Scottish Gin – an industry at its peak?

As we approach 100 distilleries making gin here in Scotland, we felt it was time for reflection, but more importantly, to look ahead at what the future may hold. None of us has a crystal ball, but we thought it’s a good time to ask some industry insiders what their thoughts are.

But first, let’s rewind – The Scottish Gin Society was established by Stephen White in 2016. The idea was simple, to build a community of fellow Scottish Gin lovers, and follow the journey of this incredible category. Stephen’s belief was that Scottish Gin would thrive and grow and ultimately challenge our other national drink – whisky.

So, in 2017 we set about documenting the distilleries and gins that were popping up all over Scotland and in 2018 we launched our online A-Z of Scottish Gin directory and Scottish Gin Distillery map, continuing to research and add new distilleries and gins as they appeared, keeping our followers up to date with the selection of Scottish Gins available.

The growth has been far beyond anything we could have imagined. In the coming months, we fully expect to log the 100th gin distillery in Scotland. Compare this with 2000, when there were just 2 (map courtesy of James Porteous, Electric Sprit Co.) 

It’s not just the number of distilleries that is quite incredible, there’s also the Scottish Gin brands that are contract or cuckoo distilled. The number of gin expressions on the market is growing at a rapid rate, with brands regularly releasing new flavours, colours & strengths to their portfolios.

And this is part of the brilliance of the Scottish Gin market – its constant innovation. The actual spirit lends itself to experimentation and there seems to be no end to the development of new and different ways to enjoy it.

But how did we get here? And where is the industry going? Well, here are the thoughts and opinions of some of the people at the heart of the Scottish Gin industry on why there has been such an explosion of interest in recent years and what the future might hold for us.

What’s behind the boom?

First off, we spoke to Andrew Niven and Wiebke Petersen from the industry body, Scotland Food & Drink for their insight into what’s behind the Scottish Gin boom. They told us that “the spirits sector is changing, primarily due to the shift in the consumer’s drinking behaviour. Consumers are starting to drink less but better quality, resulting in a higher willingness to pay more for premium products. Consumers also enjoy experimenting with new drinks, flavours and brands which aids the category’s growth. Furthermore, unique and social experiences gain popularity among consumers which drives the popularity of cocktails and other mixer drinks more than ever before.” 

They are also of the opinion that the versatility of gin makes it a popular choice for drinkers:

Gin is a key player in the cocktail world due to its high versatility. Over the last couple of years, a diverse range of unique flavoured and coloured gins as well as gin liqueurs have been introduced and gained immense popularity among the younger adult generation, which helped grow the gin industry. The huge variety of gins available means there’s a gin for any style of cocktail on the market.

And – love it or hate it – flavoured gin is, and will continue to be big business:

Flavour innovation is arguably the biggest driver of gin growth in the UK. In the off-trade, the value of flavoured gin has grown by 192% over the last year with 50+ new products and it now accounts for over a third of all gin sales. In the on-trade, Gordon’s Premium Pink has overtaken Gordon’s Original to be the no.1 gin in the market, demonstrating the impact of flavours from a product less than five years old.

The rise of pink and flavoured gins, is definitely an area to watch, Martin Murray of Dunnet Bay Distillery, winner of 2019 Scottish Gin Awards Distillery of the Year added, the growth in supermarkets expanding their ranges; and the likes of Caorunn, Hendrick’s and Edinburgh Gin releasing new editions/expressions, are meeting consumer’s demand for craft gin. 

This is supported by Alan Wolstenholme, Chair of the Scottish Distillers Association, who believes that pioneering brands such as Caorunn and Hendrick’s reinvigorated the industry. He also says:  “The market has been receptive with a desire by consumers for “genuine” product, possibly with a local angle and with engaging stories about the product. However, a key element must be the sheer number of energetic and enthusiastic individuals who have worked hard to bring their products to the public’s attention and thus driven the growth.”

And Alison Higgins, Brand Ambassador for The Scottish Gin Society, and someone who definitely knows her Scottish Gins believes there is another reason for the gin boom of recent years. She says:

“Over the last two and a half years, we have seen growth, creativity and innovation beyond our wildest dreams. As touched on, the people behind the brands are what makes this category so special.  The one area we can’t ignore is the growth in gin experiences. More and more consumers can now enjoy gin where it’s made, which looking back to 2017 there were only a few brands that opened their doors. I think there will be continued growth in gin-experiences (excluding festivals), so distillery visits, gin schools, foraging and the like, attracting both consumers from home and abroad.”

The individuals behind the brands are breathing life into what was once seen as a pretty dull category and shaping it to be something no one could have predicted. The vibrant, innovative attitudes of the gin brands have made Scottish Gin more attractive to spirit drinkers. But can it last?

What will the future hold for Scottish Gin?

It’s very hard to predict how an industry as surprising and regenerative as Scottish Gin will develop in the coming years, but again, most people have a firm opinion on this. The Scotland Food & Drink team gave us some very interesting statistics to explain their view. They say:

Global alcohol consumption fell back by 1.6% in 2018, according to data from the IWSR, with some 27.6 billion nine-litre cases being consumed.   The figure represents a setback after 2017, which saw a small uptick of 0.1%. However, among categories in growth in 2018, gin was the clear winner, with volume sales up by 8.3%. In the UK, gin was up 32.5% year on year.

According to the WSTA’s Market Report, total UK spirit sales last year were worth over £11bn, with around 400 million bottles sold – meaning that one in every five bottles of spirit sold in the UK in the last year was gin. Volume sales of gin are predicted to rise 23% globally by 2023.

So, it looks like the gin market is set to continue growing? Yes, but at a slower pace, according to Scotland Food & Drink. They tell us:

Within the next 10 years, the gin sector is likely to slow down in the UK. With the large amount of gin brands available on the market, the market is becoming highly saturated. 402 new gin brands have entered the UK market since May 2016, 367 of which are premium brands. This means there’s a real challenge for brands to stand out and achieve any loyalty and repeat purchase.

They also predict the public will be consuming less alcohol in the future, so more product innovation in lower / no alcohol options can be expected: “Due to increasing health awareness, consumers are likely to be drinking less alcohol in the next decade, and even opt for more low- and no-alcohol alternatives. The traditional gin category might share shelf space with more non-alcoholic alternatives.”

It’s also possible that we might see more adventurous consumers becoming bored with gin, as they did with Vodka in cocktails.  Rum, vermouth, tequila and mezcal are some of the competitor spirits that have recently been seen more and more in the cocktail scene, so it’s essential for the gin category to keep up to date with the latest trends and adjust to the competing market.

Martin Murray thinks the future will see some of the bigger players acquiring some of the smaller brands. He also predicts that, while consumption won’t grow, consumers will continue to diversify their ‘go-to’ brands and try more of the smaller craft gins as well as new flavours. 

James Sutherland, owner of 56 North, Talk Gin Podcast host, and South Loch Gin creator-  hopes to see the “gin liqueur” market and the trend for sugary gins give way to consumers returning to well-made Scottish full strength gins. He also cites “micro regionalisation” as a key trend for the future, where brands all buy from small local producers and companies and gin consumers buy from local gin producers, creating ‘micro gin regions’ within Scotland. He says “We’re already seeing this in Scotland where certain brands can be huge in a small area and go 15miles away and they don’t exist!”

When asked about the future of the category, Alan Wolstenholme thinks it will become even more congested in terms of numbers of brands but inevitably it will get harder to stand out and get shelf space. He thinks we might see takeovers and some brands simply exiting the sector. But he says:

‘However, until I see a glut of unsold secondhand stills I won’t believe the boom has turned to bust! I think volume will continue to increase and successful companies will upscale their production capacity.’

What’s the big opportunity for Scottish Gin?

It’s clear from talking to people within the industry that there is still potential for growth, but few see that there is much more room for new brands to enter and the sector to remain sustainable. One key area for growth, however, is the export market.

Andrew Niven told us that HMRC export figures show that, in the last 12 months to May 2019, gin exports from the UK were worth £730m, while domestically over 76 million bottles of gin were sold in the last 12 months (WSTA to March 2019), worth £2.3 billion, putting the total value of the category at just over £3bn. Of the £730m gin exported from the UK, around £350m heads to the EU with the remaining £380m worth heading further afield. 

But, they say challenges exist, especially with Brexit uncertainty.  EU tariffs post-Brexit remain a possibility and with Spain being one of the largest producers of gin outside the UK this could make a serious dent in exports to Europe, especially for smaller producers who don’t have the economies of scale of their larger multi-national competitors. Ongoing global trade disputes mean that tariffs applied by the US could also be extended.  In the UK the duty on spirits, which has been frozen in the last few budgets, may well start to rise, depending on the hue of future governments. Andrew says:

“Scottish gin producers will need to understand the trends, what the consumer is looking for and whether their new product development pipeline is in tune with the market. “

Alan Wolstenholme is cautiously optimistic about the future of the category and sees digital development playing a key role in increasing worldwide distribution. He sees a big opportunity in “primarily establishing Scottish Gin as a premium category internationally, allowing significant exports.”

Martin Murray also sees export as a key opportunity for Scottish Gin producers, as some markets are starting to grow gin cocktail sales, but he thinks gin producers may come under pressure to discount their product, that will make things difficult for some of the smaller players.

When asked about opportunities for the Scottish Gin category, James Sutherland told us that the key issue is the constant drive for new products rather than good products, he is concerned that the market may lose the ‘craft’ angle in the rush to get new products out. But he does see an opportunity in the innovation of lower sugar and lower ABV products that are made in the same way as gin and retain the flavours and skills we have in Scotland.  

James also touches upon the prickly subject of the regulation of gin production, ensuring Scottish products are made in Scotland. While this could be a threat to the industry and perhaps not welcomed by all, it can also ensure the highest quality within the Scottish Gin industry and is something he would welcome.

So, what’s the conclusion?

The future of Scottish Gin is a hot topic and as we speak to more people about the Scottish Gin industry, a clearer picture is emerging. Yes, it seems as though the arrival of many more new distilleries on the map could lead us to breaking point, but on the other hand, there is a clear appetite for new and innovative gin brands, especially those that have a great story to tell. 

And while there is always the threat that the gin bubble will suddenly burst and the public will abandon their love of gin for another spirit, it’s unlikely that this is going to happen any time soon, or that the category will be altogether forgotten. It’s also clear that gin producers are going to have to continue to evolve and innovate and think of new ways to grab the public’s attention if they are to grow and survive.

All in all, it’s a very exciting time for the Scottish Gin industry and the wonderful people who make up the community. As ever, The Scottish Gin Society is proud to be at the heart of that community, supporting and promoting it and watching with eager excitement to see what the future brings!

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