Spirits group Distil PLC (LON:DIS) says coloured and flavoured compound gins and gin-based liqueurs have had an 'extraordinary impact' on the UK spirits market.
A wave of new micro-Distilleries producing dry gins have also made inroads and the AIM-listed group is having to iincrease promotional spending to match price cuts by rivals.
Marketing expenditure rose by 48% to £688,000 in the year to March, which offset higher gross margins.
Revenues rose by 20% to £2.4mln but this was due to a 50% surge in sales of RedLeg spiced rum. Sales of Blackwoods gins were down by 12%.
Sales of vodka were also weak, though group profits increased slightly to £160,000 due to the strong performance in rum.
Dan Goulding, executive chairman, said he expects rum and gin to show steady improvements over the new year.
Gin growth will 'naturally slowdown' from the current highs though he expects it will remain in good health, but rum will grow at current levels.