How the cost-of-living crisis is impacting on Malt Whisky
Big questions and decisions ahead for malt whisky producers – how well do they really know their customers? And are they still targeting the right shoppers?
So, what’s going on in the category, and how is it effecting brands?
Volumes dropped within many branded categories such as whisky, other spirits, cereals and snacking before Christmas, mostly driven by a fall in household penetration, i.e. fewer people buying them and less frequently.
In some of those categories, such as cereal, price increases were able to lessen the impact of this drop in volume (source Kantar, Focus on Cereal, Jan ’23)
Fewer households buying Malt Whisky then…so what?
For premium categories such as Malt Whisky however, it becomes more interesting when you look at the average income of category shoppers – a 16% increase from January ‘22 to January ’23 (source: TRKR, Jan ‘23)
The logical conclusion is that a whole segment of lower income shoppers have left the category, whether to blended whisky, cheaper spirits or even red wine and beer.
Market leaders Glenmorangie and Glenfiddich saw 14% and 15% increases in average income, For Jura and Highland Park it was even more extreme, 24% and 21% respectively.
This all points to a K-shaped economic recovery, when different sections of an economy recover at starkly different rates. Affluent households are likely to have seen their incomes largely protected and are still keen to treat themselves and buy quality, while households at the bottom are likely to have witnessed permanent hits to jobs and incomes. If the Malt Whisky category has split along those lines, brands will need to react accordingly
What does this mean for brands?
For the product owners and marketing teams at these distillers it means decisions have to be made. Is their range of products and prices right for the remaining market? Are they offering promotions unnecessarily? Should they remove the lower priced bottles? Is their social media marketing reaching the right people?
At the same time, average age doesn’t seem to have changed for most brands (Bunnahabhain is the one outlier with a 10% age increase, while income has fallen – however they remain one of the younger, more affluent brands).
With such significant changes in the category over the last 3 years, it becomes so much more important that brand teams know their customer, and what matters to them.
Why do people now choose their brands? What else do they drink? Why have people switched from their brand, and where to?
What do retailers think?
The big retailers will be very aware of the drop in volume and penetration, and they’ll be expecting brands to come to them with solutions, not just with the data and insight.
And reasons to keep them on the shelf.
Is this a time for innovation and NPD? Maybe, maybe not.
Or is it a time to protect the existing range, and make sure that it’s optimised for the new customer base – definitely.
TRKR are an Edinburgh-based food & drink insight and innovation agency.
TRKR’s Category Snapshot offers manufacturers a bang up-to-date category insight report, combined with direct consumer feedback on their brand, within 10 days.