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Consumer Demand for Premium Spirits Drives U.S. Market Share Gains

By March 2, 2022Top News

Spirits growth supported by hospitality industry recovery; more help needed for restaurants and bars

From Staff Reports

The distilled spirits sector achieved strong growth in 2021 driven by the gradual reopening of restaurants and consumers trading up to super-premium spirits for at-home occasions, the Distilled Spirits Council of the United States (DISCUS) reported on Feb 3. at its annual economic briefing for media and analysts.

DISCUS President and CEO Chris Swonger reported that supplier sales in the U.S. were up 12% in 2021 to a total of $35.8 billion, while volumes rose 9.3% to 291.1 million 9-liter cases. In 2021, spirits gained market share of the total U.S. beverage alcohol market, with sales rising 1.7 share points to 41.3%, representing the 12th straight year of market share gains for spirits overall.

“Last year, enthusiasm for spirits continued as consumers spent more to elevate their cocktail experiences with super-premium brands,” said Swonger. “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. We’re also seeing strong growth for spirits-based ready-to-drink products, and that’s adding to our sector’s gains as well.”

Swonger noted 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.

Uneven COVID-19 impacts on U.S. hospitality industry

Swonger underscored, however, that while the spirits sector has remained resilient during the pandemic, the uneven economic impacts of COVID-19 remain for certain segments of the U.S. hospitality industry.

Sales volumes at on-premise establishments, which represent about 20% of the U.S. market, were up 53% in 2021 following nationwide restaurant and bar closures and restrictions. Off-premise sales volumes, which saw sharp gains in 2020, were flat in 2021.

Since the start of the pandemic, the National Restaurant Association reports that about 90,000 restaurants have temporarily or permanently closed, and the industry still hasn’t recovered more than 650,000 jobs.

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.

On a positive note, McDaniel stated 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,” he said. “This growth in spirits tourism not only benefits distilleries, it also helps transform surrounding communities and boosts state and local economies.”

Consumers’ preferences for higher-end spirits accelerate

In presenting an overview of 2021 spirits sales trends, Christine LoCascio, Chief of Public Policy, DISCUS, reported that the premiumization trend accelerated in 2021.

“Nearly 82% of the spirits sector’s total revenue increase was from the sale of high-end and super-premium spirits brands,” said LoCascio. “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.”

Tequila was reported as a key driver of growth, accounting for nearly one-third of the total increase in spirits revenue. “From sipping fine tequilas to enjoying classic cocktails like the margarita and paloma, consumers’ tastes for super-premium tequila took off in 2021,” she said.

Category trends outlined through revenue

The top five spirits categories by revenue include: Vodka sales up 4.9% or $341 million to $7.3 billion; Tequila/Mezcal up 30.1% or $1.2 billion to $5.2 billion; American Whiskey up 6.7% or $288 million to $4.6 billion; Brandy & Cognac up 13.1% or $403 million to $3.5 billion; and Cordials up 15.2% or $376 million to $2.9 billion.

Top five fastest-growing spirits categories by revenue: Premixed cocktails, including spirits-based RTDs up 42.3% or $489 million to $1.6 billion; Tequila/Mezcal up 30.1% or $1.2 billion to $5.2 billion; Irish Whiskey up 16.3% or $185 million to $1.3 billion; Cordials up 15.2% or $376 million to $2.9 billion; and Single Malt Scotch up 14.4% or $130 million to $1 billion.

Policy wins and challenges outlined

In the public policy arena, Swonger highlighted a number of victories in 2021 on the federal and state levels, including the important progress on the tariffs front. “After three very difficult years of sagging American Whiskey exports, the EU and U.S. 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 U.S. businesses caught up in the trade disputes,” said Swonger.

“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.”

Other items’ broad efforts noted were the inclusion of small distilleries in the Restaurant Revitalization Fund legislation, as well as inclusion of historic impaired driving prevention measures in the federal infrastructure bill. DISCUS also lauded cocktails to-go, now permanent in 16 states, while an additional 14 states passed legislation to extend measures and retailer home delivery laws, passed in eight states among highlights.

Promoting responsibility and road safety

Swonger, who also serves as President and CEO of Responsibility.org, underscored the spirits industry’s strong commitment to encouraging responsibility and moderation. He highlighted the recent federal government data showing historic declines in underage drinking, as well as the spirits industry’s support for provisions in the infrastructure bill that include the development of advanced technology in cars to eliminate drunk driving.

He also cited Responsibility.org in forming the National Alliance to Stop Impaired Driving to provide a strong, collaborative national focus on the growing problem of multiple substance impaired driving. “While the overwhelming majority of Americans who choose to drink do so responsibly, it’s important for adults to seek out resources or talk to a health professional if drinking is interrupting relationships or affecting daily routines,” he said.

 

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