Monday, January 12, 2009

What the world drinks

In the U.S., median home sale prices have dropped to 2004 levels and jobless claims have reached a 26-year high. These economic woes have plenty of Americans lifting a glass. A few may have one, two, or three too many.

But U.S. drinkers aren't anywhere near those in South Korea. When they want to knock one back, they choose soju, a neutral spirit similar to vodka, made predominantly of rice. The country's top three spirits brands are all sojus, accounting for roughly one-third of the market.

Sounds reasonable. But despite a population of 49 million people, South Koreans last year consumed 144.7 million nine-liter cases of spirits or roughly three cases (27 liters) per person, according to IWSR, a wine and spirits market-research firm based in London.

In Depth: What The World Drinks

Among the world's 10 biggest consumers of spirits by volume, South Korea has the second smallest population and the fourth-highest total consumption behind China and the U.S. Not even the vodka-loving Russians come close in terms of per-capita drinking; their 142 million citizens putting back 311 million cases total and, on average, about 2.2 cases per person in 2007.

Behind The Numbers

To find the world's favorite poisons, we used data from IWSR. The company provided a list of the top 20 spirits markets by volume, and the total number of cases sold of the three most popular brands in each of those countries during 2007. This data is not per capita, but is a snapshot of the popular brands in the world's largest spirits markets.

The data also show that there are roughly three different types of spirit-consuming countries: ones that prefer several different spirit types or brands; countries that like locally produced spirits of different types; and those that prefer one type of spirit, with that market dominated by several small brands. The latter category defines most of the spirits-consuming world.

"The spirits industry is really dominated by smaller companies in terms of total volume, not in terms of revenue," says Philip Lynch, VP of corporate communications for American spirits giant Brown-Forman, which owns Jack Daniel's and several other brands, "because a lot of these are small, low-price brands."

Think moonshine--just in slightly fancier packaging and, well, legal.

Russia is a prime example. Only 3% of the spirits market there is considered by industry analysts to be high-end, or at the "premium" level. That 3% includes imports and domestically produced spirits alike--some of it vodka, some of it not. The remaining 97%? All vodka--thousands of different brands of it, according to the Distilled Spirits Council, an American spirits-industry promotions group.

One industry source even suggested the number of Russian vodka producers could be as high as 6,000. Nearly all are small, local producers that make relatively little vodka on their own, but collectively account for millions of cases (some of it made legally, some of it not). The top three vodka brands in Russia, which sold a combined 20 million cases of vodka in 2007, only accounted for 6% of Russia's total spirits market.

Local Flavors

This is similar to what you'll find in China; last year its drinkers consumed nearly 500 million cases of spirits. But the biggest brand, Chivas Regal, provides the country's 1.3 billion people with only 730,000 cases (which is why the spirits giants, particularly producers of American brands such as Maker's Mark and Jack Daniel's, see China as a promising market for growth).

The reason Chivas can be the most popular big brand at such a small total volume is that the Chinese prefer Baijiu. The white spirit, made predominantly of rice, is cheap and easy to find, but it's made by small companies in tiny quantities compared with big-brand spirits. The spirit may be the most popular type there, but no particular brand of it is.

It's a similar story in Poland and the Ukraine. What the Polish and Ukrainians have in common with the Chinese is the prevalence of small, local brands. In Ukraine and Poland, the biggest three vodkas comprise about one-fourth of the total market. In these countries, people drink cheap and local. And it's pretty much all vodka.

Vodka is also popular in America. In total, Americans drank 51 million cases of vodka in America in 2007, according to Noah Rothbaum, author of the book The Business of Spirits.

"Vodka is head and shoulders the No. 1 category in the U.S.," he says. "Americans' thirst for vodka is crazy."

But unlike in Russia, one brand dominates. Though two of the top three brands in America by volume are rums--Bacardi and Captain Morgan--the biggest brand is Smirnoff vodka (it also tops the charts in the U.K. and Canada), which supplied American drinkers with 9,307,000 cases. Americans knocked back more than 5 million cases of Absolut last year, too.

But while vodka makes up roughly one-third of Americans' spirits consumption, they do like plenty of other brands and spirits types as well. Last year Americans drank nearly 5 million cases of Jack Daniel's, not to mention 1.5 million cases of Johnnie Walker (Americans drank 46 million cases of whisky total).

In total, drinkers worldwide consume billions of nine-liter cases of spirits each and every year, indicating that while different countries might have very different tastes, one thing still seems to unite us all: We think sobriety is overrated.

In Depth: What The World Drinks