Distilled spirits continued to power ahead in 2018, marking the ninth consecutive year of record sales and volumes, the Distilled Spirits Council (DISCUS) reported Tuesday at their annual economic briefing.
United States’ supplier sales were up over 5.1% for the year, rising $1.3 billion to a total of $27.5 billion, while volumes rose 2.2% to 231 million cases, which is up 5 million cases from the prior year.
In 2018 spirits gained market share, with sales rising 0.7% to now comprise 37.4% of the total beverage alcohol market.
It’s the ninth straight year of market share gains overall. 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 DISCUS President/CEO Chris Swonger.
“The spirits sector is benefiting from millennials who demand diverse and authentic experiences, and desire innovative and higher-end products.”
The “star of the show” continued to be American whiskey, with volume rising by 5.9%, driven by Bourbon and Tennessee whiskey.
In addition, Irish whiskey was up 10.2%, and Scotch whisky rose 7.6% for single malt, turning around 2017’s decline. Rye whiskey increased by 15.9%, breaking the 1 million cases-sold barrier for the first time.
Tequila and mezcal, up a total of 7.7% together, were led by strong sales in high-end Tequila. Cognac also saw an uptick in sales, with an increase of 12.5%.
Vodka, which represents nearly one-third of the market overall, grew by 1.6% last year. Meanwhile, gin and rum sales saw declines in both volume and revenue.
Millennials and the Spirit Market
In recent years, consumers have showed a willingness to pay more for spirits. The value category, bottles less than $12, fell slightly in terms of incremental growth, which is a continuing a trend from 2017.
But high-end ($20-$35) and super-premium ($35 and over) products showed strong growth in terms of case sales and gross supplier revenue, which also extends a 2017 trend.
“I’ve been doing this for about 18 years, and it’s the first time I’ve seen the growth patterns so lopsided,” said DISCUS Council Chief Economist David Ozgo.
“This screams millennial buying patterns… They’re willing to spend for something that gives them a little bit more.”
Even as sales of beer fall and some express concern about the future trajectory of wine, particularly among millennials, DISCUS seemed unconcerned about the future of distilled spirits and alcoholic beverages in general.
“The spend is definitely going up,” Ozgo noted. “Even when you look at spirits, beer and wine, the price points are moving up.”
Although he hasn’t studied retail trends, he said, in terms of U.S. supplier revenues “beer volumes are going down, and wine is flat or down slightly, but the revenues are going up, and that’s always a good thing. The total number of drinks consumed on a per capita basis is remaining constant.”
Ozgo also focused on results from a recent DISCUS study showing continued growth in spirits consumption in states where recreational marijuana has been legalized.
“In mature markets, there has been no impact on growth” in terms of spirits consumption, Ozgo concluded.
Tariffs Curtail Rapid Export Growth
However, new data showed the negative impact retaliatory tariffs are having on U.S. whiskey exports.
“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.
American whiskey exports to the European Union—the largest market for American whiskey exports—had been growing briskly in the first half of 2018, up 33%, but plunged 8.7% compared to the same period in 2017, July–November, after the tariffs went into effect.
Other countries, including Mexico, China and Canada, have also leveled tariffs on American whiskey.
Swonger added, “We strongly encourage the [Trump] administration and our trading partners in the European Union, Canada and Mexico to quickly resolve these harmful tariffs that are undercutting economic growth in this sector and adversely affecting American workers.”