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High Spirits

Posted on  | March 21, 2016   Bookmark and Share
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Paced by whiskey and premiumization, Spirits continue to gain market share.

For the sixth year in a row, distilled spirits delivered steady volume and revenue growth in 2015, according to the Distilled Spirits Council of the United States (DISCUS). “The positive performance of distilled spirits is the result of many factors, including market modernization, product innovation, consumer premiumization and hospitality tax restraint,” said DISCUS President and CEO Kraig R. Naasz, who assumed his position on January 1st, 2016. 

The long-term trend for spirits overall is especially positive:

 Total supplier revenue more than doubled from 2000 to 2015, growing from $11.7 billion to $24.1 billion in 2015.

Sales of distilled spirits in the U.S. reached 215 million cases total in 2015, a 2.3% increase from the previous year.

Spirits saw a slight increase in market share relative to beer for the sixth straight year in 2015.

The last point is especially noteworthy: 2015 marked the sixth consecutive year in which spirits chipped away at beer’s leading share of the overall beverage alcohol market. Market share gains for spirits since 2000 totaled 6.7 points, representing $4.6 billion. Spirits now hold 35.4% of the overall U.S. beverage alcohol market share.

On the policy front, Naasz had more good news. Major state tax threats in 2015 were defeated in 18 out of 18 states. Legal spirit tastings expanded in CT, ME, MS, NY and WI, bringing up the number of states that allow some form of spirits tastings to 46. Texas demonstrated a push for modernization, with 26 out of 27 wet-dry alcohol elections passing in 2015. Social responsibility also saw progress in 2015 as the nation achieved record lows for underage and binge drinking.

Category Close-Ups

DISCUS Senior Vice President David Ozgo highlighted the latest U.S. category data. Whiskey continued to be a strong sales driver with a 2.8% volume increase to 59.4 million cases, and a 8% revenue increase to $8.1 million in 2015.

Taking a closer look at U.S.-made Whiskey (comprising Bourbon/Tennessee; Rye; and White/Corn Whiskey), the category grew 5.2% in volume in 2015, to 20.4 million cases, and even more in terms of revenue, up 7.8% to $2.9 billion, a $210 million increase over 2014. The surge was paced by Bourbon and Rye; Bourbon was up 5.9% to 17.4 million cases; Rye was up 19.5% to 671,000 cases. Meanwhile, White/Corn Whiskey saw a dip in 2015 of 3.7%, selling 2.2 million cases.

Canadian Whiskies (accounting for 16.7 million cases in 2015) saw growth of 2.5%, with a notable jump at the Super Premium ($30+) level, up 17.8% in volume to 5.6 million cases. Other successes in Canadian included Flavored products (up 900,000 cases) and Rye (up 100,000 cases).

Irish Whiskey and Single Malt Scotch also saw continued success. Irish Whiskey volume was up 16.1% to 3.2 million cases and revenue increased 19.9% to $664 million; the Irish category has grown six-fold in volume since 2005. Single Malt Scotch grew 13% to 2.1 million cases, and saw a revenue increase of 13.5% to $732 million in 2015.

Tequila was up a strong 7.4% in volume and 9.4% in revenue; and Cognac was up an impressive 14% in volume to 4.5 million cases, and +16.2% to $1.3 billion in revenue. Super Premium Cognac by volume grew a whopping 20.3%. Ozgo also noted that while Rum volume and revenue were down in 2015, Super Premium Rum saw a 2.8%
volume increase.

Vodka overall saw growth of 1.8% to 68.2 million cases, and a .5% revenue increase to $5.8 billion, so the clear neutral spirit is clearly not done yet. Flavored vodka was slightly off in 2015, while traditional vodka saw
solid growth.

What To Watch

Micro-distilleries—which have mushroomed from 92 in 2010 to 750+ in 2015—were key contributors to the industry, albeit more in visibility than volume. The focus on craft-style, artisanal products is benefiting both large and small producers, according to DISCUS.

Among other factors contributing to steady volume and revenue growth were:

 Millennials coming of legal drinking age, with their interest in discovery driving innovation and premiumization

State legislatures showing hospitality tax restraint

Modernized alcohol laws expanding consumer access and choice

Arguably the most important trend in spirits overall is the premiumization of consumer tastes, evident in faster growth at higher price points (see box). Other trends DISCUS sees happening in 2016 include:

Control states taking steps to modernize, while privatization debates continue;

More wholesaler realignment and consolidation;

Expansion of delivery services such as Drizly, Minibar and Amazon; and

Growth of micro-distillers—some will flourish, some will fail, some will be acquired. 


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