Vermouth – The next big thing?

Among the talk at the on-premise Tales of the Cocktail conference in the UK this April, the consensus appeared to be that vermouth is once again gaining momentum. Indeed, the segment has been tipped by many industry observers as one to watch in the coming years.

  • How did we get here?

The rising popularity of vermouth is not a UK phenomenon. According to figures released by Technavio earlier this year, the global vermouth market between now and 2021 is set to grow at a CAGR of more than 3%, estimated to be worth almost US$19bn in four years time.

The segment is not new to bartenders. It’s an ingredient in many of the world’s most famous cocktails – the Manhattan, the Negroni, the Boulevardier, to name a few. The knowledge and understanding of the segment, therefore, already exists in the high-end on-premise.

The popularity of classic cocktails is also well-documented. The scene is set, then, for the on-premise to help consumers rediscover vermouth.

Also in the segment’s corner is its so-called ‘health halo’: Vermouth generally contains less than half the abv of a spirit, features botanicals and is a (fortified) wine. Emphasising these attributes should help Vermouth move to become the star of a drink – rather than just an ingredient.

Renowned Italian bartender Simone Caporale, who makes an appearance in Martini’s latest vermouth activation, believes the low abv could act as a major growth driver. “It’s very approachable,” says Caporale. “It can be consumed without feeling intoxicated straight away.” He also highlights the botanical “function” of vermouth. “It stimulates your appetite – that’s the main purpose of vermouth.”

The drinks also “has sweetness, bitterness and acidity, as well as some savoury notes,” he adds. “Not all categories on the market have these notes. It is very difficult to get a liquid that has those characteristics.”

When it comes to a serve that could rival icons such as the Aperol Spritz, Caporale cites vermouth with tonic water, or vermouth with soda water and a slice of orange.

The vermouth-and-tonic serve – around 75ml of vermouth and equal tonic, in a copa glass (remember those from the rise of the gin tonica?) filled with ice – comes in at just over one unit of alcohol. The same quantity of 40% abv gin would comprise three units.

“Also,” Caporale continues, “Spanish vermouths, which are slightly higher in sweetness because they use less root and bark, pair well with Vichy Catalan – a salty sparkling water. That’s actually very interesting.”

There is a strong macro case, then, for why vermouth might be ‘the next big thing’.

  • The markets

Europe, Middle East & Africa – 65.13% of the global vermouth market, valued at US$10.46bn in 2016, expected to reach $12.14bn by 2021 (Technavio)

According to Technavio’s Global Vermouth Market 2017-2021 report, the Europe, Middle East & Africa region dominates the vermouth market, accounting for almost two third of the global share. “The high demand for vermouth from European countries such as Spain, Italy, and France is the key factor behind the dominance of the market segment,” says Manjunath Reddy, alcoholic beverages research analyst at Technavio.

Within Europe, the report highlights Spain, where vermouth is “consumed on a daily basis” as well as the “large number of vermouth bars in Barcelona”.

(Interestingly, Barcelona is one of the key European cities to drive the gin boom.)

The firm suggests, however, that France is “nearing maturity”, due to a “lack of in-store promotion” for vermouth.

Outside of Europe, vermouth is said to be “booming” in Africa, driven by “good grape harvests that help in producing wines with good acidity and sugar levels, and favourable weather conditions”.

The Americas – 22.29% of the global market, expected to reach $4.24bn by 2021

According to figures released by Rabobank for 2015, vermouth appears to have been gaining momentum in the US market for a while. For the 12 months of 2015, the firm says, the segment boasted a 23% jump in import volumes and a 14% lift in sales by value.

In its latest report, Technavio flags “increasing health consciousness among consumers” in the US.

“Also, the rising production of vermouth in the increasing number of wineries is impacting the growth of the market in the region,” the report adds.

Elsewhere in The Americas, Technavio says the turnaround in Brazil’s economy will help increase demand for vermouth, while it is set to increase in other markets including Mexico, Argentina and Chile.

Asia-Pacific – 12.58% of the market, valued at $2.02bn in 2016

“Asia-Pacific is expected to be the fastest-growing segment of the global vermouth market, due to the increased consumption in major countries such as China, Australia, Japan, and New Zealand,” says Reddy.

In China, the Millennial phenomenon is going to be the most likely catalyst for growth, Technavio says, as the country’s younger consumers are inspired by western culture.

On a practical note, the research firm flags climatic conditions in most Asia-Pacific countries as having “not allowed for the development of wine culture” in the same way that is prevalent in the Mediterranean.

  • The key players

There are several sizeable and well-known vermouth brands, most of which herald from Italy and France. The main global players are Bacardi with its Italian stable under the Martini brand as well as the Noilly Prat French vermouths, and Gruppo Campari with Cinzano, Mondoro and Riccadonna.

Campari – like Bacardi with Martini – also owns sparkling wines under the same brand names. It’s tricky to separate vermouth from wine in the company’s results announcements. In its first-quarter 2017 presentation, for example, the group flagged an overall organic sales lift of 6.1% for Cinzano. Within that, Campari reported a “negative performance in vermouth mainly driven by declines in Argentina (also due to a tough comparison base) and Italy, partly offset by good trends in Russia and the UK”. Mondoro and Riccadonna, meanwhile, saw organic sales rise 2.4% in the three months to the end of March, with Mondoro performing well in Russia. However, Riccadonna declined in the period, due to weaker sales in France brought on by “shipment phasing”.

While Bacardi doesn’t release results, the privately-owned company’s key vermouth markets are Russia, Spain, France, US, Poland, Italy and Germany.

Away from Bacardi and Campari, Technavio also highlights E& J Gallo, with its namesake dry and sweet vermouths, as well as The Wine Group with Gambarelli & Davitto, Lejon and Tribuno.

Technavio’s report describes the market as “highly fragmented” with the presence of plenty of smaller companies competing with the likes of Bacardi and Campari. This is evident in the UK, with craft gin players such as Blackdown and Sacred also producing their own British vermouths.

“Some companies are … more specialised than others with respect to particular commodities and some companies have larger financial resources than other companies,” Technavio says. “To survive and succeed in this competitive environment, it becomes imperative for manufacturers to distinguish their product and service offerings through a clear and unique value proposition.”

  • The next step

Earlier in 2017, a geographical indication came into force for Vermouth di Torino (vermouth of Turin). This is a major plus for authenticity-seeking consumers and a way for companies to push premium credentials, as they will inevitably look to take drinkers on a journey to trade up.

The rules of the GI state that each brand must contain Artemisia (wormwood) native to Piedmont, must be made using one or more Italian wines and must be bottled between 16% and 22% abv.

This July, newly-formed trade association the Institute of Vermouth di Torino held a tasting in London with 15 brands: Berto, Bordiga, Del Professore, Carlo Alberto, Carpano (Fratelli Branca Distillerie), Chazalettes, , Giulio Cocchi, Drapò, Gancia, La Canellese, Mulassano, Sperone, Torino Distillati, and Tosti, as well as Campari’s Cinzano and Bacardi’s Martini & Rossi.

As companies both large and small get to grips with their marketing campaigns, no doubt we can expect more activity around the GI.