and its ownership of its popular white rum and white rum-based RTD products. Rum is ranked as the fifth most consumed spirit in the UK.

Brandy

Grape brandy is produced by the distillation of fermented grape juice. The two most popular types of grape brandy are:

Cognac

Cognac is a traditional French brandy that is named after a town in the Charente region of western France. Cognac is considered to be one of the finest types of brandy. Cognac is categorised using various initials to denote quality:

• VS (Very Special) or Three Stars: is at least 2 years old.
• VSOP (Very Special Old Pale) or Five Star: has been matured for at least 4 years.
• XO (Extra Old): matured for at least 6 years.

Armagnac

Armagnac is the oldest type of brandy in France, with documented references to distillation dating back to the early 15th century. The Armagnac region is located in the southwest corner of France. Armagnac uses similar categories as Cognac to denote quality. Other, lesser-known, grape brandies are produced by Spain, Mexico, South Africa and America. Other types of brandy include:

• Pomace brandy: produced from fermented grape pulp, seeds, and stems that remain after the grapes are pressed. (Examples include Italian grappa.)
• Fruit brandies: distilled from fruits other than grapes. Apple, plum, peach, cherry, raspberry, blackberry, and apricot are the most commonly used fruit. (Examples include Calvados and kirsch.)

UK Consumption of brandy including Cognac and Armagnac has steadily grown over the period 1999 to 2003 and this is set to continue. Many brand owners are now trying to broaden the appeal of brandy by promoting VS quality brandies for use with mixers or in cocktails, while better quality VSOP brandies continue to be offered as a premium drink for customers to trade up to.