Data released last week by the Distilled Spirits Council of the United States (DISCUS) showed that for the first time spirits revenues outpaced beer, but how did craft spirits measure up? At last weekend’s American Craft Spirits Association Conference in Portland, data experts shared insight into the segment’s growth and opportunities.
The event featured attendees representing hundreds of distilleries located across the country, including representatives of major craft players like St.George Spirits, High West and Balcones Distilling.
Craft Growth Exceeded General Spirits Growth
After putting up big numbers during pandemic lockdowns, spirits have maintained a slight uptick in sales growth rates during the past two years, as reported by the Distilled Spirits Council of the United States (DISCUS) in its annual briefing last week. But despite “misconceptions that large spirit brands benefited during COVID,” craft shares also grew, said Danny Brager, of Brager Beverage Alcohol Consulting. The share of non top-100 brands in dollars reached 24.5% in the latest 52 weeks, compared to 21.5% in 2017. In addition, craft spirits volume growth was +10.4% in 2021, while total spirits grew 9.3%.
While there is no legal definition of a craft distillery, the data project defines them as licensed U.S. distilled spirits producers that have removed 750,000 proof gallons or less from bond, market themselves as craft, are not openly controlled by a large supplier, and have no proven violation of the ACSA Code of Ethics.
Consumer demand for higher-end spirits could continue to benefit craft producers. The average retail selling price of craft spirits is about $47 according to the Craft Spirit Data Project, as opposed to the average retail scan of a 750 ml spirit bottle which clocks in at about $25.
“We play in a good area and a growing area,” Brager said to the crowd of craft distillers.
Regional craft brands also have an emerging opportunity to compete with national brands, said Brian Krueger of Bump Williams Consulting. A deep dive into spirit dollar trends by distribution tier showed that spirit companies with 75% to 90% or higher national weighted distribution have slowed over the past two years. Meanwhile products with 10% to 20% weighted distribution have seen the strongest trends.
“So local regional brands are outpacing the category,” Krueger said, adding that craft distillers should emphasize to retailers that they are driving the industry in order to compete for shelf space.
In the canned cocktail category, while national brands make up the majority of the top 15 players, Devils Backbone was still able to make the list with only 5% weighted distribution. The brewing company, which was acquired by Anheuser-Busch in 2016, makes a line of spirit-based ready-to-drink cocktails.
“Pretty impressive somebody out in the Mid Atlantic was able to bracket into total U.S. top 15 in a hot category,” Krueger said. “Not saying that it is an opportunity for everybody but it does speak to the fact that there is an opportunity for regionals, for locals, not only in prepared cocktails but across the board.”
As a whole, the craft spirit industry has made strides in a short time. In about a decade, the number of craft spirit distillers has gone from 280 to 2,687. While still dwarfed by craft beer, “we have come a lot faster in a short time compared to craft beer,” said Brager, adding that the volume from craft distillers is also increasing, an important indicator of growth beyond the number of producers.
Who Is Buying Craft Spirits?
Regions in which craft distillers have a presence also spend more on spirit bottles, according to the data. Close to 30% of spirits business in the Northeast and Pacific region comes from bottles priced $25 and above, followed by South Central states.
“[California, New York and Texas] are three states where you’ve got the most number of craft distillers, and there’s definitely some correlation between where the distillers are concentrated and the share of that high price segment coming from those regions,” said Brager.
While the bulk of direct-to-consumer craft spirit shoppers make over $100,000 annually, one-third are still in households making less than $75,000, according to data from SOVOS ShipCompliant.
Brager’s analysis of a consumer survey by CGA illustrated craft spirit consumers’ priorities when selecting a drink at a bar or restaurant. Across all age ranges, nearly a third of consumers prioritize craft spirits that are either made with premium ingredients, used in a favorite cocktail or locally made. Other factors such as an authentic brand story, independent ownership and sustainable practices are also of particular interest for younger consumers.
Against the backdrop of younger drinkers in general placing greater value on beverage producers that share their ethical and environmental values, data also showed that craft spirit shoppers are skewing younger. More than half of online craft spirit shoppers are between the ages of 21 and 34, and 26% are between the 35 to 44 age range.
“I do a lot of speaking at wine events and they would die to have those numbers,” Brager said.