Distilled Spirits Council Reports Ninth Straight Year of Record Spirits Sales, Market Share Gains

American Whiskey Exports Take Hit From Tariffs

The Distilled Spirits Council today reported at its annual economic briefing that 2018 marked the ninth straight year of record spirits sales and volumes, reflecting continued market share gains.

Supplier sales were up over 5.1 percent, rising $1.3 billion to a total of $27.5 billion, while volumes rose 2.2 percent to 231 million cases, up 5.0 million cases from the prior year.

In 2018, spirits gained market share versus beer and wine with sales rising seven-tenths of a point to 37.4 percent of the total beverage alcohol market. It is the ninth straight year of market share gains overall, where each point of market share is worth $740 million in supplier sales revenue.

“These robust results show adult consumers are continuing to favor spirits over beer and wine, particularly among millennials,” said Distilled Spirits Council President and CEO Chris Swonger. “The spirits sector is benefiting from millennials who demand diverse and authentic experiences, and desire innovative and higher-end products.”

 

New Data: Tariffs Curtail Rapid Export Growth

UPDATED: Full Year 2018 International Trade Data (Impact of Retaliatory Tariffs on U.S. Spirits Exports)

On a down note, new data show the negative impact retaliatory tariffs are having on U.S. whiskey exports, which had been a bright spot for distillers, small and large alike.

“For the first time, data can demonstrate the negative impact of retaliatory tariffs on what had been a booming export growth story,” said Council Senior Vice President for International Affairs Christine LoCascio.

While it was another record year for total U.S. spirits exports, reaching almost $1.7 billion through November, the retaliatory tariffs had a measurable impact on American whiskey exports, particularly to the EU, the largest market at $675 million (Jan-Jun: $363 million; Jul-Nov: $312 million).

In fact, American whiskey exports to the EU for the first half of the year were growing at a brisk 33 percent but took a sharp downturn following the imposition of tariffs, declining -8.7 percent compared to the same period in 2017 (July-Nov.).

Globally during the first six months of 2018, U.S. exports of American whiskeys were growing at 28 percent (Jan-Jun: $595 million).  Following the imposition of the retaliatory tariffs, these exports decreased -8.2 percent (Jul-Nov: $526 million) compared to the same period in 2017 (July-Nov.).

Swonger added, “We strongly encourage the Administration and our trading partners in the EU, Canada and Mexico to quickly resolve these harmful tariffs that are undercutting economic growth in this sector and adversely affecting American workers.”

 

U.S. Growth Drivers: High-End and Super Premium Spirits

Council Chief Economist David Ozgo pointed to the strongest growth in high-end premium and super premium products across most categories. The revenue for those price points increased 8.9 percent and 10.5 percent, respectively, and by 8.0 percent and 7.5 percent for volume.

Key category drivers of sales growth included American Whiskey, up 6.6 percent or $224 million to $3.6 billion; Tequila, up 10.2 percent or $279 million to $3.0 billion; Cognac, up 14.2 percent or $250 million to $1.8 billion; and Irish Whiskey, up 12.0 percent or $108 million to $1.0 billion.

Ozgo also noted the return to growth of Single Malt Scotch, up 9.4 percent or $72 million to $843 million and the sales strength of super premium Gin, up 15.6 percent; and super premium Rum, up 28.5 percent.

Vodka, the sector’s largest category and representing one-third of all volume, had another solid year with volumes up 1.6 percent and revenues up 2.9 percent to $6.4 billion, Ozgo said. Vodka sales were paced by high-end premium products with revenue growth of more than 11.4 percent to $2.6 billion.

“Growth was concentrated in the higher priced categories, allowing the industry to enjoy significant revenue growth while also picking up drinking occasions from other beverages,” said Ozgo. “The continued excitement surrounding super premium American whiskeys is creating a halo effect for the entire whiskey category.”

 

Marketplace Modernizations Improve Consumer Access to Spirits

Other key drivers of growth include marketplace modernizations that improved consumer access to distilled spirits, including two more Sunday sales victories in Indiana and Tennessee in 2018.  Since 2002, 20 states — representing 86 million adult consumers — have passed Sunday sales legislation for distilled spirits, bringing the total to 42 states across the country that have ended these dated Blue laws.

Another key driver of industry growth, and the growth of super premium products in particular, has been the passage of consumer sampling laws.  The Council has focused on this effort to allow adult consumers to taste products before they purchase, driving the premiumization trend.  Since 2002, 25 states have enacted laws allowing retail tastings for spirits, permitting 132 million adult consumers to sample premium spirits. In total, 46 states allow spirits tastings, also leveling the playing field with wine tastings.

Additionally, since 2007, Texas wet/dry elections have increased access to spirits products for up 2.8 million people for off-premise and 6.2 million on-premise.

Also, tax threats were defeated in 19 states in 2018, saving the sector over a half a billion dollars.  Importantly, the first federal excise tax cut since the Civil War, which passed in 2017, has launched a wave of investment among distillers large and small enabling them to invest in new facilities and equipment, create jobs and boost local tourism.

For 2019, extending or making permanent the Craft Beverage Moderation and Tax Reform Act will be a top priority for the entire alcohol industry — beer, wine and spirits.  The bipartisan bill, S. 362, was introduced in the Senate last week.

 

Important Social Responsibility Progress

“Underage drinking is at historic lows as the country continues to make progress on social responsibility,” said Swonger, who also serves as the CEO of Responsibility.org, a foundation funded by distillers to lead the fight in eliminating drunk driving and underage drinking and promote responsible decision-making regarding beverage alcohol. “The entire spirits industry is dedicated to promoting moderate and responsible alcohol consumption among adults.”

According to the U.S. Department of Transportation, alcohol-impaired driving fatalities as a percent of total vehicle traffic fatalities is at its lowest level since 1982.

“The distilled spirits sector has been an important contributor to this progress through the evidence-based underage drinking programs of Responsibility.org, and the support for strict enforcement of existing laws and comprehensive anti-drunk driving legislation,” Swonger concluded.

2018 Annual Economic Briefing Presentation

UPDATED: Full Year 2018 International Trade Data (Impact of Retaliatory Tariffs on U.S. Spirits Exports)

2018 Supporting Category Tables