Thirst for luxury: who would pay £250 for a bottle of spirits?

Italy's Illva Saronno is the latest brand to launch an ultra-expensive alcoholic beverage. But how big is the market for pricey liqour?

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Britain may be known for having a boozy culture, but investors are hoping we have a taste for luxury as well as alcohol. Illva Saronno, the Italian drinks company that makes the liqueurs Tia Maria and Disaronno, this week revealed it will make an audacious new push into the UK with a special blend costing £250 a bottle.

The UK spirits industry is big. In total last year, it made a profit of £721.3m on sales of £4.1bn generated from 122 companies, according to IBISWorld. The research body also forecasts that revenue will increase at a compound annual rate of 1.8 per cent over the five years to 2020.

But what is it that convinces Illva Saronno’s chief executive, Augusto Reina, that now is the time to expand further in Britain? What is it about luxury drinks, many endorsed with a celebrity name, that attracts the public? And which other companies are cashing in?

Illva Saronno expansion

The luxury drinks brand is launching its new product, Disaronno Riserva, across the world and it will hit British shores in the second half of the year. It is produced by mixing Disaronno with Scotch whisky in oak barrels that previously contained marsala wine reserves.

Negotiations are now under way to sell the product in high-end retailers. It will also be stocked in some UK duty- free shops.

“This is something new and very different that has taken time and dedication” said Mr Reina. “The UK market right now is one of the most important for us and London has a key role to play for our UK sales.”

The company has just hired a new, four-strong dedicated UK-based team, including Ian Taylor who joins as a director from rival Pernod Ricard. Previous luxury initiatives by the company include forming an alliance with the fashion house Versace to create a designer look for its bottles. Mr Reina said the company wants to increase its UK presence aggressively.

Disaronno and Tia Maria revenues reached €350m (£250m) last year, of which 10 per cent came from Britain.

What’s the appeal of luxury liquor?

Christian Davis, editor of the trade magazine Drinks International, said he does not envisage any slowdown in the high-end drinks market.

“This is what is dubbed ‘premiumisation’ and it is a very important revenue channel for key drinks companies. Some of the firms are recruiting people from the perfume and haute couture industries to help market their brands as a luxury product.”

Mr Davis added that the drinks “tend to be bought by rich people passing through airports, or stocked in the coolest London and New York bars”. The middle classes of countries such as India and China are also keen buyers.

Sara Grady, food and drink analyst at Datamonitor Consumer believes companies making unusual and limited products can expect a strong customer base.

“Consumers become more aware of the qualities associated with a luxury beverage, such as exclusivity, production expertise, and product provenance,” she said. “This starts to become the norm and to be expected in mainstream alcohol launches. We can therefore expect these super-luxury arrivals to focus even more on exclusivity and production routes.”

So confident are some of the brands, especially those linked to celebrities, that James Ebel, a partner at the property agent Harper Dennis Hobbs, has been approached by companies from the US seeking shops and concession space on some of the UK’s most elite shopping streets.

He said there is some concern among landlords about “whether all the brands will have longevity”, but that they are willing to offer pop-up space and short-term leases.Any business willing to commit to the sometimes troubled British high street is probably convinced that the returns will outweigh the risks in  any investment.

What else is on the shelf?

The luxury drinks market has been hit by a drop in sales in China as consumers stop buying pricey bottles of upmarket alcohol such as cognac amid the Chinese Government’s crackdown on lavish gift-giving. Recent results from companies such as Pernod Ricard and Diageo show they have both been affected.

Nevertheless, Pernod said in March that sales of Martell cognac performed well during the Chinese New Year holiday, and last year Diageo confirmed its commitment to luxury celebrity products by launching Haig Club – a new Scotch whisky – in partnership with David Beckham and the showbusiness svengali Simon Fuller.

One company that has seen the benefit of stocking celebrity lines is the three-year-old

The e-tailer prides itself on securing the latest “must-have” releases, such as George Clooney’s Casamigos Tequila and “Hipster” Chablis (which comes in a glow-in-the-dark bottle).

Last year the company’s turnover hit £1m. Director Jay Swanborough said: “We are seeing more and more brands approach us with new, higher-end formats and approaches to distilling and blending. People are buying larger formats across the board, spending more. A bigger bottle of anything tends to feel special, and to some extent can be seen as a bit of a luxury or extravagance.”

With Illva Saronno prepared to invest so much time and money on a new luxury product, it certainly seems confident that the thirst for expensive alcohol will not be sated for some time.