Innovative drinks sector is brim-full of opportunity | ONE

It is an attractive sector for scaling businesses and new entrants with enormous scope for innovation. The market is extensive with numerous alcoholic and non-alcoholic product categories and sales channels to the on and off-trade, retail and direct to consumers.

North east producers including 6 Degrees North, Brew Toon, Burnside Brewery, Deeside Water, Esker, Fierce Beer, House of Botanicals, Lost Loch, Porter’s Gin, Raven spirits, Raw Culture, Summerhouse Drinks, The Teasmith, and The Wee Scottish Cider Company are increasingly familiar to discerning drinkers at home and internationally. Not to forget the whisky distilleries such as Fettercairn, Glengarioch and Royal Lochnagar.

Drinks in all their many forms are, however, competing in a crowded marketplace. Success requires a combination of high-quality products, innovation with an eye on evolving consumer tastes, and effective sales and marketing targeted at the highest margin returns. This is a sector where you can build a brand, and hopefully a premium, through a focus on quality, particular consumers, a unique story, how you go to market and how you produce.

Critical issues for the sector are sustainability, changing consumer tastes and new product development, and the growth in drinks tourism.

Sustainability is now essential in an industry that is often a significant user of energy and resources. Many craft brewers, for example, have already shifted their focus from bottles to cans because they are lighter to transport and require less energy to recycle. A national mandatory bottle return scheme is still on the government legislation list. Production techniques will be another area for evolution to achieve environmental targets. Many distillers and brewers are already capturing waste heat, adding value to their mash by-products or generating green energy from them.

Opportunity North East and Scotland Food & Drink are partnering to bring new, dedicated resource to the region to support businesses with their sustainability drive and achieve commercial advantage from it.

There have been significant shifts in the drinks sector globally in the past 18 months.

In 2020, at-home consumption increased sharply. Consumers searched for more sophisticated alternatives to traditional non-alcoholic options such as soft drinks. The moderation trend that pre-dated Covid-19 saw no- and low-alcohol drinks increasing their traction among a broad range of consumers. Awareness around health and wellbeing has meant that no- and low-alcohol offerings have become aspirational, with consumers willing to pay a premium.

Covid-19 lockdowns and the subsequent rise of the at-home drinking occasion forced many drinks businesses to shift channel investment into ecommerce. As consumers have become increasingly comfortable with buying alcohol online, the value of alcohol ecommerce grew by 40% in 2020. By 2024, in the top ten global markets, the value of the channel will surpass $40 billion, more than double the sales of 2019.

The ready-to-drink (RTD) alcohol category, which includes pre-mixed cocktails, is under rapid transformation. Volume growth is outpacing other categories globally as consumers look for lower ABV, portability and single-serve options. In the US and Canada, the volume consumption of RTDs overtook that of spirits in 2020.

New product development (NPD) will ensure drinks producers capitalise on these trends. Opportunity North East and SeedPod are working with Scotland Food & Drink and the Knowledge Bank to pilot an insights into NPD programme. It will enable businesses to use market data and foresight to create new, on-trend premium products. The potential is enormous and could include anything from cider, soft drinks, oat milk, and water to vending technology, pre-mixed cocktails, and nitro beers.

Alongside the drinks as experiences trend, there is increasing demand for drinks tourism, with consumers wanting to connect with products at source. The whisky industry has long recognised this, but the visitor experience now extends to brewers and distillers of other spirits. For example, Lost Loch Distillery, Porter’s Gin and City of Aberdeen Distillery have established successful visitor experiences.

An excellent case study of a business in the region investing, innovating and embracing new opportunities is Lost Loch Distillery on Deeside, which took part in Opportunity North East’s 2018 food and drink business growth programme.

The business saw a significant increase in enquiries for contract distilling during the lockdown. Pre-pandemic, it had five contract distilling customers. Today, it has 21 and is producing over 30 different products at the distillery.

Lost Loch appointed a hospitality manager in late 2020 and has been building the tourism and events side of the business. They are open for tours and tastings and run an award-winning spirit school. Investment in facilities includes a new road, an outside bar, signage and lighting, and expanded storage space. They have also rebuilt their website with an improved e-commerce shop front.

Lost Loch’s current priorities include increasing sales and distributing its eeNoo Gin, Haroosh, and Murmichan products to the broader UK market. It also plans to launch new products under the Singular series range to include whiskies and rums.

Lost Loch is one of more than 20 businesses across the region taking part in the Provenance Festival, led by Opportunity North East, that starts today and enables people to experience the region’s world-class food and drink products first-hand and at the source. See the provenancefestival.co.uk website for more details of 100-plus events.

There are enormous opportunities for the drinks sector as the food and drink industry across north east Scotland develops its leading role in sustainable production, product innovation and premium market development. A busy market pushes innovation. I think we will see exciting products coming forward alongside advances in production, packaging and distribution. All of which will create new jobs and income as part of the region’s green economic recovery.