CHICAGO — The spirits industry is overcoming economic headwinds to meet changing consumer preferences as it chips away at the dominance of beer.
Spirits revenue market share grew from 28.7% in 2000 to 42.1% in 2022, surpassing beer for the first time ever, according to the Distilled Spirits Council of the United States. Beer holds a 41.9% market share, it said.
The trade organization, which is celebrating its 50th 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 key trends driving, but also slowing, growth across the industry this year.
Despite supply chain issues and high inflation, the beverage alcohol industry has a lot to toast to these days, said Chris Swonger, president and CEO of DISCUS.
"This is a great American success story," Swonger said of the industry's market share supremacy. "We're focused on continuing to stay ahead through perseverance and by ensuring all of the positive trends we're seeing continue."
As the spirits industry works to maintain its top spot this year amid fears of a recession, here are some key trends industry leaders who spoke to CNBC see shaping the business today.
1. Celebrity brands steal the spotlight
A growing number of celebrities are investing their time — and money — in the spirits business.
From movie stars to athletes, models and musicians, celebrities of all types are backing brands, getting involved with distillation, deciding on flavor profiles or forging partnerships within 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 cash out that has motivated others to get in on the action.
"I saw there was lots of success in the celebrity tequila space and that intrigued me," said actor Mark Wahlberg during a panel at the Chicago conference.
Wahlberg launched the tequila brand Flecha Azul earlier this year 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 have some friends that are successful in this business, and I like to beat them at everything I do," Wahlberg said.
"But it's more than just the name," he added. "Everything we've done from the beginning is about the quality of the product."
Wahlberg joins other high-profile individuals leveraging their celebrity in the liquor landscape including Ryan Reynolds, Sean "Diddy" Combs, Kendall Jenner, Dwayne Johnson, Michael Jordan and David Beckham.
2. Premiumization propels luxury spirits, RTDs
During the Covid-19 pandemic, consumers developed a taste for higher-quality spirits, and they became accustomed to drinking outside of the bar in the form of ready-to-drink cocktails.
Luxury brands rose 4% in 2022 compared with 2021, according to DISCUS. The group's data does not track the share luxury brands have overall in the spirits market.
The trend, characterized 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 year 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 an excellent addition to our portfolio because it's become such a common expectation of brands," said Holla President Patrick Shorb.
3. No- and low-alcohol drinks are buzzy alternatives
In recent years, major alcohol companies 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 among consumers who want to drink less, or those who may want to abstain for health or personal reasons.
No- and low-alcohol beer and cider, wine, spirits and RTD products grew more than 7% in volume across 10 key global markets in 2022, according to IWSR Drinks Market Analysis.
"Younger generations especially are drinking less and drinking with more intention when they do," said Tobin Ludwig, co-founder of Hella Cocktail Co.
The company uses botanical flavors and spices to give its line of nonalcoholic beverages a kick.
"You no longer need alcohol to socialize and have fun. In fact, for many, alcohol was viewed or experienced as a detractor and choosing nonalcoholic options is now socially acceptable and in some segments of the sober curious movement, it's the norm, not the exception," he added.
4. Conscious consumers want a story
Today's consumers increasingly want to feel connected to brands that share their values. Companies are tapping into this opportunity by highlighting their efforts in sustainability, contributions to local communities and commitments to diversity.
The trend will continue as consumers become more vocal about their priorities and begin to hold companies accountable for their practices.
More brands than ever are using eco-friendly packaging for their 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 in recent years.
Moreover, brands are doubling down on initiatives tied to diversity.
Jomaree Pinkard, CEO and managing director at Pronghorn, said this "is not only a social good, but is good business for all."
The company runs incubator and accelerator programs to develop Black talent within 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 2% of executives in the industry.
Pinkard said this "should be alarming to shareholders" as consumers become 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 companies. In certain cases, supply chain disturbances have led to price increases that consumers 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 some of 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 keep momentum in the spirits industry going.
If a deal is not reached later this year, a 50% EU tariff will be placed on all American whiskeys beginning in January.
Business - Latest - Google News
June 17, 2023 at 01:39AM
https://ift.tt/6t3Qziw
Here are 5 key trends shaping the liquor industry as spirits overtake beer for the first time - CNBC
Business - Latest - Google News
https://ift.tt/VQ7BtnS
Bagikan Berita Ini
0 Response to "Here are 5 key trends shaping the liquor industry as spirits overtake beer for the first time - CNBC"
Post a Comment