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29-05-2017

Alcoholic Drinks in Latvia

Positive development for alcoholic drinks is expected in the upcoming years
Over the forecast period, alcoholic drinks is expected to register a slight improvement in total volume CAGR compared to the stagnant review period CAGR. However, the numbers of people of drinking age are expected to continue to decline. While spirits is expected to benefit from ongoing government activities designed to combat illegal sales of alcoholic beverages, all other categories will be driven from a consumer shift from spirits towards beverages with a lower ABV. Improving purchasing power will also further benefit higher-end products.
Improving value performance but volumes decline
Improving purchasing power contributed to the premiumisation trend observed across various alcoholic beverages in 2015. This resulted in a positive value performance, which outperformed the review period CAGR despite the new tax increase. However, the current economic environment did not allow alcoholic drinks to register positive growth in volume terms in 2015. On the other hand, the review period revealed stability in total volume CAGR terms despite the decline in the number of people of legal drinking age.
Economy segment shrinks while the premium segment continues to grow
Excise tax increases negatively affected the performance of the economy segment, which is still significant in Latvia. As a result, this moderated consumption habits and resulted in some minor shifts in leading categories, such as standard lager in beer and vodka in spirits. At the same time improving purchasing power enabled players to benefit from the improving performance of the premium segment. This trend was also represented in a number of new product launches, making the environment fruitful for their success.