The cost of living crisis makes its presence felt in the cocktail hour

Forget cheap tequila sold in bottles sporting cliche Mexican images, hand-crafted tequila and premium cocktails on tap are the next big trends.

Super premium tequila has got incredible credentials, says Diageo chief Dan Hamilton. Picture: Britta Campion

The cost of living crisis is making its presence felt in the cocktail hour.

While some drinkers cling to mainstream brands, others are reducing drinking and choosing to imbibe more expensive and luxury drinks when they do.

And while the gin craze continues to grab the attention of drinkers and retailers with gin and tonics still incredibly popular, in the distance looms tequila as the new global juggernaut beverage expected to fill the glasses and cocktail shakers.

Dan Hamilton, recently appointed boss of Diageo Australia and a 12-year veteran of the alcoholic beverages giant, told The Australian trading conditions were returning to normal rhythms after the end of the Covid-19 pandemic but cost of living pressures were playing out as consumers selected what and when to pour a stiff drink.

This meant a return in growth at restaurants, bars and cafes - known in the industry as on-trade - as people were once again going out and socialising.

He said Diageo is rolling out its “cocktails on tap” that will see 200 pubs around Australia by the end of the year fitted with quality cocktails poured from the bar at competitive prices.

Diageo Australia’s recent financial accounts which showed a healthy uplift in sales to $738m for 2023, up from $707.35m in 2022 with its net profit up 19.5 per cent to $68.52m.

Johnnie Walker continues to be popular. Picture: AAP Image/Julian Smith.

“It’s great to see the on-trade coming back after such a disruptive period but it feels like it is coming back strong and we are seeing consumers wanting to being out there, celebrating and socialising in a pretty positive way and I think that is good to see,” he said.
“But clearly it is a multifaceted consumer dynamic and we are certainly seeing the top end of our portfolio still staying strong, so for those consumers who are looking for a more luxury or super-premium type offerings, they are continuing to spend but for many consumers obviously the cost of living pressures are very real.”

Diageo, one of the biggest drinks companies in the world, is able to walk both sides of the street.

Its mainstream, and more affordable, liquor brands include whisky giant Johnnie Walker, Smirnoff vodka, Baileys, Captain Morgan rum, J&B, beer brand Guinness and Tanqueray gin. It also offers premium and super premium brands such as its Don Julio tequila range, Ketel One vodka and Australian iconic rum brand Bundaberg, plus also the portfolio of Johnnie Walker labels from entry level though to the most expensive.

Lana Wilkinson in the Don Julio marquee during the Melbourne Cup Carnival. Picture: David Caird

Mr Hamilton said there were some price increases across its beverages portfolio to reflect its own rising supply costs with overall volumes slightly down for the year but the stronger mix of premium and super premium drinks helped to lift sales and profitability.

“Our volume actually was slightly back, but that‘s OK,” he said.

“I think the growth just reflects resilience of the portfolio we have.

“One of the beauties about our business is we do obviously play into the premiumisation trends particularly with brands like Johnnie Walker Blue or a Don Julio tequila.

“But also then with the big brands like Bundy and Smirnoff, Gordon’s and Baileys, for those consumers who are feeling a little bit more price sensitive.”

Mr Hamilton, who previously ran Diageo in Japan and South Korea, said the super premium beverage category was growing particularly strongly at the moment with tequila now shaping up as the ‘next big thing’ on the menu for drinkers.

Brody Watson holds up a glass in the Johnnie Walker marquee in the Birdcage at Flemington racecourse. Picture: AAP Image/Julian Smith.

“Super premium tequila has got incredible credentials, and great diversity of how it can be drunk, and we have a very strong position with Don Julio which is the No.1 super premium tequila and Casamigos which is the fastest growing, so we will double down and focus on investment in tequila”

These quality, premium tequilas are far removed from days of cheap-priced tequila sold in local neighbourhood bottle shops that left drinkers feeling very seedy the day after.

“The modern world of tequila is a very different world to perhaps some of those perceptions, with the modern world of tequila products that are 100 per cent blue agave sourced products, they are products that are handcrafted and products that have incredible credentials from a quality perspective.

“And we do see tequila as a category that has got some of those quality credentials that we do see in a category like scotch.”