Gin and tonic eases the pandemic pain as drinkers turn away from beer

Pandemic drinkers have brought the bar experience home and increasingly reached for the spirits shelf to drive unprecedented sales growth at drinks giant Diageo.

Diageo Australia managing director Angus McPherson said trends before Covid-19 of drinkers turning away from beer and wine to reach for spirits like gin, whiskey and rum accelerated through the pandemic.

Drinkers locked up for months during Covid-19 lockdowns and unable to visit their favourite club or pub have brought the bar experience into their homes, setting up small cocktail bars, mixing up drinks and increasingly reaching for gin, whiskey and vodka to drive unprecedented sales growth at drinks giant Diageo.

Gin was the fastest growing spirit through 2021.

Such was the excitement around cocktails and pre-mixed drinks, across the colour spectrum from vodka to spiced rum, that online searches for the term “drink cart” had lifted more than 300 per cent as Australians kitted out their own drink trolleys through Covid-19, commented Diageo Australia managing director Angus McPherson.

And the trends witnessed before the pandemic hit Australia of wine and beer drinkers moving into the spirits category have only accelerated, with the latest financial performance for Diageo Australia revealing the spirits category posting more than double the growth of wine and beer.

“The on-trade sector (pubs, clubs, bars) was shut. The volumes and total alcohol consumption was relatively flat once you factored in on-premise versus off-premise, but what we did see with on-trade shut is that people shifted away from beer and wine and moved into spirits, both glass bottled and premium ready to drink (RTDs) during lockdowns,” Mr McPherson said.

Diageo’s top brands include Johnnie Walker, J&B, Bell’s, Baileys, Gordon’s, Smirnoff, Ciroc, Captain Morgan and Australian iconic rum Bundaberg.

Latest accounts for Diageo Australia show sales for fiscal 2021 rose to $697.727m from $589.465m, a gain of 18 per cent.

Johnnie Walker is one of Diageo’s top brands.

Annual net profit was $58.43m, up from $31.11m, although some of those gains were from the payout of a loan in 2020 that boosted last year’s profit by $13.1m. Gin once again proved itself a champion of the spirits category, as reflected in the hundreds of gin distillers that have now popped up all over Australia.

“The gin boom continued to power on in the last 12 months,” Mr McPherson said.

“The trend was before Covid, but it continued to really be the market leader within the spirits category through Covid.”

For Diageo this helped cement its Gordon’s brand as the No.1 gin in Australia, as well as supporting robust sales growth for its other key gin Tanqueray.

Vodka was another ‘‘white spirit’’ that excelled in 2021, with Diageo’s Smirnoff and Ketel One pulling in new and old drinkers to the category and its brand.

“Diageo Australia saw sales revenue of close to $110m up in 2021,” Mr McPherson said.

“Drinker preferences are changing. That was happening before Covid and accelerated during Covid, and as a result beer and wine lost share.”

Mr McPherson said RTDs were also a significant winner from the shift of drinkers away from beer and wine.

Diageo Australia financial accounts show domestic alcohol sales (in the off-premise segment) grew 12.5 per cent, with spirits up 17 per cent and pre-mixed drinks such as RTDs rising 30 per cent, easily outperforming beer and wine, which were both up 7 per cent for the year.

As a result, and given its dominance of the white and dark spirits and pre-mixed drinks RTD categories, Diageo Australia reported in its local accounts that it saw “unprecedented growth”, with volumes up 22 per cent.

“Consumer preferences are changing and in particular white spirits are the driver, driven by gin and as well as vodka, and RTDs as consumers weren’t able to go into the on-trade to get their vodka, lemon and lime or their gin and tonic that moved into the home.

“The versatility of spirits and the ability to make interesting and different drinks at home I think has brought real energy into the spirits category.

“The ability to pour a standard serve of a single gin and tonic, or a whiskey on the rocks or one highball at home, enjoy it, and you only want one drink, versus a reluctance to open a full bottle of wine … I think really helped that spirits category.”