On-Trade Volumes Show Stronger Than Expected Recovery Europe But Weaker in Americas

• European on-trade buyers reported that volumes exceeded expectations, with most of our sources reporting sell-out volume increases within the range of +25-60% YOY supported by re-opening of on-trade throughout Europe and the pent-up demand from lockdown. Evidence of weaker recovery in North America as consumers fearful over job security and COVID variants.

Off-Trade Momentum Shows Signs Of Stopping

• In EMEA, respondents are seeing evidence of demand shifting from the off-trade to the on-trade, resulting in a slowdown of the off-trade. Similarly, in North America, buyers are seeing a slowdown in the off-trade driven by tightening budgets over job security concerns.

Spirit Buyers Can’t Get Stock In And Consider Alternative Brands

• The majority of buyers we spoke to complained about severe supply chain issues resulting in depletions getting ahead of shipments. In particular, many respondents notes that Pernod Ricard was largely unable to fulfil orders. Meanwhile, Diageo maintains the most reliable supply chains, leading to some buyers switching their portfolios to Diageo brands. Some spirit buyers put in bulk orders in the lead up to Q4-2021 but have resulted in some being over-stocked and the rest being under-stocked.

Weak Q3-2021 YOY Pricing Growth But Hikes Imminent

• In Europe and North America, sources reported 1% price increases YOY but, due to labour shortages, rising raw material costs and issues surrounding COVID and Brexit, spirit buyers are expected larger price hikes in the region of +4-8% in Q4-2021. Asia has seen greater increases in price this quarter due to unfavourable FX rates and production costs being passed onto buyers and consumers. New Zealand wine shortage anticipated leading to up to +30% price increases YOY in Q4.

RTD Cocktails Offering Fits Post-COVID On-Trade Needs

• On-trade showing strong demand for RTD cocktails, where bars and restaurants are trying to upsell cocktails and the labour shortages, magnified by pent up demand from COVID lockdowns, have made the ease and speed of getting drinks out of key importance to these businesses. Diageo has reportedly won several large contracts based on the success of their Smirnoff RTD cocktail offering.

Polarisation In Consumption Trends Affecting Sales Mix

• Several respondents report that they are seeing premiumisation continue but that certain consumers and low-cost pub chains are increasingly opting to consume low-cost spirits.