FEATURE: It’s time for spirits to hit back

Figures for the 12-month period to September 2024 show gin, whisky and brandy in double-digit volume decline in the on-trade, while vodka and rum are 9% down.

Pub operators are having to work hard to create good value for their customers – but there are strategies that can be deployed to lure people back.

“There’s no doubt spirits have been by far the toughest category of 2024 in the on-trade, with consumer trends such as cost focus, earlier visits and moderation all damaging it,” says Violetta Njunina, who as client director for GB drinks at research company CGA by NIQ has crunched the worrying numbers.

“Value perceptions are more important than ever, and suppliers and venues urgently need to find ways to change them,” she insists. “Range and pricing ladders need to appeal to consumers who are feeling the pinch, and improving serves is a quick and easy way to add value. By understanding people’s changing needs, we can navigate this tricky landscape.”

A comparison with price points for other long drinks suggests why pub customers may feel they’re not getting best value from spirits. The average £6.32 for a gin & tonic is 7.7% higher than for a standard glass of wine and 32.8% above a pint of beer.

“Though price isn’t always the deciding factor, it’s part of the reason why the proportion of consumers drinking spirits with mixers in the on-trade has fallen 11 percentage points to 21% in the past year,” says Njunina.

Operators are also having to work more closely with suppliers to tailor their spirits range from venue to venue to meet a widening range of consumer needs, she points out.

“While spirits have become increasingly premiumised in recent years, there is still a clear need for options suited to consumers who are feeling the pinch. Pricing ladders that differentiate between these different needs are crucial.”

Rich Holt, on-trade director at Bacardi-Martini, believes a pub requires a range of spirits that can attract and engage people as soon as they walk through the door – but “it’s not easy to call what works, the on-trade landscape is so varied, based on location and type of occasion, from cocktail bar to sports bar and from community pub to Michelin star restaurant”.

Holt continues: “In short, it’s about providing a choice of brands to complement the outlet and their consumers. Our recommendation is to always start with an essential core offering, vodka, gin, rum and so on, and, then brands that are trending.

“Then make sure the quality and presentation of branded serves, and all serves, reflect the price point and always live up to the expectations of your consumers.

“The focus on quality and presentation is not just a spirits play,” he adds. “It’s 100% applicable to every touchpoint in every outlet.”

Trending spirits

“Some spirits have been hit harder than others by the cost-of-living crisis,” Violetta Njunina reports. “For example, year-on-year sales of gin have slipped by 17.4% over the latest quarter while there has been more resilience in segments like golden and dark rum, where sales have dropped only 9.9%, with spiced brands faring best. Tequila has also outperformed the market, down by only 6.9%.

Of course, vodka remains a staple of the pub offer thanks to its versatility, lending itself to a wide variety of occasions across a large audience, as Diageo’s Alex Haslam points out.

And there is evidence gin is merely finding its right level after one of those bouts of extraordinary popularity it has seemed to enjoy throughout its long history.

While whisky and brandy might be suffering from their higher price points, they’ll always have their place on the back bar.

It’s rum and tequila, though, that most deserve your attention. Rum, at last, seems to be attaining its long-promised status as ‘the new gin’ with younger pubgoers now exploring a growing variety of flavours, while tequila might still be rather more niche but is benefiting from a proliferation of styles hitting the market and stirring up interest.

“Pub operators can lean into this trend and consider expanding their tequila range to suit a range of palates,” suggests Haslam. “There is still some education to be done around how to best enjoy the liquid, though, and bar teams can support customers on this journey by extending their spirits knowledge and suggesting serves.”

Trends in on-trade spirits volumes to September 2024 (CGA by NIQ)

Silent Pool Gin makes a noise

Brands and flavours have come and gone in the great gin boom but some of the new wave have established robust businesses that are still growing thanks, in Silent Pool Gin’s case, to being rooted in craft values and a specific location.

Celebrating its first 10 years in October, the distillery is based in old farm buildings in idyllic surroundings amid the Surrey Hills, beside the placid lake that gives the brand its name.

This provenance, along with the skills of its distillers and some smart design, lends Silent Pool Gin a longevity not enjoyed by most, according to founder director Ian McCulloch.

It’s positioned as an “affordable luxury” and doesn’t fit in everywhere, he admits, “but the on-trade is very important for us in places where customers will pay more and want to know where their gin is from.

“We typically sell in pubs where people will spend £100 on a night out, pubs that are working hard to differentiate themselves.

“A lot of the froth has come off the gin market but where we sit among premium plus brands retailing above £35 a bottle, it’s growing.”

One of the first things people remark on with Silent Pool Gin is the beautiful bowl glassware, which McCulloch attributes to an early customer, Mark Robson, the founder of Red Mist Leisure, now at New Dawn Pubs.

“He persuaded us to do it and he was right. People see the glass and say ‘I’ll have one of those’. They do get stolen but then it’s on someone’s sideboard working for us.”

Bar staff he sees as ambassadors for the brand. “We want to engage directly with them so they understand how our gin is made and can unpack the flavours in it and take people on a gin journey, a curated path to premium spirits.

“Ideally, we get them to the distillery. Silent Pool Gin is provenance-based, physically rooted in a spot. It’s not coming out of a marketing department. It’s not a factory.”

The cocktail party

According to CGA by NIQ figures, the cocktail market to March 2024 was worth more than £700m, slightly down on the previous year but gaining volume share of spirits serves and, as many licensees have discovered, a way of attracting customers and driving sales.

As Covid lockdowns ended, people flocked to exotic cocktails to give them the kind of experiences they’d missed at home. With the rising cost of living, they returned to more tried-and-trusted serves, but more recently, says Violetta Njunina, there has been a shift away from the classics, though still preferred by 47%, to ‘signature’ and modern cocktails, registering 21% and 16% of serves respectively.

“Consumers now have an average of seven flavours in their repertoire, one more than a year ago, and they are increasingly confident about buying unfamiliar serves.”

Strongest growth is coming from flavours such as coconut, lemon, vanilla, and even smoky and sour are on the rise, along with apple, pineapple, lime and cherry, plus more exotic fruits.

Surprisingly, perhaps, Njunina also sees healthy choices coming through, with acai berry, turmeric and matcha green tea among the trending ingredients.

Young’s Pubs is one company where cocktails are playing a bigger part in the mix.

“We’ve aspired to create a range of cocktails that are accessible, on trend and delicious while still being easy to serve for our bar teams,” says marketing activation manager Rosie Francis.

“The younger generation is drinking less but better, trading up from wines and spirits. Twists on classic cocktails are always popular and we have seen huge growth in our picante spicy margarita, for instance.

“But we’ve created serves that touch every drinker, including low and no alcohol and spritzes as well as post-dinner cocktails like the Bakewell Tart.”

Share of cocktails ingredients (CGA by NIQ)

On the menu

For Alex Haslam, head of on-trade category development at Diageo GB, getting the spirits range right can be a “game-changer” for a pub, “providing a unique selling point that sets it apart”.

“A well curated spirits range isn’t just ticking boxes, it’s about tapping into trends and enhancing the customer experience. By offering a mix of popular, premium and emerging spirits, operators can meet the diverse tastes and demands of their customers while creating a drinks menu that not only attracts attention but keeps people coming back.”

The menu itself can play a key role, he believes. “More than a list of drinks, it’s a powerful tool for shaping the customer experience and reinforcing a venue’s identity. It can influence choices, spark interest in future orders and create a lasting impression when shared online.”

A menu can also boost profitability, by highlighting best-sellers and high-margin products. “Well-considered descriptions, such as ‘small-batch’ or ‘floral’, can draw attention and elevate the drinks you want to promote,” Haslam adds.

Fruit alternatives

The fruit garnish is an important part of most spirits serves, enhancing the value of a drink. But using fresh fruit is time-consuming and creates a lot of waste because leftovers are tipped into the bin at the end of the night.

Freeze-dried fruits could be the answer, with suppliers such as Mixologist’s Garden offering pubs sliced lemons, limes and oranges, plus whole strawberries, raspberries and blueberries, in resealable bags.

Ready to use, and with a four-month shelf-life, dried fruit helps improve speed and efficiency at the bar, rehydrating as it hits the liquid with the looks, aroma and taste of fresh fruit.

Views from the back bar

Spirits have played a big part in the success of Arc Inspirations, which runs 17 venues across three brands in northern cities.

“We have a massive spirits portfolio across the group,” says head of bar operations Mark Austin. “In our Manahatta bars, cocktails are 60%-plus of alcohol sales and they are also important at Banyan while sales at Box sports bars are lower.

“Two years ago, in the wake of Covid, everyone wanted cocktails, something they couldn’t get at home. That’s dropped off a bit and people are moving towards more of a pub offering. But they still want good-quality cocktails and have become more discerning about the spirits they choose.

“Value for money is creeping in more. On Saturday nights, people want to treat themselves, let loose on the cocktails, try something new, but it’s quieter midweek when we’ve introduced two-for-one cocktail offers, happy hours and a £4 Aperol Spritz.

“Gin & tonic has fallen off. It peaked pre-Covid, when the market reached saturation point with all the brands and flavours. Now we’re seeing growth in premium-flavoured vodkas and spiced rums where you’ve now got better options.

“Spiced rum is taking the place of gin at Box among younger drinkers, which is interesting, and we’re seeing a renaissance in brandy sales at Manahatta for the first time in years, perhaps thanks to brands being sponsored by celebrities. Whisky is steady. It’s a tough market because of the price.

“Tequila is a small percentage of the market but it’s growing. Quality has improved and we’re selling more Margaritas and tequila cocktails. There’s a move away from shots except with cream liqueurs - Baby Guinness is our number one shot.

“Alcohol-free spirits are also growing for us and at Banyan we’re experimenting with lower alcohol serves with half the usual alcohol content, flavouring them with yuzu, grapefruit, clementine. The danger is they become no more than a bland fruit juice so we’re going for sharper, citrussy flavours.”

Student-led pub

In his decade running Marston’s Pub of the Year, the Griffin in Loughborough, lessee John McCarthy, has seen big changes in the spirits market.

“As a student-led pub, we’re mostly about vodkas and rums now. Gin has gone, at least the flavoured ones. They do ask for flavoured rums, though, which have taken over that role from gin. And it’s the same with vodka flavours.

“People want something easy-drinking these days and cocktails fit the bill. We don’t use big name brands. You can display expensive brands but you can use a cheaper vodka as long as it hits the right ABV and increase your GPs and offer deals.

“It’s all in the theatre. We like Funkin’ pre-mixed cocktails here but you’ve still got to put in the same performance with the shaker. It’s what people come for.

“Students are still drinking shots, tequila, sambuca, Jagermeister, and in the past year especially, Baby Guinness has taken off. We get through 20 bottles of Baileys and Tia Maria in a month. Once somebody has one, everybody wants it.”

Massive for us

Among his five leases with Greene King Marc Edmunds’ runs The Futurist in Liverpool, where more than 20% of drinks sales are spirits, twice as much as any of his other pubs.

“Spirits are massive for us at The Futurist,” he says. “We are free-of-tie on spirits and able to access different suppliers. Wholesalers such as Booker, LWC and Hops & Barley have a good range and go with the trends. We talk to reps and visit other bars and restaurants to find out what’s new.

“Cocktails account for 12% of our drinks sales. From the start, we’ve made it a gimmick, giving them a cinema-themed twist. As well as our house and traditional cocktails, we have a cocktail of the week advertised on chalkboards and see a massive uplift from them. People are curious about the combinations.

“Rum is probably our most popular spirit now, especially Kraken, which people are drinking with ginger ale and a squeeze of fresh lime, and tequila is growing, too. Customers have started asking for it with soda or lemonade. While most cocktails tend to be drunk by females, when it’s rum or tequila-based, it’s a more equal split.

“Among the simple mixes, gin & tonic has had its day. Once you might have had 20 different tonics and 100 gins. Now we’ve got 10 and rum is our leading spirit.

“Staff are all trained to mix cocktails when they start in the business,” he continues. “We test their knowledge and get them behind the bar using dummy bottles to acquire the techniques. We also audit our pubs, sending in a mystery customer who will order a cocktail that isn’t on the list and see how they get on.

“We also invite staff to suggest ideas for a new cocktail, then put them into a hat and if their mix comes out, they get a cut of the sales. It gets them involved.”

Different approach

People are drinking spirits differently, according to Ally Heath, lessee at Marston’s Star Inn in Penkridge, Staffordshire.

“We still have 40 gins here but mixing with soda rather than tonic is a big thing at the moment, which could be to do with the price. Soda is free while you’re paying £2.50 or £3 for a tonic. And they’re not asking so much for different fruits. They want to taste the gin.

“It depends on who is drinking and when, too. At weekends, younger people go for a Gordon’s flavour with lemonade, and midweek evenings the older crowd will choose Tanqueray or something more upmarket.

“I think rums will overtake the gin market eventually, though. Rum drinkers are mostly the younger end, mid to late-20s with decent jobs. Some drink it neat, or it’s mixed with cola or lemonade.

“The rum people are doing a lot of work getting it out there. I remember in the ’90s all we had was Captain Morgan. Now we stock the Dead Man’s Fingers and Kraken ranges, flavoured, spiced, all sorts.

“We don’t do cocktails. Our bar is too small and our high-end customers wouldn’t like it if we sold premix cans. If we did cocktails, we’d have to do them properly.”