Cheap spirits in decline

The domestic production of spirits totalled 46 million litres last year. Less than 3,5 per cent of this quantity has been exported. Imports account for 15 per cent of domestic sales. As András Nagy, director of the Hungarian Association of Distilleries has told us, they do not have precise data about the revenues and profitability of specific companies. Profitability is low in general. Accession to the EU and the lifting of import tax has presented domestic manufacturers with a major challenge, especially in the premium segment. As a result, the development of premium palinkas has accelerated and new spirits have been introduced. According to KSH data, per capita consumption of spirits was 3.5 litre in 2005, expressed in pure alcohol. This shows stagnation. The market share of spirits from illegal distilleries is estimated to account for approximately 30 per cent of total consumption. Long drinks and RTD-s have been rapidly gaining in popularity for years world-wide. The Hungarian market is no exception, though growth is less dynamic. Cheap products accounted for two-thirds of sales in the 46 million litre market of spirits. This segment however, has been showing gradual decline in recent years. Within this segment, only private labels show expansion, holding a market share of 20 per cent at present. Both domestic and imported premium brands show dynamic growth, with a current market share of 15-16 per cent.