Looking beyond the current gin boom

Following gin's meteoric rise over the past decade, Clay Smith, from distilling and business management training company Moonshine University, asks what is next for the category

Clay Smith Moonshine University

Whether it’s due to being stuck at home during Covid-19, or people pivoting on their own to explore the spirits world, one thing is for sure: the spirits industry is booming in both purchasing and consumption. The gin category, and specifically the craft category, has seen exponential growth, specifically a 9 per cent increase each year for nearly a decade, according to the American Distilling Institute. And while it wasn’t a typical year due to the global pandemic, the category of craft gin distillers reached a growth rate of 122 per cent from 2020 to 2021.

The idea of “what goes up, must come down” naturally comes to mind when industry leaders see similar outlier statistics, so what will happen after the current gin craze, and how will businesses prepare for the inevitable shift in popularity?

With a steady increase in people trying to enter the gin industry, growth numbers are similar to those seen during the pre-Prohibition era, except this time around, we have an increased capacity for production. Launching a gin brand isn’t an exorbitant cost for entry. With the unilateral intrigue in craft cocktails and distilleries, investment and further exploration in craft and gin categories make sense. With gin, wait times for market entry are shorter, and overhead costs are naturally lower, so it’s a fantastic product for new distillers to start with. Other spirits, like bourbon, must wait for age appropriateness before launching into the market, so gin is a much faster spirit to produce. In fact, due to local legislation changes in many states across the US, which enable beverage businesses to function more like a bar, investing in gin categories is a smart move if you’re already a fixture in the industry. With these businesses now offering incentives like tastings and product cocktails, gin has become more of a destination that can remain sustainable if business owners become experts in their local economy and demographic.

There are currently about 2,100 distilleries across the United States, which equates to anywhere from three to 150 “local” distilleries for every state that a bar or restaurant would need to carry to support local product growth. There’s simply not enough shelf space for this. This means a gin producer needs to think about how to differentiate their brand and make it unique. Whether that’s utilising local botanicals or ingredients indicative of their specific area, or standing out with overall marketing efforts, producers need to strongly consider what will make customers reach for their product on the shelves while also being mindful of the FDA “GRAS” (generally recognised as safe) list. As long as there is supply and demand for gin, the market can maintain its competitiveness, but for this to happen, consumers need to keep their money in their economy by shopping these local brands. Meanwhile, business owners and developers in the gin space must focus on how they can better serve and accommodate the interests in their community to support this organic growth.

If your business doesn’t have the privilege of selling your brand products on-site or offering cocktails to customers due to differing state laws, finding a way to make that change is the first step in increasing revenue capital. Legislative leaders have their eyes on Kentucky due to its rich distilling history, and other state legislatures will often follow suit once we see success in the Bluegrass. Your state’s local distilling guild or association is a powerful tool for achieving parity through legislation.

In 2021, nearly 10 million nine-litre cases of gin were sold in the United States, generating US$1 billion in revenue for distillers, according to the Distilled Spirits Council of the United States. The category is a saturated industry that will naturally ebb and flow as beverage trends evolve. Hopefully, we see these numbers stabilise and remain above the nearly 10 per cent growth seen within the last decade. And while learnings tell us that relying on gin alone is typically not enough to sustain a small business like a local distillery, because of the numerous barriers for entry, focusing on local trends and consumer interest will help retain brand loyalty in a competitive market. Ultimately, with these practices in place, gin exploration will remain a fixture in beverage popularity rather than just a fad.

24 June 2022