If you’ve been tempted to try one of the new craft ales or artisan gins in the nation’s bars and pubs, you’re not alone – the beer and spirits trade is on a roll.
Gin broke the £1bn sales mark for the first time ever in the UK in 2016, six months ahead of forecasts, making it a record-breaking year.
For six consecutive quarters, sales of gin in pubs and clubs have seen double-digit growth, outperforming every other spirits category, according to the latest report from the Wine and Spirit Trade Association (WSTA).
The artisan gin boom gained momentum in 2009 when London-based Sipsmith won a two-year legal battle to be allowed to make gin in small quantities.
Since then, growth has been nothing short of phenomenal – 96 new distilleries opened over the two-year period 2015-16, taking the total to 273, compared with just 110 in 2010, a 148% increase.
Gin sales in pubs and bars have increased by £300m since 2012, while sales of gin in shops, supermarkets and off-licences have increased by 68%.
Alcohol exports are also up, with British gin now sold overseas in 139 countries around the world. America, Canada, Spain and Germany are the top buyers, with exports to the US up a staggering 553% in the past decade.
The gin boom helped spirits overtake beer in terms of excise duty in an historic industry first. HM Revenue and Customs (HMRC) earned an extra £225m in revenue from spirit drinkers in 2016, taking total spirits duty to more than £3.38bn, while beer duty stood at £3.32bn. Wine remains the biggest contributor to the Treasury at more than £4bn.
WSTA chief executive Miles Beale said: “The WSTA dubbed 2016 the year of gin, and the gin boom has had a large part to play in the windfall now being enjoyed by the Treasury.
“The 7% increase in revenue takings came as a result of the Chancellor freezing spirit duty in 2016 and allowing the industry to grow and invest.
“It proves the point that cutting or freezing spirits duty brings rewards, which is why the inflation-busting rise in duty this year was such a disappointment and threatens the industry’s ability to invest, grow and export.”
Why gin is a winner
The Isle of Wight’s Mermaid gin is one of the new artisan brands enjoying dramatic success. Launched in 2015, the company saw a 10-fold increase in sales from year one to year two.
Already Mermaid’s HMS Victory Navy Strength Gin has been awarded a prestigious ‘Best in Category’ accolade at this year’s American Distilling Institute (ADI) Spirit Competition.
Mermaid initially focused on capturing local trade, then winning over the sailing community who use the island as a base – sponsoring a series of races – and is now promoted across the UK.
Its unique blend of botanicals – the flavourings that make gin so distinctive – includes rock samphire seaweed. It’s this ability to vary the recipe, using local ingredients, that has encouraged the launch of so many regional distilleries.
Mermaid’s marketing director Xavier Baker believes it’s all part of the general movement to try local produce.
Supporting local producers
“A lot of it stems from the craft beer scene, people trying different beers – also people going organic, trying to support local producers. On the gin side, the product lends itself to that, because you can use local botanicals. For us it’s rock samphire. It’s part of the exploration – different tonics, different garnishes.”
Mr Baker says there may be a risk of a gin ‘bubble’, however, with the market close to saturation point in the next couple of years. “But hopefully the ones that are producing good, true gins and are passionate about gin will carry on.
“It will get to the point where there is too much out there, but it’s got a way to go yet.”
He says there will inevitably be some consolidation. “The bigger guys step in – it’s happened to a couple of distilleries already, but they allow them to carry on relatively independently – the same management team, the same distillers, and they are just there for support.”
Whisky sales up
Of course, gin is not the only UK spirits player in town. The latest HMRC figures show the number of 70cl bottles of Scotch whisky released for sale in the UK in the first three quarters of last year totalled 57.2m, up 5.6% from 54.2m in the same period of 2015.
The increase built on a rise in demand in 2015 – the first period of growth for whisky sales in the UK since 2010. Scotch exports increased last year by 4% to more than £4bn, with the value of single malts exceeding £1bn for the first time.
It marked a return to growth for Scotch exports, after a few years of levelling off and small declines as a result of economic headwinds and political uncertainty in some markets, according to the Scotch Whisky Association.
Last year, Scotch remained the biggest net contributor to the UK's balance of trade in goods. In 2016, without the impact of whisky, the UK trade deficit in goods would have been 2.8% larger at almost £139bn.
Whisky accounts for more than a fifth of the UK's total food and drink exports. In 2016 the European Union remained the top destination for exports, worth around £1.2bn, with US exports growing 14% to £865m, followed by Asia, with shipments of £768m.
After the US, Poland showed one of the biggest year-on-year increases at 18.9% by value (£63m total sales), with India another dramatic riser at 13.8% (£97m), Japan up 8.4% (£82m), and Germany up 13% (£164m). China remained fairly static at +0.5% (£41m).
Exporting alcohol from the UK
The UK is by far the largest exporter of spirits in the world and the industry supports some 296,000 jobs in the UK, both directly and indirectly. Around 45% of all UK spirit exports, by volume, go to the EU and 33% by value, worth £1.6bn.
However concerns remain about Brexit, in particular a ‘cliff-edge’ scenario. “As an industry we are all in this together,” said Mr Beale. “Any disruption of trade is bad for businesses on both sides of the Channel.
“It is the joint ambition of the UK and European wine and spirit industry to secure free trade flows and we have agreed to make this clear demand to all our politicians.
“It is very encouraging to see Philip Hammond has heard our views, and those of other industries, and realised the need for a transitional period to allow time to agree and prepare new and equally frictionless customs arrangements.”
Craft ale boom
When it comes to brewing, it’s a tale of two extremes – with the big brewers getting bigger, while under their feet a host of new microbreweries are springing up selling an ever-increasing range of premium craft ales to discerning consumers.
According to a 2015 global beer market report by Allied Market Research, the global beer market is expected to reach $688.4 billion by 2020, maintaining a compound annual growth rate (CAGR) of 6%.
It says a significant increase in the consumption volume is being fuelled by growth in developing regions.
Takeover creates world's biggest brewer
Last September Anheuser-Busch InBev won shareholder approval for its takeover of US giant SABMiller, in a $100bn deal that made it the world’s biggest brewer.
The new group, which will produce roughly 30% of the world's beer – 137bn pints – will trade under the AB InBev name.
AB InBev brands include Budweiser, Stella Artois, Corona and Beck's, while SABMiller labels include Peroni, Pilsner Urquell and Grolsch.
However, to win approval from national regulators, AB InBev has had to agree to sell the Peroni and Grolsch brands to Tokyo-based drinks company Asahi, together with British craft brewer Meantime, which it bought in 2015.
AB InBev has also had to sell SABMiller’s 49% stake in China’s Snow brand, the world’s biggest-selling beer by volume. More than 18bn pints of Snow are produced each year, making up 5.4% of global beer sales.
Meanwhile rival Molson Coors bought SAB’s 58% of MillerCoors and the Miller global brand portfolio from AB InBev for $12bn – again, to reassure regulators.
By virtue of the merger, Heineken moved up to second place in the global brewing stakes, at 9.0% of sales, with Carlsberg third at 6.1%.