Spirits Sales Hit $27.5 Billion in 2018

The spirits category increased its market share for the ninth consecutive year in 2018, accounting for 37.3% in revenue market share and 35.3% in volume, according to the Distilled Spirits Council’s annual economic briefing this morning.

US spirits supplier sales were up just over 5% for the year to $27.5 billion in 2018, a $1.3 billion increase over 2017. By our count, this was the fifth consecutive year that supplier sales grew by at least $1 billion. Volumes were up 2.2% for the year to 231 million cases, which DSC svp economics & strategic analysis David Ozgo noted is in line with a “solid pattern” of volume growth over the last few years.

HIGH END ACCOUNTS FOR “ALL GROWTH.” Breaking down the category by price segment, the high end and premium accounted for nearly 62% of revenues for the year, at $9.2 billion and $7.8 billion, respectively. By volume, premium accounted for 34.5% and value still accounts for a good chunk of volumes at 32%.

“All the growth in 2018 was really in the high end and super premium products,” said David. In 2018, incremental growth for the high end was up nearly 4 million cases and super premium grew by more than 1.6 million cases. “We’ve seen this pattern before, but this is the first time I’ve seen the growth so lopsided,” he said, adding “this screams millennial buying patterns.”

CATEGORY LEADERS. American whiskey was a “big star of the show” in 2018, with volumes up nearly 6% and sales up 6.6% for the yer, led by bourbon/Tennessee whiskey. Whiskey also reported strong growth across all price categories. “This is important,” David noted, because “you have to get someone into the category before you can trade them up.”

Meanwhile, rye broke the 1 million case mark in 2018 and hit $205 million in sales. Irish whiskey is also bright spot, with volumes up 10.2% and sales up 12% for the year.

Tequila and mezcal volumes were up 7.7% to 18.5 million cases and sales were up 10.2% to $3 billion. 2018 was another big year for mezcal, according to David, with volumes reaching 450,000 cases. “It’ll be interesting to see how quickly mezcal gets to the million case mark,” he added.

IS 2019 THE YEAR FOR GIN AND RUM? As aforementioned, the high end and super premium price segments drove category growth in 2018 and gin and rum were no exception. In fact, super premium gin volumes were up 14.7% and sales were up 15.6%, while the overall category was down. Similarly, rum high end volumes were up nearly 1% and sales were up 5.5%.

“Oftentimes what we’ll see, before a category takes off, we see a lot of interest in the super premium. It will be interesting to see if that’s the case for gin and rum,” said David.

THE IMPACT OF RETALIATORY TARIFFS. The Council also addressed the impact of the recent retaliatory tariffs. Currently, whiskey faces a 10% tariff in Canada and 25% tariffs in the European Union and Mexico, and all spirits categories face 140% tariff in Turkey and 15%-30% tariffs in China.

US spirits exports are approaching $1.7 billion, but right now is the “most challenging time for exporters” than ever before, said DSC svp international trade Christine LoCascio. From January to June, exports were up 28%. But after the tariffs took effect, exports were down 8.2% from July to November.

You’ll recall, new DSC ceo Chris Swonger told WSD navigating through the challenges of the retaliatory tariffs is one of The Council’s top priorities in 2019 [see WSD 02-11-2019].

We’ll have more from the economic briefing in future issues.

LAWMAKERS COME TO AGREEMENT TO AOVID GOVERNMENT SHUTDOWN 2.0

Last night, congressional negotiators said they reached a “tentative deal” last night to avoid another government shutdown. Recall, the government reopened temporarily at the end of January and the new deadline is this Friday.

The top four congressional appropriators announced they reached an agreement in principle to fund the government past the deadline. It would include $1.4 billion toward physical barriers and 55 new miles of bollard fencing, a source tells CNBC. You’ll recall, border security is still the main point of contention.

A bill could be introduced later today or tomorrow, but President Trump would still need to sign off on it.

You’ll recall, the shutdown earlier this year resulted in doubling the existing backlog of COLAs and other applications that the Alcohol Tobacco Tax and Trade Bureau (TTB) is currently sifting through [see WSD 02-01-2019].

WSD BRIEFS:

MGP INGREDIENTS PARTNERS WITH RNDC IN KY. MGP Ingredients has appointed Republic National Distributing Co. to handle its proprietary brands in Kentucky. MGP’s brands – Till American Wheat Vodka, George Remus Straight Bourbon Whiskey, Remus Repeal Reserve Straight Bourbon Whiskey, Rossville Union Straight Rye Whiskey and Eight & Sand Blended Bourbon Whiskey – are now available in AZ, CO, IL, IN, IA, KS, KY, MN, MO, NE, OH, TX, WI and MT.

HENNESSY DEBUTS RIDLEY SCOTT SHORT FILM. Hennessy has released a short film by acclaimed director Ridley Scott as part of a new campaign. The film, called “The Seven Worlds,” explores the brand’s seven flavor profiles, per a release. A 60-second version of the film will air during the Oscars on February 24.

Until tomorrow,
Sarah

“Your present circumstances don’t determine where you can go; they merely determine where you start.” – Nido Qubein

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