That's the spirit - gin has a fight on hits hands

Gin is struggling to compete in today's spirits market. Ben McFarland finds out what the future holds for one of our more traditional tipples.

The Dutch have been leading us innocent English folk astray for centuries. Long before enticing us across the English Channel with stories of loose women and even looser drugs laws, our friends from the Low Countries had introduced us to the delights of a new juniper-flavoured alcoholic drink called gin.

Gin was initially a pretty unpleasant tasting drink, consumed for its medicinal rather than social properties, and sold in Dutch chemist shops to treat stomach complaints, gout and gallstones. In an effort to make it more palatable, those crazy Dutch started to flavour it with juniper, which also happened to enhance its curative powers.

During the Thirty Years War, when British troops fought alongside Dutch soldiers against the powerful Hapsburg Empire (the Hapsburg family were, incidentally, renowned for having extremely big chins), gin was often drunk before battle and it is here that the term "Dutch courage" originated.

When the full-time whistle was eventually blown on the conflict in 1648, English soldiers returned to blighty with new recipes and gin gained a strong following among the poor by capitalising on the scarcity of whisky and cognac resulting from an on-going spat with the Scots and the French.

As the image improved, so did the scale of distillation. Before long, merchants and tradesmen such as Walter Gilbeys, Alexander Gordon, Charles Tanqueray and James Burrough (Beefeater) established themselves as the major players in the burgeoning gin market.

These names still dominate today's gin sector, albeit one that isn't enjoying the accelerated growth of two hundred years ago. As the flexible qualities of vodka and rum have seen them increase their share of the UK spirits market, the standard gin category has been in steady, yet small, decline in recent years and has struggled to shed its stuffy suburban image.

While Gordon's still leads the field in the UK gin market, its volumes declined from 5.4 million cases in 1999 to five million last year as more premium and lesser-known brands enjoyed rapid growth. Two years ago, in an attempt to buck the declining trend and widen its catchment area beyond the more mature "Gin and Jag" brigade, UDV tried unsuccessfully to reposition Gordon's as a more funky tipple for the younger generation.

It failed to convince a sufficient number of whippersnappers, and UDV swiftly performed an embarrassing u-turn, returning to its greying roots with a £3m "You can only be good at one thing" advertising campaign having recognised that just 14 per cent of gin consumers - over-40 regular gin devotees - drink 60 per cent of volume.

This has left the company free to pursue style-conscious youngsters with its small yet growing Tanqueray brand, having realised that any potential growth in the gin market will be in the fast-developing premium sector that has grown at a rate of 15 to 20 per cent every year since 1996.

Although unlikely to replicate the 1950s cocktail era when gin was the ultimate sign of sophistication, the recent resurgence of the style-bar and the return to cocktail culture has catalysed the growth of a number of premium brands such as Tanqueray, Bacardi-Martini's Bombay Sapphire (pictured above)​ and Plymouth, until recently owned by Seagram.

The success of these brands prompted Allied Domecq to give its struggling Beefeater gin a premium-style makeover (new look pictured left)​ and move it away from the mainstream sector, where it had long played second fiddle to Gordon's, towards the more discerning end of the market.

While the brand's trademark yeoman logo has been retained, Allied Domecq is hoping that a new see-through label and slimmer bottle will help it to duplicate the kind of success it has on the continent. A spokesperson for Allied Domecq said: "We have got a premium-positioned gin in both price and ABV and now the premium packaging supports that proposition and makes it very salient for the style bar arena."

Bombay Sapphire has developed close links with the über-trendy world of design and, since it moved from UDV in 1998, has become a one million case brand - although its growth has been attributed to a cross-over from other premium brands rather than a renewed curiosity in the sector per se.

In an attempt to disassociate itself from the struggling standard category, Bombay Sapphire markets itself not as a gin, but as a super premium spirit positioned alongside the likes of Absolut vodka. Consequently, the fact it's distilled by G&J Greenall in the relatively unfashionable town of Warrington is understandably kept firmly under wraps.

Bombay Sapphire, currently the chief mover and shaker in the fashionable gin set, is likely to be hotly pursued by the up-and-coming Plymouth gin. Despite nearly being written off several years ago and a period of neglect under Seagram's Ideal Brands, Plymouth gin has managed to hold its own in the premium category.

Over the past five years, it has grown from 4,000 cases in the UK to over 55,000 this year, backed by new packaging and a return to its original ABV of 41.2 per cent.

And with Sweden's Vin & Sprit, owner of Absolut vodka, buying a 50 per cent stake in the brand, a global sales target of one million cases by 2011 has been set.

If the premium sector continues to grow at its current rate then this goal could well be within reach, although the likes of Bombay Sapphire or Plymouth will never challenge Gordon's in terms of volume.

Where the gin sector will go once the premium opportunity has been exhausted remains to be seen.

Last year, UDV poured tonic on rumours that it was about to launch the super-premium gin, Tanqueray No 10, in the UK after it gained a following in the US.

It decided to postpone release of its best quality varietal until the parent Tanqueray brand is firmly established, as the UK gin category was not deemed mature enough to accommodate an additional super premium segment. However, it will no doubt be introduced when the current premium brands run out of steam.

Unlike vodka, the complex taste of gin has so far scuppered attempts to enter the premium packaged spirits market save a smattering of unsuccessful gin and tonic concepts. Gin's relative incompatibility has also prevented expansion into flavoured variations in the way vodka and schnapps has and there would have to be a major change in consumer perceptions before "Gin and Red Bull" becomes a regular bar shout!

However, trends are cyclical and if UK drinkers adopt those of their US counterparts, and they usually do, then there's every possibility that gin can improve its standing in the hitherto vodka-dominated white spirit market.