High-end spirits, falling within the prestige and prestige-plus price categories, account for a modest portion of global spirit volumes, yet they represent a substantial 15% of the market’s value.
Particularly driven by key regions like Asia and North America, these segments saw growth during the pandemic years. Despite challenging economic conditions, their volume increased by over 6% and value by 8% between 2021 and 2022.
However, the Covid-19 lockdowns have reshaped the way consumers purchase luxury spirits, and these shifts may endure in the post-pandemic world.
E-commerce Centre Stage
Lockdowns prompted the rapid expansion of the e-commerce channel in many markets, especially in the US. Consumers turned to at-home consumption, supported by relaxed rules on home delivery. This was particularly beneficial for the $100-$249.99 price segment. E-commerce sites also enhanced their offerings, providing educational and entertaining browsing experiences. Although e-commerce growth slowed in 2021 and 2022, the post-Covid e-commerce environment is more advanced, with increasingly tech-savvy consumers. It is anticipated that e-commerce will remain a vital channel for high-end spirits vendors.
On-Trade Recovery Slow
Traditionally, on-trade has been critical for prestige and prestige-plus spirits. In 2019, 56% of sales in these categories came from the on-trade, but by 2022, this figure was 43%. The financial repercussions of the pandemic may make it difficult for on-trade operators to restock expensive products, resulting in a slower recovery at this end of the market.
Eyes on Global Travel Retail
Global Travel Retail (GTR) serves as a valuable storefront for the spirits industry, with pre-pandemic data showing its significance, especially for Scotch. Duty-Free accounted for nearly a tenth of all prestige and prestige-plus sales in 2019, but this figure dropped to less than 4% in 2020 due to COVID-19. Sales are rebounding as travel outlets recover, and suppliers are integrating GTR into a broader brand strategy rather than considering it a separate entity.
Secondary Market Softens
The secondary market for top-end spirits had been on a strong upward trajectory, but it has softened recently, with prices falling. Nonetheless, volumes are increasing at the lower-priced end of the market. The health of the auction market depends partly on high-end launches selling out, as the secondary market benefits from this excess demand. When economic conditions improve, auctions are expected to regain momentum.
VIP service and experience
The desire for an exceptional experience when purchasing high-end spirits, especially among High-Net-Worth individuals, is unchanged. Consumers are increasingly seeking a VIP service, going beyond the purchase of the bottle to include experiences like distillery visits and brand ambassador interactions. Trust and high-level service have contributed to the rise of third-party agencies and private client divisions.
IWSR forecast suggests the prestige and prestige-plus segment will continue to grow once macroeconomic challenges subside. Initial indications are positive, and the high-end spirits market is expected to increase its value by around a third by the end of 2027.
