For the first time, spirit revenues have eclipsed beer, according to the Distilled Spirits Council of the United States (DISCUS) in its annual economic briefing today.
That gain, however, was smaller than a percentage point: In 2022, spirits supplier sales rose 0.8 share points to 42.1%, surpassing beer at 41.9% of market share. The inch upwards points to spirits experiencing their fastest growth in two decades, rising by 7.5% over the past five years compared to average annual growth of 5.4% over the last 20 years.
Representatives of the beer industry insisted that beer remains America’s top choice in beverage alcohol.
“It’s important to consider the context of their claims,” Brian Crawford, president and CEO of the Beer Institute (BI), said in a statement. “If the liquor industry is making more money simply because they are charging a higher premium for their products, it’s not a true reflection of its market success.”
The briefing, which highlighted industry data and legislative priorities for the advocacy organization, showed the lingering positive and negative impacts of the pandemic on consumer trends and sales.
Overall in 2022, spirit supplier sales in the U.S. increased +5.1% to a record total of $37.6 billion, while volumes rose +4.8%. Off-premise sales volumes, which saw sharp gains in 2020 during lockdowns, remained steady in 2021 and 2022 with +1% and +2% growth, respectively. But as restaurants and bars bounce back from closures, sales volumes at on-premise establishments, which represent about 20 % of the U.S. market, remain 5% lower than 2019 levels. Hospitality industry employment was also down by 750,000 jobs compared to pre-pandemic levels, according to the U.S. Bureau of Labor and Statistics.
“Continuing to look at the ongoing recovery in the hospitality industry, it’s still not back to where it was prior to the pandemic,’” said Christine LoCascio, DISCUS chief of policy and strategy.
Still, the slow recovery of on-premise outlets helped boost spirit sales last year. The consumer trends driving momentum for the industry? With no surprise, ready-to-drink canned cocktails, and premium whisky and tequila.
RTDs, Premium Whiskey and Tequila Lead Trends
While the premiumization trend slowed overall in 2022, it still remained strong thanks to agave spirits and American whiskey. Of total spirits revenue growth, 61% was accounted for by high-end and super premium spirits, compared to 58% in 2020. As other analysts have noted, premium spirits experienced a slight dip with the softening of the economy last year, as well as the return to an average growth rate following consumers stocking up on super-premium spirits at the beginning of the pandemic.
While vodka led in revenue, tequila, RTDs and whiskey were the top drivers of growth 2022.
“When we look at in terms of revenue, specifically the $1.8 billion new supplier revenue that was generated in 2022, the story here really is it’s driven by tequila at the top spot at almost $890 million, by cocktails and RTDs growing at almost $590 million, and American whiskey at $483 million,” LoCascio said.
A look at the five fastest-growing spirit categories also revealed that three bottom slots belong to American whiskey, Irish whiskey and blended whiskey. RTDs remain the fastest growing spirits segments in both volume (+37.4%) and revenue (+35.8%). Malt-based RTDs still dominate the category, but spirits-based RTDs now account for 13% of market volume compared to 8% in 2021.
Legislative Priorities: RTD Access, Tariff Suspensions
To make room for more growth in the hot category, the organization will continue to build on its efforts to push for state laws that lower taxes on spirits-based RTDs or allow for grocery and convenience store sales, targeting California, Indiana, New Jersey, Oklahoma, Tennessee and Washington.
“There are many states that have reduced the taxes on spirits-based RTDs, so we’re not breaking new territory, but there are probably 10 to 15 states that are going to be moving on this and obviously the Distilled Spirits Council is going to be very, very aggressive in our advocacy efforts,” said Chris Swonger, DISCUS president and CEO.
Tax reductions for RTDs have been signed into law in Michigan, Nebraska and Vermont over the past two years. Similar bills were defeated or stalled in at least seven states, and opposition from the beer industry is expected to continue.
“It’s interesting to hear liquor companies boast about making money hand-over-fist while simultaneously going state-to-state hunting for more tax carveouts from state legislatures,” said the BI’s Crawford.
Other legislative priorities include securing the permanent suspension of EU, UK, and U.S. retaliatory tariffs on all distilled spirits, and new tariff reductions for U.S. distilled spirits, including the reduction of India’s 150% tariff on American spirits, particularly on American whiskeys.
Highlighting last year’s launch of Destination Distillery, a web platform featuring distillery trails across the country, the briefing also shared the economic impact of distillery tourism with a study that shared findings from 2019 in California, New York and Texas.
“The distillery industry generates additional tourism related impacts as customers visit distilleries and collections of distilleries, and spend money on other businesses within the local economy,” said Michael Marino, head of economic development for Tourism Economics, which conducted the study.