Sunday, November 25, 2007

Is the Gin Market Flat?

I read a lot on the Internet, including many blogs. I am often inspired by others, and I enjoy learning from my online adventures. Occasionally I read something that sticks with me and gets me thinking. A couple of weeks ago, this article by Jordan Mackay appeared on chow.com. In the article, Mr. Mackay writes that the “gin market is flatlining” and that “[t]he proliferation of new gins is not a response to a market demand, but instead seems angled to create one, fueled by bartenders, distillers and booze enthusiasts rather than the general public.”

To be candid, the only reason I knew about it was because our website received a few hits from the article. In the interest of full disclosure, I am the co-founder of a small distillery (North Shore Distillery), and our flagship product is a thing called Distiller’s Gin No. 6. Mr. Mackay mentions our gins (neither positively nor negatively) in the article, so we got a few hits.

This article got me thinking. Is Mr. Mackay right? Is the gin market really flat? Is the proliferation of new gins really not a response to market demand? I am sure the statistics Mr. Mackay cites are accurate, but I don’t think they tell the whole story of what is happening with gin.

Proliferation of Gins
Indeed, as Mr. Mackay writes, there are a number of new gins coming to the market. He singles out some of the smaller brands in his critique, but the new gins are coming from a variety of sources. Some are from big houses (e.g., South Gin from Bacardi, Martin Miller from Skyy), others from small craft distilleries (e.g., Aviation, Distiller’s Gin No. 6) and still others from small marketing companies that seem to have lots of capital and big aspirations to launch national/international brands (e.g., Bulldog, D.H. Krahn). This isn’t so different from what you see in other segments of the alcoholic beverage industry. You could point to a similar variety of sources (and volume of new products) in beer, rum/cachaƧa, and tequila, and there are far more new entries coming in the vodka market.

As with any category of spirits, there are a variety of flavors and styles represented in these news offerings. Some are closer to a flavored vodka, with very little juniper flavor (and some with very little flavor at all), while others are an entirely new take on gin. The federal government’s definition of “gin” is very broad, so the distiller has a lot of latitude. And indeed, as Mr. Mackay writes, some of these gins are being made by people who don’t have a lot of experience. Based on what I’ve seen in the industry, any poor quality product will surely be dismissed as such by the consumers and critics.

Consumer Interest in Gin
Just as background, I spend several hours nearly every Friday and every Saturday in a liquor store or wine shop. I’m there to pour samples and tell people about our company and products, but I also have an opportunity to observe consumer behavior. I also spend nearly every Thursday and quite a few other nights a week in the restaurants, bars and clubs in the Chicago area. So I consider myself well-exposed to what’s happening in the alcoholic drinks world, at least in Chicago.

What do I see? I see a lot of younger people asking about gin, and interested in gin. They like the variety and options available in gin, and that it’s something different. Many folks have been turned off by all the hype and marketing around vodkas, and are looking for something else to drink. At least some of them are turning to gin as an alternative. The marketing approach used by Hendricks Gin is at least partly responsible – it aims to appeal to the person who doesn’t like to follow the herd. And there are a lot of them out there.

Now are these people the “general public”? No, but they are the trendsetters. In my experience, this is how new trends start. The general public doesn’t set new trends, it tends to follow rather than lead. Now, at least some of the leaders are going toward gin. This is all part of the resurgence of the cocktail culture, and interest in old-time cocktails (and properly made cocktails) rather than artificially flavored schlock.

A couple of other observations:

  • There is a dramatic difference between what people who live or hang out in the city are drinking from those who live in the suburbs (and beyond), and the city usually leads the trends.
  • More and more people in Chicago (and elsewhere) are beginning to appreciate high quality cocktails, as evidenced by the tremendous success of the cocktail programs at Nacional 27, the Spring Restaurant Group, The Violet Hour, and the newest entry, The Drawing Room at Le Passage.
  • Gin is an essential ingredient in a classic cocktail program, along with rye whiskey, bourbon and other spirits that are also experiencing a bit of a revival.

Craft Distilling
Another trend that Mr. Mackay noted is the growth in craft distilling, and that some of the new gins are coming from small craft distilleries. When we started our distillery three years ago, there were about 65 small distilleries in the U.S. Now there are 90 or so, so craft distilling is definitely a new trend. It’s a relatively uncharted frontier – the spirits industry has long been dominated by very large players (
Diageo, Pernod-Ricard, etc.), and distribution is tightly controlled by very large distributors in most markets. Nonetheless, intrepid adventurers are making spirits and trying to bring them to market.

Like the craft breweries before us (and small wineries before them), true craft distillers are often trying to challenge the status quo and showcase their capabilities as craftspeople. We use real ingredients rather than flavorings from flavoring labs, and sometimes step outside the traditional bounds and categories. As a result, we will sometimes make things that not everyone will like (especially those purists or traditionalists among us). But this is how real innovation occurs. We don’t use big focus groups and test marketing strategies like a Pernod-Ricard would (e.g., Indigo Gin, which seems to be disappearing from the Chicago market (can't even find a website for it)).

Are some craft distillers going to put out bad products? Undoubtedly. But some will also put out amazing things, the likes of which have not been seen before. While the former can be said for the big houses and the spirits marketing companies, the latter is less likely to come from those two groups.

The Bottom Line
The bottom line for me (us) is we love gin. We’re really excited to see people exploring gin again, and we see it all across the market, not just among the bartenders & booze enthusiasts.

2 comments:

Cachaca Dave said...

LOL Nice article and I will read it again in the AM. I love gin and I think more people will be turned on to it once they drink tastier gin. Good to hear from you even though it's indirectly. :) Did I give you guys a bottle to take home after the show?

Best Regards,

Cachaca Dave
Cachaca Fazenda Mae De Ouro

http://www.caipirinha.us

~Sonja~ said...

Hi Dave,

Thanks for visiting my blog, its great to hear from you too. Hope you're doing well and having fun making caipirinhas!