How lesser-known spirits categories are thriving in Italy - Market Intel

The current fortunes of Italy’s spirits market are closely aligned with the country’s worsening economy. In 2022, Italy’s economy grew 3.8% in 2022, but slowed to 1.2% last year, according to the Organisation for Economic Co-operation & Development (OECD). With inflation eroding consumer confidence and government assistance on utility costs gradually being withdrawn, forecast growth for this year is a paltry 1%.

In short, Italians are feeling the pinch. A consumer survey by market research firm Nomisma in December discovered that only 13% of Italians thought their financial situation would improve in 2024, while 37% of families planned to reduce their leisure spending.

Consequently, IWSR Drinks Market Analysis predicts the Italian spirits market will limp along with a CAGR of 2% until 2027, with value growth over the same period a little higher at 3%. These modest expectations are a far cry from Italy’s robust 12.2% rebound from the Covid-19 pandemic in 2022, when the on-premise fully reopened and tourism resumed.

Brand owners acknowledge that 2023 was awash with challenges. “The economic situation was difficult, the economy was not growing in Italy,” says Stock Spirits Italy MD Evelina Teruzzi. “We had high inflation and lower consumer confidence. These elements negatively influenced consumers’ willingness to go out and made them more careful with spending.”

However, amid what Teruzzi describes as a “double-digit declining market”, Stock Spirits enjoyed a positive year: Sales were strong in the peak summer months of July, August and September. The company’s leading brands in Italy are Keglevich Vodka, Limoncè Limoncello and Stock 84 Brandy, which will mark its 140th anniversary this year with a limited-edition expression.

Meanwhile, Nio Cocktails founder & CEO Luca Quagliano believes that 2024 will be “difficult” for Italians, with further increases in energy costs and petrol prices widely expected. However, the Milan-based RTD cocktail producer believes there will be opportunities for those brands with a strong off-premise presence. “Recession is the big danger,” he warns. “Italians will spend less on unnecessary purchases. At the same time, people might decide to go out less and spend more time at home, alone or with friends – this could be an interesting factor for Nio, with its features and benefits.”

Gin remains the ‘most-dynamic’ of the major categories

While bitters, liqueurs and brandy took Italy’s top three spots in volume terms in 2022, according to IWSR), it was fourth-placed gin that performed the most brightly, growing 38.3%. The gin bubble may haves burst in other European countries, but not yet in Italy.

“Of the major categories, gin is still the most-dynamic, even though growth in 2023 is set to be lower than in recent years as the cycle matures and consumers investigate other categories,” says IWSR’s Western Europe research director, Humphrey Serjeantson.

Campari Group’s MD for Italy. Gabriele Ornaghi, says that gin “has been having a resurgence over vodka, once deemed the cool spirit for those in the know”. She adds: “Gin’s complexity seemed to better cater to the growing audience of drinkers looking for an all-round sensory experience.”

Best known for its top-selling Campari and Aperol bitters brands, Campari Group’s gin portfolio includes the standard Bickens London Dry and super-premium O’ndina. However, the company has focused its promotional activities on the New York-inspired Bulldog Gin brand, adopting a ‘g-local’ strategy and forging links with social influencers. “Bulldog’s vision is simple, becoming the symbol of bold expression for cool nightlife,” explains Ornaghi.

“Within the context of booming gin sales in Italy, where most of the players are focusing their communication on product credentials and botanicals, we decided to position Bulldog as a lifestyle gin brand, starting to build a link with both well-known and emerging fashion brands, becoming a go-to for fashion parties, especially within the Milan scene.

“Over the last two years, Bulldog has been the main partner of the tenth anniversary party for Marcelo Burlon’s County of Milan brand, as well as for JW Anderson, Sunnei, Dsquared2 and Diesel,” she adds. “There’s a different strategy for each of the countries where the spirit is distributed and Italy, which is growing at a fast pace, was the natural fit for a fashion-leaning approach.”

Agave spirits and no/low make breakthroughs

From a very small base, tequila was another star performer in Italy in 2022, growing volumes by more than 30%, according to IWSR. The country is now the eighth-largest export market for tequila, according to the official regulatory body the Consejo Regulador del Tequila, with imports doubling in 2022. Imports over the first half of 2023 totalled 2.7m litres.

“Drivers of growth for agave [in Italy] are mainly the global trend behind tequila, with celebrity involvement and cocktails, as well as sipping serves boosting consumption,” explains IWSR’s Serjeantson.

Unsurprisingly, Stock Spirits’ Teruzzi says the company has high hopes in Italy for its recently-acquired Sierra Tequila brand, which is already sold in 90 countries and currently ranks second in size in Europe.

Another minnow in the Italian spirits market with a bright future is the no- & low-alcohol segment, which grew 615% in 2022, according to IWSR data. “No-alcohol spirits growth is being boosted by an increasing appetite for healthy living and a wider availability of product in both on- and off-premise,” says Serjeantson.

Bottega Spa MD Sandro Bottega agrees that low/no is “becoming relevant to the market”. The Veneto-based wine and spirits producer’s portfolio includes Elixir Zero, a non-alcoholic amaro. “This bitter digestif is the perfect choice for teetotallers and all those who, for any reason, choose to be cautious in their consumption of alcohol,” says Bottega.

In a similar vein, Campari Group recently launched a 17.5cl format of its bittersweet non-alcoholic aperitif, Crodino, with the aim of pushing the brand within the long-drink consumption occasion. The larger format sits alongside the existing 10cl version.

Shift to at-home consumption

The Covid-19 lockdowns led Italian consumers to become more adventurous in their drinking habits, argues Amaro Santoni global brand ambassador Simone Caporale. As well as representing Amaro Santoni – a 16% ABV floral bitter liqueur made with 34 botanicals – Caporale co-owns Barcelona’s Sips, ranked The World’s Best Bar 2023.

“The fact that people were stuck at home for long periods of time meant they had the time to explore new spirits categories,” says Caporale.

Italy has now become much more “interesting” as an export market, according to La Clandestine Absinthe co-owner & commercial director Alan Moss. The country is now La Clandestine’s third-biggest European market after Switzerland and Germany. In Italy, Moss says, the absinthe segment was dominated by cheap, lower-quality brands until the launch of a new online retailer, Assenzi Originale, in late 2022.

“It has over 50 quality absinthe brands from France, Switzerland and Italy,” says Moss. “We have two brands in the top six absinthe sellers [including La Clandestine, above] and three in the top ten… It’s not an enormous business yet, but [Assenzi Originale] is doing the right things methodically and professionally.”

Troubled times for traditional spirits

Liqueurs, brandies and aniseed-based spirits, traditionally popular categories in Italy, face a tough future, says Serjeantson. “Liqueurs were boosted by cocktails, especially during and immediately after the pandemic, but the effect of this is wearing off now,” he says. “Aniseed (mainly local sambuca) is in long-term decline. It is generally drunk as a shot and that occasion is in decline as consumers increasingly focus on health & wellness. [On top of that], the category is often seen as less sophisticated than other, more international categories.”

Brandy too, Serjeantson warns, is in trouble, with grappa and grape-based brandies largely appealing to an ageing customer base. Other challenges include rising health concerns and younger LDA consumers gravitating towards other spirits categories.

“The challenge for grappa is to attract the younger generations,” admits Bottega, a big producer of grappa which has created a wide range of grappa-based cocktails over the past decade.

“Gen Z likes mixability,” he adds. “Some of them are also interested in knowing more about the distillation process and the difference between young and aged grappas. Alexander Exquisite Premium (above) is a new release of our brand. It is a reserve grappa obtained by distilling selected pomace of outstanding quality. Long, careful ageing in wood gives it an amber shade and enriches its bouquet with smooth rare notes.”

Producers of traditional Italian spirits, like Bottega, are clearly aware of the long-term challenges they face and are making strenuous efforts to appeal to younger consumers.

Time will tell whether these attempts can revive their flagging fortunes.