A bartender creates specialty cocktails made with Casamigos on the opening party for Alo Miami in Miami, December 16, 2021.
Jason Koerner | Getty Images
CHICAGO — The spirits industry is overcoming economic headwinds to satisfy changing consumer preferences because it chips away on the dominance of beer.
Spirits revenue market share grew from 28.7% in 2000 to 42.1% in 2022, surpassing beer for the primary time ever, in keeping with the Distilled Spirits Council of the USA. Beer holds a 41.9% market share, it said.
The trade organization, which is celebrating its fiftieth anniversary, held its annual conference this week in Chicago. The event saw spirits executives, trade leaders, distilling experts and industry stakeholders gather to reflect on the important thing trends driving, but additionally slowing, growth across the industry this yr.
Despite supply chain issues and high inflation, the beverage alcohol industry has rather a lot to toast to today, said Chris Swonger, president and CEO of DISCUS.
“That is an excellent American success story,” Swonger said of the industry’s market share supremacy. “We’re focused on continuing to remain ahead through perseverance and by ensuring the entire positive trends we’re seeing proceed.”
Because the spirits industry works to take care of its top spot this yr amid fears of a recession, listed below are some key trends industry leaders who spoke to CNBC see shaping the business today.
1. Celebrity brands steal the highlight
A growing variety of celebrities are investing their time — and money — within the spirits business.
From movie stars to athletes, models and musicians, celebrities of all sorts are backing brands, getting involved with distillation, deciding on flavor profiles or forging partnerships inside the industry.
Those agreements have proven lucrative. In 2017, actor George Clooney and his co-owners sold the fast-growing tequila brand Casamigos to Diageo for $1 billion in a money out that has motivated others to get in on the motion.
“I saw there was plenty of success within the celebrity tequila space and that intrigued me,” said actor Mark Wahlberg during a panel on the Chicago conference. Â
Wahlberg launched the tequila brand Flecha Azul earlier this yr with Mexican co-founder Aron Marquez. The pair has been traveling across the country promoting the brand, which Wahlberg touted as “the drink of the summer.”
“I even have some friends which can be successful on this business, and I wish to beat them at all the things I do,” Wahlberg said.
“Nevertheless it’s greater than just the name,” he added. “All the things we have done from the start is in regards to the quality of the product.”Â
Wahlberg joins other high-profile individuals leveraging their celebrity within the liquor landscape including Ryan Reynolds, Sean “Diddy” Combs, Kendall Jenner, Dwayne Johnson, Michael Jordan and David Beckham.
2. Premiumization propels luxury spirits, RTDs
In the course of the Covid-19 pandemic, consumers developed a taste for higher-quality spirits, and so they became accustomed to drinking outside of the bar in the shape of ready-to-drink cocktails.
Luxury brands rose 4% in 2022 compared with 2021, in keeping with DISCUS. The group’s data doesn’t track the share luxury brands have overall within the spirits market.
The trend, characterised by consumers’ willingness to spend more on premium bottles, has led to booming sales of tequila, American whiskey and other spirits.
Tequila sales rose 21%, while American whiskey climbed 19% in 2022, DISCUS said.
Meanwhile, pre-mixed cocktails, including spirit-based RTD beverages, rose on the heels of this trend. In 2022, the category grew 35.8% to $2.2 billion in sales.
Brands are satisfying the thirst for spirit-based RTDs by diversifying their product offerings.
Holla Spirits is a Pennsylvania-based vodka company that entered the RTD space last yr with a line of vodka-based cocktail pouches blended with organic vodka and coconut water. Their flavors include lime, watermelon and papaya.
“These have been a wonderful addition to our portfolio since it’s develop into such a standard expectation of brands,” said Holla President Patrick Shorb.
3. No- and low-alcohol drinks are buzzy alternatives
In recent times, major alcohol corporations including Heineken, Anheuser-Busch InBev and Molson Coors have joined in on the no- and low-alcohol drinks craze.
Demand for these alternatives has grown amongst consumers who need to drink less, or those that will want to abstain for health or personal reasons.
No- and low-alcohol beer and cider, wine, spirits and RTD products grew greater than 7% in volume across 10 key global markets in 2022, in keeping with IWSR Drinks Market Evaluation.
“Younger generations especially are drinking less and drinking with more intention after they do,” said Tobin Ludwig, co-founder of Hella Cocktail Co.
The corporate uses botanical flavors and spices to present its line of nonalcoholic beverages a kick.
“You not need alcohol to socialize and rejoice. In actual fact, for a lot of, alcohol was viewed or experienced as a detractor and selecting nonalcoholic options is now socially acceptable and in some segments of the sober curious movement, it is the norm, not the exception,” he added.
4. Conscious consumers need a story
Today’s consumers increasingly need to feel connected to brands that share their values. Corporations are tapping into this chance by highlighting their efforts in sustainability, contributions to local communities and commitments to diversity.
The trend will proceed as consumers develop into more vocal about their priorities and start to carry corporations accountable for his or her practices.
More brands than ever are using eco-friendly packaging for his or her products as a way of limiting their environmental footprint. Craft spirits, typically produced by small distilleries that use locally sourced ingredients and materials, have also gained popularity lately.
Furthermore, brands are doubling down on initiatives tied to diversity.
Jomaree Pinkard, CEO and managing director at Pronghorn, said this “will not be only a social good, but is sweet business for all.”
The corporate runs incubator and accelerator programs to develop Black talent inside the spirits industry. Its research finds that while Black Americans represent 12% of alcohol consumers across categories, they make up only 7.8% of the sector’s labor force and a pair of% of executives within the industry.
Pinkard said this “must be alarming to shareholders” as consumers develop into more conscious of the ways brands interact with marginalized communities.
5. Supply chain and inflationary issues persist
Rising costs for glass bottles, the oil used for freight shipping and other parts of the spirits industry’s complex ecosystem has been a challenge for some corporations. In certain cases, supply chain disturbances have led to price increases that buyers have absorbed.
The industry has seen some relief following the lifting of the EU and U.K. retaliatory tariffs on American whiskeys. This has allowed distillers to regain their footing in these key international markets, but among the protections may soon expire.
Lisa Hawkins, chief of communications and public affairs at DISCUS, said it’s “critical that these tariffs are permanently removed” to maintain momentum within the spirits industry going.
If a deal will not be reached later this yr, a 50% EU tariff can be placed on all American whiskeys starting in January.
