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Millenials: the new target demographic

More aware of environmental concerns and healthy living than older generations,
millennials prefer products that are seen as authentic and natural.

Not a single press conference goes by without mentioning Generation Y, or millennials, to justify the launch of a new product,” said Virginie Roumage, food and beverages analyst at Bryan, Garnier & Co. “This generation has become the alcohol industry’s biggest obsession.” Pernod Ricard, the world’s second largest spirits producer, devoted a long chapter to millennials in its 2018 annual report. This generation, born between 1980 and 2000, is targeted heavily by alcohol giants because millennials fall within the age bracket (20 to 40 years old) that spends the most, and the demographic continues to increase (in total there are more than 2.3 billion, the largest generation in the world).

But it’s also because this generation has very different consumption habits from their predecessors, which forces the alcohol industry to reinvent itself. “Millennials have a strong moral and ethical awareness, and are no longer attached to a single brand,” said Pernod Ricard in its annual report. “Generation X (born between 1960 and 1980) was very loyal. If a person liked one whisky, they would never change brands,” said Roumage. “However, millennials prefer new experiences. They like products that tell a story and prefer local products.”

This trend explains the success of craft alcohol, which is particularly booming in the beer industry with its explosion of micro‑brewers. In the early 2000s, Switzerland had less than one hundred breweries. This number has increased tenfold in less than 20 years. “The rise in microbreweries is a global phenomenon; this is happening all over the world,” said Pierre‑Olivier Bergeron, secretary general of The Brewers of Europe. “I think it’s a consequence of globalization. In the 1990s, beer was too standardised. Today, people aged 20 to 35 don’t want that any more. They’re looking for authenticity, a return to the source.”

TAP WARS

In the reference market of the United States, craft beer, seen as cool and anti‑establishment, is now worth $25 billion in annual revenue, which is nearly a 25% market share. Officially, this rise to power is a golden opportunity for industry giants: “The rise of craft beers benefits everyone, including small and large breweries,” said Bergeron. “It’s an incredible opportunity because younger generations are more interested in beer thanks to these products.”

In reality, however, multinationals are doing everything they can to halt the growing craft beer movement. In bars and restaurants, alcohol giants are imposing exclusivity agreements and offering refrigerators, umbrellas and other goodies emblazoned with logos in order to keep craft beers from reaching the taps. They also have no problem pulling out the chequebook. Very active in the industry, global beer leader ABInBev has multiplied its acquisitions of microbreweries since 2016. The most recent was in August 2019, when the giant acquired Platform Beer, a booming regional US brewer.

“Traditional beer players had to figure out how to counter the craft beer phenomenon,” said Moshmi Kamdar, analyst at Union Bancaire Privée (UBP). “One of the solutions is innovation. Giants are launching more complex products, such as low‑calorie or non‑alcoholic beers, which requires lots of R&D that independent brewers cannot easily afford.”

 

“Millennials prefer local products and products that tell a story”

Virginie Roumage, analyst at Bryan, Garnier & Co.

 

The beer sector is particularly impacted by the craft beer boom because anyone can brew their own beer, and even buy a kit to brew at home. “The spirits market is much more protected, because there are significant barriers to entry,” said Roumage. “Not everyone can just distil whisky at home. It’s a complex process, so big companies are at an advantage.”

Nevertheless, a few brands have emerged on the market, such as French start‑up Fair, whose flagship product is vodka made from organic quinoa that is vegan, gluten‑free and fair trade. It’s a small threat to the spirits industry, but multinationals are taking it seriously. In its 2018 report, Pernod Ricard stated its strategy to win the hearts and wallets of millennials. The French group will first “promote the traditional aspect” of its brands Jameson, Martell and Absolut; they are now marketed as products that are made in the traditional way and are therefore authentic. Secondly, the company is innovating, playing up the natural and local qualities.

Last year, it launched “pastis from fresh plants” grown in the Valensole Plateau in Haute‑Provence, France. It’s an attempt to dust off the ancient image of pastis, or “pastaga”. Finally, Pernod Ricard has embarked on a policy of acquiring the most promising artisanal brands, such as German gin Monkey 47, Italian gin Malfy and American‑Mexican mezcal Del Maguey.

Pernod Ricard’s biggest competitor, Diageo, is doing the same. In 2017, the UK group spent $1 billion to acquire Casamigos, George Clooney’s tequila brand, and began a partnership with Cuba Ron this August to distribute its premium brand Santiago de Cuba. “That’s the paradox of the craft boom,” said an analyst. “Customers, and millennials in particular, think they’re buying local, artisanal and independent products. But in reality, the alcohol market is controlled by a handful of multinationals that own almost every brand.”

THE SURPRISING GENTRIFICATION OF GIN

It’s the trendy alcohol, the darling of aperitifs. In 2018, gin experienced the highest increase of all spirits in terms of volume (+8.3%), according to International Wine and Spirit Research (IWSR). It’s a breakthrough for the spirit, which for a long time was reserved for the end of the night, when all other bottles were finished. Invented in the Netherlands, the ancestor of gin was imported in the 17th century to Great Britain by soldiers who had left for war. It marked the beginning of a mad consumption that gave gin its unfortunate reputation and nickname: “mother’s ruin”. In the 19th century, British officers based in India mixed quinine with gin to protect themselves from malaria. And the gin and tonic was born. It was followed by other cocktails, such as the gin fizz and the dry martini, which restored the reputation of this eau de vie.

But then, gin rested on its laurels. In the 1980s, it had become a “has‑been” alcohol again, reserved for English dockers and the Queen Mother. Sales didn’t pick up again until the advent of the craft phenomenon. Starting in 2010, new companies have entered the gin market, such as Monkey 47 and Ferdinand, which happily focus on the artisanal, organic, vegan, gluten‑free and/or natural aspects of their gin production.

They had immediate success, which has led to an explosion of brands. There are now more than 6,000 gin makers around the world, including Alata (Monthey), Matte Brennerei (Bern), Xellent (Lucerne) and Nginious (Basel) in Switzerland. This boom is due to practicality: for craft distilleries, ageing alcohol such as bourbon or whisky is very complex. They would have to wait years to make any kind of profit. Distilling a clear alcohol, which brings in profits quickly, is much easier.

 
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