Oceans Apart

The differences between the US and UK spirits markets are as vast as the expanse of water between them, says Patrick Schmitt

ONE COULD compare spirits in the States with porn – they are both popular (especially export strengths) and yet, when peddled, people tend to pass judgement. 

For instance, several US supermarkets refrain from stocking the stuff, the sale of Absinthe is still illegal, advertising is infrequent – banned on some networks – whole areas are "dry" and in general a Calvinistic attitude pervades.

The drink’s even called hard liquor – a pretty pejorative term if ever there was one. Consumption per capita, accordingly, is much lower in the US than the UK where we prefer to talk of sharpeners, snifters and just plain booze.

As for Calvinism, well, we prefer hedonism. But while Americans choose to drink less, they certainly like to imbibe better – and branded – spirits, and such a similar penchant for premium is yet to really develop in Britain.

Furthermore, it seems America’s image as a flat, mature market is beginning to change, or rather, the leviathan is growing.  It is interesting to compare the two in more detail.

To begin with, the most striking difference is size – the US literally dwarfs the UK in terms of consumption of spirits.  In fact, the British market is some five times smaller than America’s, whose massive 162 million cases rather overshadow the 31.5m cases consumed in the UK.

As for what we are drinking, well, tastes aren’t that different.  For a start both countries exhibit a fondness for whisky, it tops the charts in the UK at 9m cases, as it does in the States, but with a significantly larger 45m cases.

Tailing this in both nations is vodka, at 6m cases in the UK and 37m in the US. At this point, however, the order changes. In this country FABs (flavoured alcoholic beverages) come in at third, which accounts for 5.2m cases, or rather "equivalent cases" because just the alcoholic content is recorded (if measured purely by volume these ready mixed drinks would shoot to first place).

In the US, on the other hand, they enter at 7th with an 8m case market, which is probably a function of the complicated distribution system in the US and the fact it’s quicker to swamp a smaller market such as the UK.

Other than this the order of preferred spirit styles is pretty similar (see table on page 52), except for rum which has a much stronger presence in the US – 17m cases versus 2.4m in the UK – while pipping the demand for gin – at 11m cases in the States.

The Brits, on the other hand, seem to prefer botanicals to Bacardi – gin makes up 2.7m cases, 0.3m more than rum.  Oh yes, and Tequila has a rather stronger following in the US, coming in at 8th place with a 7.5m case market compared to its 9th position in Britain and 0.1m case consumption.

But to really understand the markets we need to consider the main categories in turn. So, to take the largest first, whisky, which, although placed number one in both countries, contains some very different trends.

For a start, Bourbon leads consumption in the States, while Scotch unsurprisingly holds sales superiority in the UK.  Furthermore, the US whisky sector is more brand-led, dominated by Jack Daniels and Jim Bean, which sell 3.8m and 3.2m cases respectively, and although both brands are important in the UK, they don’t rule.

Nevertheless, Jack Daniels, it should be noted, has almost 73% of the total Bourbon/other US whisky market volume sales in this country, and in the ontrade this figure is nearer 90% – a result of its mixability and trendy image.

But overall, major brands in Britain are, in order of importance, Bells, Famous Grouse and Teachers.  This contrasts markedly with the US, where the highest-ranking Scotch is Dewars, at 25th place with 1.5m cases.

A further difference concerns market growth. While in both countries there is a trend towards malts, up 15% in the first three months of this year in Britain, blended Scotch fell 1.8% in the UK last year while rising slowly in the US.

As Stuart Gunn, sales director, Quality Spirit International says: "Because of the size of the market these are important numbers." However, American blended whiskies fell 2% in 2002.

But what about vodka? Well, the white spirit certainly dominates in both countries, taking second position behind whisky while showing share increases in each market – the US has experienced a 4% rise year on year and the UK a 7% surge.

However, these figures hide two different markets.  To take Britain first, the vast majority of vodka volume is made up by Smirnoff, Vladivar and Grants, with the former dominating the market with some 2.3m cases out of a 6m case total. In fact, the top three brands account for over 50% of the sector by volume.

In the US, although Smirnoff also leads the pack, the strength of the premium market is much larger. For instance, Absolut is the second largest brand while Skyy, Ketel One, Grey Goose, Finlandia and Belvedere are all in the top 10 fastest growing drinks brands according to Adams Beverage Group.

And while all these brands are present in the UK, they make up only about 5% of the British market – Absolut the largest premium brand in the UK, and in fourth position, only sells some 120,000 cases, while Ketel One alone sells about 1.2m in the US and Belvedere about 500,000 cases.

Much of this difference can be explained by America’s obsession with the Martini, where the flavour of the vodka is evident, and thus smoother styles are preferable.  Brand call is more important in the US on-trade, with the likes of Ketel One or Grey Goose asked for by name.

In Britain, on the other hand, the cry is more likely to be for the generic spirit category, not the brand, although it is believed this is slowly changing.  However, both markets are characterised by continuing innovation and an explosion in flavoured vodkas, up 12% in the British on-trade.

A sector not renowned for innovation, however, is gin and both Britain and the States have experienced declining volumes of the white spirit over the last 10 years – although the US market did grow 0.1% last year in volume.

And, the biggest brands in the category are rather different, with Gordon’s in this country leading the pack by some margin; it has 10 times the volume of its nearest competitor, Bombay Sapphire. In the US Gordon’s is the third largest brand with top position  reserved for Seagram’s Extra Dry, followed by Tanqueray.

Then, after Gordon’s comes Gilbys, Beefeater and Bombay Sapphire. And, as with vodka, the US is famed for its more branded approach to the market, and especially the premium positioning of its spirits.

Tanqueray’s success in the States is testament to this, as is the introduction of the super premium Tanqueray 10 a little over two years ago.  However, it is hoped the UK will follow the US lead in building a luxury level for this classic spirit.

Rum, like vodka, has also proved fastgrowing in the States, increasing in volume by 3.8% last year, although in the UK it has experienced a decline in value of around £7m between 1997 and 2002.

This, however, is mostly due to a drop in sales of dark rum hiding an increase in interest in white rum – a change "driven by demographics", according to John Burke, marketing controller at Bacardi Martini. Darker rums tend to be adopted by older consumers whose consumption falls as their age rises, while white and golden rum is drunk more by the young.

And it seems Diageo’s Captain Morgan drives the major difference between the two markets.  In the US this is one of the fastest growing brands, increasing almost 12% between 2001 and 2002 according to Adams Beverage Group, and although in second place to Bacardi, the latter experienced only a 2.4% change over the same period.

In the UK, however, Captain Morgan, or rather Captain Morgan Spice is a predominantly  regional success, enjoying most of its sales in Scotland.  But this may change as Diageo is promoting the spirit in England and Wales, but as yet there are no significant signs of take-up.

Nevertheless, it’s notable the brand positioning should be so different in the two countries: in the UK the drink is known for its Caribbean spirit while in the US recognition revolves around the word "Captain".

Also, Diageo’s Myers is a powerful dark rum brand in the US with a much smaller  presence in the UK.  A further sector worth analysing is Tequila.  In the UK this has experienced a decline in value of around 12% MAT in the on-trade and 14% in the off.

And although this category also suffered in the US in 2001, with the top 10 brands – almost 80% of the segment – down 12.8% in volume, in 2002 this trend reversed.  But while much of the US sales problems were a result of supply issues with agave stock, Cathryn Sleight, ADUK marketing director, suggests the problem in this country may have a different cause.

"Others are shouting harder for that consumer spend," she comments, "and there is a need to unlock the potential to drink Tequila not just in shots and slammers, especially as there is a heavy social responsibility message in this business."

As for brands, well in both countries it’s José Cuervo which dominates the sector.  But overall, it seems the US is a good two years ahead of the UK in terms of market maturity.

In vodka, the super-premium category was really initiated back in 1996 with the launch of Grey Goose, and by 2000 sales of premium vodkas worldwide totalled almost 19m cases, of which half were sold in the US.

"The US by its nature is much more forward driven," comments Andrew Notcutt, brand manager for Belvedere, "and people tend to ask for drinks by brand." 

This can be seen in the market for Cognac too, where growth in the US, centred on Afro-Caribbean culture, has started to spill over into the UK, while in general a more premium positioning is developing in the British market – the trend is not just confined to vodka.

Cathryn notes a resurgence in the British consumer’s interest in Allied’s Esprit de Courvoisier for instance – the group’s most expensive Courvoisier – as well as its Laphroig 30 year old and cask strength.

But overall, the markets are very different.  Not only is Britain more focused around the on-trade with a more relaxed attitude to spirit drinking, but it is also experiencing increased penetration of alcohol. In the US, on the other hand, it seems fewer are drinking, but those that are drinking are consuming more.

For example, currently 12% of alcoholic beverage consumers account for 80% of the population; the former figure was 15% five years ago.  This is probably connected to the fact that access to alcohol and especially spirits is to some extent restricted in the States.

In Texas, for instance, you can buy beer in 60,000 outlets but "hard liquor" in only 6,000. Coupled with this is the fact that some networks are refusing to show spirits advertising.

Nevertheless, the US does represent one of the fastest growing spirits markets on the planet – mostly because of the high numbers of Hispanic and African-American communities which are heavy imbibers of premium spirits – and a population bulge of people over the legal drinking age of 21.

But as for differences in palate, well, the Brits have more of a penchant for juniper and the Americans a taste for Tequila.  And similarities? Smirnoff and Baileys show the most obvious branded overlap.