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Finally, proof the UK gin boom is over - Analysis

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It's a question often asked - is the UK gin boom over? According to one analyst, for the first time, we can answer with a definitive 'yes'.

Diageos Gordons gin has benefited from the 2017 launch of a pink variant

Diageo's Gordon's gin has benefited from the 2017 launch of a pink variant

Despite recent assurances from trade groups in the UK that there's growth in gin yet, Bernstein today released a client note arguing that the category's glory days are at an end in its most important market by value. The pronouncement is bad news for Diageo, which through its Gordon's brand is by far the market leader in the UK. In the past couple of years, Gordon's has been fuelled by impressive growth for its pink variant.

With the boom over, tough comparisons for Diageo lie ahead, Bernstein says, as well as an end to the company's reliance on gin for new growth. For the wider industry, a levelling-out of gin growth proves it has been unable to wring fresh appeal out of consumers through a recent proliferation of flavour innovation. A rethink is on the cards, with possible solutions to be found in vodka's return to basics in the face of so-called 'flavour fatigue'.

But first, the evidence. What proof does Bernstein have that a category that in 2018, according to Hendrick's owner William Grant & Sons, put on 45% value growth, and ended the year accounting for a fifth of the overall spirits market in the UK?

The analyst points to latest Nielsen data that shows rolling three-month volume growth for UK gin down to just 4%, from a peak of about 50% in mid-2018. Furthermore, gin's three-month rolling price-mix growth has turned negative for the first time "in some years", Bernstein says. In a possible dig at recent launches, the analyst's note says: "It appears as if the market has now reached saturation for ever-higher-priced new entrants, with ever-more-obscure botanicals."

Digging further down into companies, Nielsen's three-month numbers show that growth for Diageo's gin brands has flipped dramatically. Volumes and value, which were increasing by about 120% on a rolling basis in September last year are now declining by 11% and 10%, respectively.

Bernstein does offer the caveat that Nielsen numbers do not always give the full picture, but concluded that "it does look like this could be the beginning of a sea change in UK gin trends".

Far from being a negative, the slowdown could actually be good for the gin category. The reason people in the industry have repeatedly been querying when the gin boom will end is because the phenomenon already seems to have outstayed its welcome, with some recent launches verging on parody. Indeed, consumers now risk being confused about what gin is.

What's more, gin appears to have taken the place of the commemorative T-shirt, judging by its new-found use in publicising events such as Pride in London. The ease with which gin can be produced compared to, say, whisk(e)y and dark rum is as much a curse as a blessing.

The end had to arrive eventually, and away from the more ludicrous end of the flavour launches, companies have hunkered down in to what will likely form the bulwark of future gin sales. Core SKUs such as Gordon's and Pernod Ricard's Beefeater will continue to do the heavy lifting while recent acquisitions of Italian gin brands, with their light Mediterranean flavourings, are likely to set distillers fare beyond the boom years.

The double-digit growth may be over in the UK, but there's still a lot of value to be found in gin.

The industry may be bored of gin, but is the consumer? - Click here for a estmachines.comment


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