Distilled Spirits Market Share Edges Upward in 2012
New Product Innovation and Market Modernization Drive Growth
New York, NY – The distilled spirits industry market share edged upward in 2012, gaining share from both beer and wine, as companies innovated with new, sophisticated line extensions, and as a decade of regulatory modernization for spirits continued to pay dividends.
Overall, U.S. supplier sales grew a solid 3.0% in volume to 202 million cases, while supplier revenues grew 4.5% to $21.3 billion as consumers continued to gravitate to higher end premium and super premium product choices. Meanwhile, the distilled spirits industry grew its market share of sales for the third straight year to 34.3%, taking a bit of share from both beer and wine.
“Moderate growth driven by product innovations and sophisticated line extensions highlighted 2012 for distilled spirits companies of all sizes,” said Peter Cressy, President and CEO of the Distilled Spirits Council at the industry’s annual briefing for Wall Street analysts and business media. “The premiumization trend continues to captivate consumers here in the U.S. and around the globe,” he added.
Decade of U.S. Market Modernization Helps Drive Spirits Growth
“Regulatory modernization over the course of the last decade, with the steady repeal of prohibition-era Blue Laws, has paid real revenue dividends for the distilled spirits industry,” Cressy said, calling the sector a key component of the hospitality industry.
He pointed out that since 2002, 16 states have adopted Sunday sales of distilled spirits, for a total of 38 nationally. This is worth $260 million in new annual sales. In the past two years, the last northeastern state, Connecticut, repealed its Blue Law, and even Georgia voted for the repeal, with local jurisdictions there racking up local election victories at an 85% clip. Cressy attributed the changes to the recognition of the economic benefits of modernization and consumer convenience.
Also, since 2002, 17 more states have passed legislation to allow distilled spirits “tastings” at liquor stores, for a total of 44 states that allow some form of tasting. This has made a significant contribution to the consumer fascination with high end premium and super premium products. Council data show that while 2003-2012 supplier sales of value-priced products have grown from $3.75 to $4.08 billion, a 24.5% rate of growth, super premium products have grown from $1.48 to $3.90 billion, a 163% rate of growth.
“Reasonable access and modern shopping environments have certainly contributed to consumer preferences for premium distilled spirits product choices,” Cressy stated. “When added to a steady fascination with cocktail trends and a wonderfully diverse array of product innovations, the industry has charted a course for steady, sustainable growth.”
Third Consecutive Year of Record Exports, Led by Strong Whiskey Appeal
The Council alsoprojected a third-straight record year of export growth to $1.5 billion, showcased by the continuing strength and appeal of American Whiskeys, which represent nearly 70% of exports and had solid gains in most traditional markets while growing rapidly in emerging markets. U.S. distilled spirits exports now exceed wine exports by nearly a quarter of a billion dollars and are more than triple beer exports. Policy changes, including free trade agreements that resulted in significant tariff reductions or outright elimination in Korea, Colombia and Panama, and Permanent Normal Trade Relations (PNTR) with Russia in 2012, contributed to the record while providing a springboard to future export growth.
“Free trade agreements like the one in Korea, which resulted in immediate tariff elimination, improved American spirits access to the fifth largest spirits market in the world,” Cressy noted. “These are exciting developments for American spirits exports and, coupled with other market-opening measures such as PNTR for Russia, will provide a springboard for sustained export growth.
“Just as in the U.S., premiumdrinks are steadily gaining favor, both in traditional export markets and among the rising middle classes in newly open emerging markets,” Cressy said. “American Whiskeys are also well-positioned from a flavor perspective to take advantage of the growing sophistication in cocktail culture.”
Category Highlights from Economic Briefing
The Council’s annual briefing also included an extensive economic and category performance report by Chief Economist David Ozgo. It showcased a number of 2012 highlights from the different distilled spirits categories:
- Flavor trend: Over 40% of all spirits products in the U.S. have a flavor component beyond the traditional category – as many as 220 different expressions, from citrus to wasabi.
- Vodka, the largest spirits category, saw volumes increase 4.0% to 65 million 9-liter cases, with Super Premium Vodkas up 10.0%. Vodka supplier revenues grew to $5.5 billion.
- Bourbon and Tennessee Whiskey volumes, the largest Whiskey category, climbed 5.2%, with Super Premium products up 12.4%.
- Irish Whiskey continued its rapid growth with volumes shooting up 22.5%.
- Single Malt Scotch also grew at double digit rates with volumes up 13.0%.