The U.S. Spirits Industry Powers To A 12th Year Of Unprecedented Growth

Food & Drink

For the 12th year in a row, strong consumer demand for premium spirits drove significant market share gains for the US spirits industry. In its annual review and report on the state of the US spirit industry, the Distilled Spirits Council of the US (DISCUS) highlighted the factors primarily responsible for the continued rise in spirits revenues.

According to DISCUS, the gradual reopening of restaurants and bars, consumers trading up to super-premium spirits for at-home consumption, and a red-hot premium Tequila market were the three primary factors that drove consumer demand for premium spirits, although it did note that more help was still needed to get the hospitality industry on a solid footing.

At its annual economic briefing for media and analysts, DISCUS President and CEO Chris Swonger reported that “supplier sales in the United States were up 12 percent in 2021 to a total of $35.8 billion, while volumes rose 9.3 percent to 291.1 million 9-liter cases.”

According to DISCUS:

In 2021, spirits gained market share of the total US beverage alcohol market with sales rising 1.7 share points to 41.3 percent. This represents the 12th straight year of market share gains for spirits overall.

Added Swonger:

Last year, enthusiasm for spirits continued as consumers spent more to elevate their cocktail experiences with super-premium brands. Consumers savoring spirits at home and trading up to higher-end brands, combined with the gradual reopening of bars and restaurants, resulted in record sales for the spirits sector.

Spirits based Ready to Drink (RTD) products are “also seeing strong growth,” according to Swonger, and “that’s adding to our sector’s gains as well.”

Swonger emphasized that “the premiumization trend, along with innovative COVID-relief measures such as cocktails-to-go, delivery and e-commerce, have helped to boost restaurants, bars and small distilleries as they continue to manage through the uncertainty and volatility created by the lingering pandemic.”

According to Swonger, however, “the twists and turns of this pandemic continue to create volatility in the recovery of restaurants and bars.” He went on to add:

While the spirits sector has remained resilient during the pandemic, the uneven economic impacts of COVID-19 remain for certain segments of the US hospitality industry. Restaurants showed signs of roaring back during the first half of the year, but sales stalled in the second half with the new spike in COVID cases, staff shortages and supply chain disruptions.

According to the National Restaurant Association about 90,000 restaurants have temporarily or permanently closed, and the industry still hasn’t recovered more than 650,000 jobs.

Per DISCUS,

During the briefing, Philip McDaniel, CEO and co-founder of St. Augustine Distillery and chair of the DISCUS Craft Advisory Council, also reported that “many distilleries continue to face major challenges from supply chain disruptions, including difficulty securing glass bottles, closures and labels, as well as rising costs of materials and transportation.”

McDaniel also noted that:

The uptick in tourism across the country will help support the recovery of small distilleries, which rely heavily on tasting room sales. There are now more than 30 spirits trails across the United States. This growth in spirits tourism not only benefits distilleries, it also helps transform surrounding communities, and boosts state and local economies.

Another significant trend that accelerated in 2021 was the premiumization of spirits. According to Christine LoCascio, DISCUS head of Public Policy:

“Nearly 82 percent of the spirits sector’s total revenue increase was from the sale of high-end and super-premium spirits brands. Purchasing luxury spirits to create craft cocktails was a simple pleasure for spirits consumers who hunkered down at home and curtailed spending on vacations and dining out for a second year in a row.”

LoCascio also noted that Tequila was a principal driver of revenue growth in premium spirits, accounting for nearly one-third of the total increase in sales:

From sipping fine Tequilas, to enjoying classic cocktails like the margarita and paloma, consumers’ tastes for super premium Tequila took off in 2021.

According to DISCUS, the top 5 spirits categories by revenue were:

·       Vodka, sales up 4.9 percent or $341 million to $7.3 billion

·       Tequila/Mezcal up 30.1 percent or $1.2 billion to $5.2 billion

·       American Whiskey up 6.7 percent or $288 million to $4.6 billion

·       Irish Whiskey up 16.3 percent or $185 million to $1.3 billion

·       Single Malt Scotch up 14.4 percent or $130 million to $1 billion

·       Brandy & Cognac up 13.1 percent or $403 million to $3.5 billion

·       Cordials up 15.2 percent or $376 million to $2.9 billion

·       Premixed cocktails including spirits-based RTDs up 42.3 percent or $489 million to $1.6 billion

Swonger also highlighted the important progress on the tariffs front: “After three very difficult years of sagging American Whiskey exports, the EU and US are back to a zero-for-zero tariff agreement on distilled spirits thanks to the Biden administration’s efforts to reset trade relations and bring an end to the needless damage being done to US businesses caught up in the trade disputes.”

He added: “It’s time now for the UK to lift its tariff on American Whiskeys so we can get back to sharing the special taste, heritage and quality of America’s native spirit with our UK consumers.”

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