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Gin Bubble

Ian-Hart Gin Still
Sacred Gin Liquid Nitrogen
Written by Gin Foundry

Is there really such a thing as a “gin bubble”? We keep being told that this seemingly omnipresent bubble will pop and that once it has - the gin boom will collapse and die a brutally savage death. “Most of these brands won’t survive and they’ll be many left bankrupt”, they tell us. “The category is over saturated”, the analysts say.

The verdict is out and the naysayers are certainly getting louder. The big brands are all waiting for their return back into the limelight, while the artisan producers are also stepping up their impassioned efforts to create newer and evermore unique gins that capture the imagination. Gin, as a category, is in an interesting place, however is there really such a thing as a “gin bubble” and what happens if it bursts?

We’ve scribbled a few ramblings down to try and help you make sense of it all…

Are we currently experiencing a “gin bubble”?

Probably. A bubble is certainly a more accurate phrasing than calling it a boom anyway. Things have been positive for the gin category in recent years, but it’s not been a comprehensive whitewash over other spirits either.

In an interview with Just Drinks, JC Iglesias, Pernod Ricard’s brand director for gin, said, “the category numbers don’t show that there is a boom at an aggregate level. The gin boom is in the super premium [category], but then super premium is about 8% of the total category. [The boom] is happening. You just have to look at it at a more granular level”.

Looking at the data for gin sales globally in 2013, things have been on the up for sure. What JC Iglesias goes on to explain is that Spain is a slow-burn market that’s been growing nicely, except when you look at the super premium category and its dizzying +30% growth. In the US for comparison, premium gin has only had a 1% growth and below that (the cheaper end of the market) sales have been declining. However, super premium gin is in double-digit growth Stateside. Therefore there has been mediocre to declining growth in the premium category and an astonishing growth in the super premium category in a couple core markets, but this has not been a universal trait.

Smaller markets are providing good growth for the major players all around the world and previously insignificant battlegrounds are now being hard-fought with ever increasing marketing budgets. South America is a good example of this, marking the continued rise of the spirit with the launch of its first gin - Príncipe de los Apóstoles, hailing from Argentina.

A bubble seems to be an appropriate description for what’s been going on. It’s not universal – rather more fleeting and floating. It’s been a little whimsical at times, occasionally lob-sided and floats around rather than aggressively increasing. Since 2005, the gin category has experienced a special period but we are nowhere near the boom everyone makes it out to be.

When will the “gin bubble” burst?

We’ve seen no sign of the gin renaissance coming to an end. Common sense dictates it must however - anything that goes up must come down. We accept that gin’s rise in popularity can’t continue forever. But we can only find a couple of examples of failed brands that have discontinued, amidst the ongoing one or two new releases happening each week.

It’s maybe worth giving our view on why there’s been a gin renaissance in the first place. We believe that gin benefited from an amalgamation of factors, including but not limited to the rise of craft beers and craft distilleries in the US, the revival of the spirit as a cool and trendy drink, as helped by good work of brands like Hendrick’s, Tanqueray No.10 and Beefeater 24. The rise of provenance and organic produce in everything food and drink related – consumers have become knowledge thirsty – has also played a part too.

Gin’s resurgence has benefited from craft distilling pioneers such as Sipsmith, Sacred and Chase, and inevitably by those who tried to copy and ride the wave with them. This ultimately has lead to a busy market and thus this feeling of a bubble/boom.

While we, along with the other countless gin fans out there, may not want to believe it but this exciting and diverse category will surely reach a tipping point and consumer demand will eventually drop off. Perhaps, this tipping point may be caused by consumers being fed up of falling in love with imposter brands as they realize that many are quite simply frauds. Or perhaps because there are just too many gins to choose from and it gets complicated to decipher the good from the bad. Sometimes, too much choice is not a good thing! Either way interest will, at some point, wander.

There are too many trusted voices rumbling about the rise of whisk(e)y and a shift towards dark spirits. It would seem that the clouds looming over juniper based spirits are rather ominous indeed. Paco Receuro, global brand director for gin at Chivas Brothers has said: “The category is over-saturated and over the next three years only the strongest brands will survive”.

Certainly, his opinion is both valid and well informed. It’s true that only the strongest will survive but in our opinion - only because there’s now a bigger than ever demand for credible, high quality products – it won’t be due to over-saturation. If you’re not good enough, you’re not going to survive in any market condition and that’s the bottom line.

Take a look at Oliver Twist Gin as an example. It was launched in 2012 and by mid 2013 – it was nowhere to be seen. An average product at an uncompetitive price point with poor distribution and middle of the road design, that ultimately lead to its demise. As a result, it has sunk into the obscurity like a lead balloon. During that time the market wasn’t saturated and interest in new products was high. It just didn’t cut it, as consumers continue to demand better.

The gins that won’t survive the next two years will die off because they too are poor products – not because the category is over-saturated, and it certainly won’t be because the “gin bubble” has suddenly burst, as a result of a new distillery in East Texas opening it’s doors and finally breaking the camel’s back. The ones that will prevail will be those with a strong ethos, an interesting story and backbone. They will have matched both brand power (marketing, design, distribution) and producer power (provenance, authenticity and credibility), and will be operating with a dedicated team of interesting individuals all focused on producing quality products.

Some brands going bust aside, will interest in gin fade this year?

Again, we don’t think so.

There are many reasons 2014 will not be the tipping point towards gin obscurity. Bombay Sapphire will be spending considerable resources unveiling their new distillery in Laverstoke Mill. Beefeater will be spending a lot of time showing visitors around their reupholstered distillery (and PR efforts) in Kennington, once it is open to the public, and Sipsmith will unveil their new site in Chiswick. These are just UK based examples, but it’s even more exciting in the USA, Spain and elsewhere. The established producers are set to have a massive year, so we just can’t see how this will equate to ringing the death bells of the category during this calendar year. Too much is on the line for Bacardi and Pernod Ricard for it not to continue for at least another 12 months, let alone the smaller craft producer’s ongoing reliance on gin to sell, as they wait for the bulk of their whisky to mature.

What will happen if it bursts?

We asked Michael Vachon from Maverick Drinks, someone who’s been at the forefront of importing craft spirits over the past couple of years, what he thought of the Chivas comments during our recent interview with him. He responded: (to the idea of only the strongest surviving) “That’s not even a little bit true. In fact, the opposite is true. We’re going to continue seeing more gin brands launched, but production will shift towards local— much like you’re seeing in food. Every once in a while, you’ll have a brand that’s so good, it can go global.”

We agree. If the “gin bubble” bursts, volume in the super premium end of the category will surely decrease once attention shifts elsewhere, but the amount of gins available may well continue to increase. It seems counter intuitive - but it’s possible. In the US, even if craft spirits are experiencing almost 30% increases in their on-trade market share, their overall on-trade share remains small - a tiny 5%. For gin, craft gin accounts for only around 2% of the overall volume of gin sold in bars in the US in 2013. A decline in overall category wide sales is likely to affect them, but not as much as one might think. It’s the bigger brands that are set to loose more of the market share as it’s their volume that is being slashed. Additionally, the larger players may not be as well equipped to diversify - don’t forget, over 80% of those craft distillers are making other spirits too - very few are solely ginsmiths. It’s not like they are going to stop distilling gin if they are still in business, even if the company cash cow goes from white to brown.

As a result, we think that lower overall volume doesn’t necessarily have to mean fewer brands to choose from. Relatively static growth has resulted in an explosion in craft spirits, so perhaps a reduction in overall volume won’t be that devastating for those craft niche producers. It’s not going to be easy and it certainly isn’t positive for them - but it’s not going to be one way traffic to the scrapyard as makers desperately pawn off their copper stills to the highest bidder.

There is no doubt availability will decrease and certain gins will be harder to get hold of. Retailers and bars will not want to stock overflowing shelves of hard-to-shift stock, opting to go for the ones that fly in their area. There will be fewer niche brands available globally, but they should endure in their respective areas. Hopefully retailers, bars and consumers alike will champion the local, cherish the original and reject the uninspired but cheap. We for one, hope so.

The verdict is out as to when gin will stop being the darling of the drinks world and what the repercussions will be once it has. To be honest – no one knows. Hopefully these musing have given plenty of food for thought and a few suggestions of where it could all head. We’re always open to a debate about the subject so just drop us a line via email or on Twitter (@GinFoundry).

Until we hear the “pop”, we’re digging out a bottle of vintage, original batch craft gin, with unusual locally foraged botanicals from a country we can’t pronounce, having bought it at our local liquor store on the highstreet. Enjoy it while you can – after all this may be a once in a lifetime moment for gin.