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A bartender makes special cocktails made with Casamigos at the Alo Miami Opening Ceremony in Miami, December 16, 2021.
Jason Corner | Getty Images
CHICAGO — The spirits industry is weathering economic headwinds to meet changing consumer preferences as it recedes from beer’s dominance.
Spirits revenue market share grew from 28.7% in 2000 to 42.1% in 2022, overtaking beer for the first time ever, according to the US Distilled Spirits Council. It added that beer has a market share of 41.9 percent.
The trade organization, which is celebrating its 50th anniversary, held its annual convention this week in Chicago. The event saw CEOs, commercial leaders, distillation experts and industry stakeholders gather to reflect on the key trends driving growth in the industry this year, but also slowing down.
Despite supply chain woes and high inflation, the alcoholic beverage industry has a lot to roast even these days, said Chris Songer, DISCUS President and CEO.
“This is a great American success story,” Songer said of the industry’s market superiority. “We are focused on continuing to stay ahead of the curve by persevering and ensuring that all the positive trends we see continue.”
As the spirits industry works to stay ahead of the year amid fears of a recession, here are some of the key trends from industry leaders who spoke to CNBC to see the business shaping up today.
1. Celebrity brands steal the spotlight
An increasing number of celebrities are investing their time – and money – in the spirits business.
From movie stars to athletes, models and musicians, celebrities of all kinds endorse brands, get involved in distilling, decide on flavor profiles, or forge partnerships within the industry.
These agreements have proven profitable. In 2017, actor George Clooney and his companions He sold the fast-growing Casamigos tequila brand to Diageo for $1 billion in cash, incentivizing others to get in on the action.
“I’ve seen that there’s been a lot of success in the celebrity tequila business and it intrigued me,” actor Mark Wahlberg said during a panel discussion at the Chicago convention.
Wahlberg launched the tequila brand blue arrow Earlier this year with Mexican founder Aaron Marquez. The duo traveled across the country promoting the brand, which Wahlberg described as “the drink of summer.”
“I have some friends who are successful in this business, and I like to beat them in everything I do,” Wahlberg said.
“But it’s more than just a name,” he added. “Everything we’ve done since the beginning is about product quality.”
Wahlberg joins other notable celebrity profiteers in the alcohol world including Ryan Reynolds, Sean “Diddy” Combs, Kendall Jenner, Dwayne Johnson, Michael Jordan and David Beckham.
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2. Premium Drive Drives Luxury Spirit, RTDs
During the Covid-19 pandemic, consumers They developed a taste for quality spirits, and became accustomed to drinking outside the bar in the form of ready-to-drink cocktails.
Luxury brands are up 4% in 2022 compared to 2021, according to DISCUS. The group’s data does not track the overall luxury brands’ share of the spirits market.
This trend, characterized by consumers’ willingness to spend more on premium bottles, has led to booming sales of tequila, American whiskey, and other spirits.
DISCUS said tequila sales rose 21%, while US whiskey sales rose 19% in 2022.
Meanwhile, pre-mixed cocktails, including spirit-based RTD drinks, have skyrocketed in the wake of the trend. In 2022, the category has grown by 35.8% to $2.2 billion in sales.
Brands satisfy the thirst for soul-based RTDs by diversifying their product offerings.
Hola Spirits is a Pennsylvania-based vodka company that entered the RTD space last year with a line of vodka-based cocktail sachets blended with organic vodka and coconut water. Their flavors include lemon, watermelon, and papaya.
“This has been an excellent addition to our portfolio as it has become a co-signature for the brands,” said Patrick Schurb, President of Holla.
3. Alcohol-free and low-alcohol drinks are loud alternatives
In recent years, major alcohol companies including Heineken, Anheuser-Busch InBev And Molson Course Join the craze for alcohol-free and low-alcohol drinks.
Demand for these alternatives has increased among consumers who wish to drink less, or those who may wish to abstain from smoking for health or personal reasons.
Non-alcoholic beer, cider, wine, spirits and RTD products grew more than 7% in volume across 10 major global markets in 2022, according to IWSR Beverage Market Analysis.
said Tobin Ludwig, co-founder of the company Hella Cocktail Company
The company uses botanical flavors and spices to give a range of non-alcoholic beverages a boost.
“You no longer need alcohol to socialize and enjoy. In fact, for many, alcohol or its experience used to be seen as critical, choosing non-alcoholic options is now socially acceptable and in some segments of the sober curious movement this is the norm, not the exception.”
4. Conscious consumers want a story
Today’s consumers increasingly want to feel connected to brands that share their values. Companies are taking advantage of this opportunity by highlighting their sustainability efforts, contributions to local communities and commitments to diversity.
This trend will continue as consumers become more vocal about their priorities and begin to hold companies accountable for their practices.
More brands than ever before are using eco-friendly packaging for their products as a way to reduce their environmental impact. Spirits, which are produced by small distilleries that use locally sourced ingredients and materials, have also gained popularity in recent years.
Moreover, brands multiply diversity-related initiatives.
Jomari Pinkard, CEO and Managing Director Slit hornHe said that this is “not only a social benefit, but a good business for everyone.”
The company operates incubation and accelerator programs to develop black talent in the spirits industry. Her research found that while black Americans account for 12% of alcohol consumers across categories, they make up only 7.8% of the sector’s workforce and 2% of industry executives.
Pinkard said this “should be concerning to shareholders” as consumers become more aware of the ways brands interact with marginalized communities.
5. Supply chain and inflationary issues remain
Rising costs for glass bottles, oil used to ship goods and other parts of the complex spirits ecosystem have challenged some companies. In some cases, supply chain disruptions have led to Price increases absorbed by consumers.
The industry saw some relief after the European Union and the United Kingdom lifted retaliatory tariffs on US whiskey. This has allowed distillers to regain their footing in these key international markets, but some of the protections may soon expire.
It is “important to permanently remove these tariffs” to maintain momentum in the spirits industry, said Lisa Hawkins, DISCUS’s chief of communications and public affairs.
If no deal is reached later this year, the EU will be slapped with a 50% tariff on all US whiskeys starting in January.
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