Eighth Consecutive Year of Market Share Gains

The Distilled Spirits Council today reported at its annual economic briefing record spirits sales and volumes in addition to continued market share gains versus beer in 2017.  Supplier sales were up 4 percent, rising $1 billion to a total of $26.2 billion, while volumes rose 2.6 percent to 226 million cases, up 5.8 million cases from the prior year. These results reflect adult consumers’ ongoing taste for higher-end distilled spirits products across most categories.

Spirits gained market share versus beer with sales rising seven-tenths of a point to 36.6 percent of the total beverage alcohol market. It is the eighth straight year of market share gains, where each point of market share is worth $720 million in supplier sales revenue.

“The spirits sector had a banner year in 2017, driven by consumer confidence in the U.S. economy, product innovations that adult consumers want, and a fascination with premiumization across categories,” said Council President & CEO Kraig R. Naasz. “The U.S. distilled spirits market is the second most valuable in the world, and we continue to promote consumer-friendly policies that expand responsible access to our products.”

New Record: $1.63 Billion in Spirits Exports

On the international front, the trade association also projected a new export record of $1.63 billion of U.S. spirits sold around the globe in 2017, rising 14.3 percent over the prior year. Consumer tastes for premium American spirits and favorable exchange rates drove global sales, especially to markets where U.S. spirits enjoy duty-free access. Volumes were up 5 percent.

“American spirits, particularly whiskeys, are the toast of the global cocktail scene,” said Council Senior Vice President for International Affairs Christine LoCascio. “International adult consumers are exploring more expensive U.S. spirits driven by their fascination with American whiskey’s heritage, as well as its mixability and versatility in cocktails.”

The top five growth markets by dollar value included the United Kingdom, up $55.7 million to $177.9 million or 45.6 percent; Germany, up $22.6 million to $123.5 million or 22.4 percent; Brazil, up $18.9 million to $29.1 million or 186.5 percent; France, up $15.7 million to $114.1 million or 16 percent; and Spain, up $14.5 million to $117.1 million or 14.1 percent. The Council has conducted export promotions in four of the five markets.

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 7.1 percent and 6.1 percent, respectively, and by 7.3 percent and 4.9 percent for volume.

Key drivers of growth included American Whiskey, up 8.1 percent or $252 million to $3.4 billion; Tequila, up 9.9 percent or $246 million to $2.7 billion; Cognac, up 13.8 percent or $200 million to $1.6 billion; and Irish Whiskey, up 12.8 percent or $114.8 million to $897 million.

Ozgo also noted the growing strength of Rye Whiskey, which was up 16.2 percent by volume to 900,000 cases, now worth $175 million to suppliers, and the emergence of other categories such as Mezcal, which has grown from less than 50,000 cases in 2009 to approximately 360,000 cases in 2017. Other noteworthy points in 2017 were the sales strength of super premium Blended Scotch, up 13 percent; super premium Gin, up 12.9 percent; and super premium Rum, up 8.3 percent.

Vodka, the sector’s largest category and representing one-third of all volume, had another solid year with volumes up 2.2 percent and revenues up 3 percent to $6.2 billion, Ozgo said. Vodka sales were paced by high-end premium products with revenue growth of more than 15 percent to $1.6 billion.

“Adult consumers, particularly millennials, continue to gravitate toward high-end and super premium spirits products,” said Ozgo. “Companies are creating excitement in the marketplace with new products and new technologies to interact with spirits customers.”

Tax Reform Provides Equalizing Tax Cut to Distillers

In the public policy arena, landmark tax legislation at the federal level reduced the excise tax on spirits producers of all sizes for the first time since the Civil War. A two-year version of the Craft Beverage Modernization and Tax Reform Act, which equalizes the federal excise tax (FET) on spirits, beer and wine for the first 100,000 gallons for all producers, was included in the federal tax reform package. The Council estimates that the tax cut will be worth more than a half-billion dollars to distillers over the two-year period.

“This historic tax cut will enable distillers to invest back in their businesses and communities, generate jobs and support agriculture and growing whiskey tourism,” said Naasz, noting that the spirits sector supports 1.5 million hospitality jobs and $160 billion in economic activity. “Ensuring that the tax cut is continued beyond the two-year period will be a top legislative priority for the Council in the coming years.”

Naasz highlighted other policy victories in 2017 including:

  • Sunday sales bans were lifted in Minnesota and Oklahoma, the 39th and 40th states to repeal their Blue Laws, generating an estimated $19.7 million annually;
  • The defeat of tax threats in 18 states, saving the sector $321 million annually;
  • The National Football League modernized its policy to accept league-wide spirits advertising, becoming the last major professional sports league to do so, and leveling the playing field with beer and wine; and
  • In Boston, the city reversed its five-year beverage alcohol advertising ban on its mass transit system, gaining new revenue and marking another First Amendment win for distilled spirits.

Continued Gains in Social Responsibility

“Importantly, our country continues to make significant progress on social responsibility,” said Naasz, citing numbers showing that underage drinking and binge drinking both continue their long-term decline.

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 spirits sector has been a part of this progress through our companies own responsibility programs and the programs of the Foundation for Advancing Alcohol Responsibility (FAAR),” he added. “The Council and its members are committed to moderate and responsible enjoyment of our products by legal-age consumers.”

2017 Annual Economic Briefing Presentation

2017 Supporting Category Tables