According to analysis from market experts at IWSR, the premium spirits sector, encompassing those priced above US$100 per bottle, remains on a trajectory of robust growth globally, with expectations of further enhancement as the travel retail sector resumes and expands.
In 2022, data from IWSR reveals that over 80 percent of the value within the premium spirits segment was attributed to high-end baijiu sales in China. Excluding baijiu, the premium spirits market heavily relies on China, the US, and travel retail, accounting for more than two-thirds of its revenues.
Cognac and Scotch whisky persist as dominant players in the upper echelons of pricing, representing 78 percent of global spirits sales by value. Recent years have witnessed notable advancements in agave spirits, alongside promising indications for Irish and US whiskies, particularly as the demand for high-priced spirits gains traction in emerging markets.
Guy Wolfe, Head of Status Spirits Insights at IWSR, stated, “We continue to maintain a broadly optimistic outlook for the future of premium spirits, although expectations were tempered during 2023 amidst a less stable global economic landscape.”
The forecast from IWSR anticipates that the resurgence of global travel retail and the US market will spearhead growth in the premium spirits sector. Over the period from 2022 to 2027, the duty-free market is projected to more than double, expanding by 115 percent. Meanwhile, the US market is expected to witness a 50 percent growth, with China trailing at 10 percent as affluent Chinese consumers gradually resume travel.
By 2027, travel retail is anticipated to emerge as the most lucrative market for premium spirits, commanding a value share exceeding 25 percent, marginally ahead of China (24 percent) and the US (23 percent).
Adam Rogers, Research Director for North America at IWSR, highlighted the evolving landscape of premium spirits consumption in the US, stating, “The post-pandemic recovery of the on-trade sector in the US has been somewhat subdued, but consumers are opting for higher-end products to enrich their at-home experiences. Tequila remains highly sought-after at a premium level and is poised to capture additional market share in the coming years.”
The anticipated revival of travel retail is expected to catalyze category growth, particularly benefiting stalwarts like Cognac and blended Scotch. IWSR forecasts project an 83 percent increase in revenues for status-level blended Scotch between 2022 and 2027, surpassing agave spirits (+77 percent), while Cognac sales are forecasted to climb by 28 percent over the same period.
Wolfe further remarked, “Nearly 60 percent of the growth in high-end Cognac is expected to originate from the travel retail channel between 2022 and 2027, with the channel projected to account for nearly one-third of global status Cognac sales by 2027.”
Despite immediate economic challenges and a more stringent trading environment in 2023, impacted by inflation and economic uncertainties, IWSR’s positive outlook underscores the enduring potential of premium spirits. Wolfe noted, “While the traditional notion of ‘higher price point, higher growth’ faces challenges with softening auction prices, there remains optimism for sustained market growth in the long run.”
The expansion of the middle class in markets such as China, India, and the broader APAC region, coupled with a growing affinity for high-end products among buyers and collectors in Tier 1 cities, reflects a broadening audience for premium spirits. Moreover, in Western markets, the inclination towards ‘less but better’ consumption patterns, alongside the evolution of premium at-home drinking and entertaining, is fostering a trend of consumer upgrading across the board.
