A bartender creates specialty cocktails made with Casamigos at the opening party for Alo Miami in Miami, December 16, 2021.
Jason Koerner | Getty Images
CHICAGO — The distilled beverage industry is overcoming economic headwinds to meet changing consumer preferences as it breaks down beer’s dominance.
According to the United States Distilled Spirits Council, distilled spirits market share grew from 28.7% in 2000 to 42.1% in 2022, surpassing beer for the first time. Beer has a market share of 41.9%.
The trade organization, which is celebrating its 50th anniversary, held its annual conference in Chicago this week. The event brought together spirits executives, trade leaders, distillation experts and industry stakeholders to reflect on the key trends driving, as well as slowing, growth across the industry this year.
Despite supply chain issues and high inflation, the beverage industry today has a lot to toast, said Chris Swinger, president and CEO of DISCUS.
“This is a great American success story,” Swinger said of the industry’s market share. “We are focused on staying ahead through persistence and ensuring that all the positive trends we see continue.”
As the distilled beverage industry tries to maintain its top spot this year amid recession fears, here are some key trends industry leaders who spoke to CNBC see shaping business today.
1. Celebrity brands are stealing the spotlight
A growing number of celebrities are investing their time – and money – in the liquor business.
From movie stars to athletes, models and musicians, celebrities of all types support brands, get involved in distilling, decide on flavor profiles or forge industry partnerships.
Those deals have proved lucrative. In 2017, actor George Clooney and his co-owners sold fast-growing tequila brand Casamigos to Diageo for $1 billion in a payout that has motivated others to get in on the action.
“I saw that there was a lot of success in the celebrity tequila space and that intrigued me,” actor Mark Wahlberg said 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 traveled across the country promoting the brand, which Wahlberg touted as “the drink of the summer.”
“I have a few friends who are successful in this industry and I like beating them in everything I do,” said Wahlberg.
“But it’s more than just the name,” he added. “Everything we’ve done from the beginning has been about the quality of the product.”
Wahlberg joins other high-profile individuals leveraging their celebrity in the booze landscape, including Ryan Reynolds, Sean “Diddy” Combs, Kendall Jenner, Dwayne Johnson, Michael Jordan and David Beckham.
2. Premiumization drives luxury spirits, RTDs
During the Covid-19 pandemic, consumers developed a taste for higher quality spirits and they got used to drinking outside the bar in the form of ready-made cocktails.
Luxury brands increased 4% in 2022 compared to 2021, according to DISCUS. The group’s data does not reflect the share of luxury brands in general in the spirits market.
The trend, characterized by consumers’ willingness to spend more on premium bottles, has led to explosive sales of tequila, American whiskey and other spirits.
Tequila sales are up 21%, while US whiskey is up 19% in 2022, DISCUS said.
Meanwhile, pre-mixed cocktails, including spirit-based RTD drinks, have followed suit. In 2022, the category grew 35.8% to $2.2 billion in sales.
Brands are satisfying the hunger for ghost-based RTDs by diversifying their product offerings.
Hello ghosts 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 are lime, watermelon and papaya.
“These are an excellent addition to our portfolio because it has become such a common expectation of brands,” said Holla president Patrick Shorb.
3. Alcohol-free and low-alcohol drinks are effervescent alternatives
In recent years, major alcohol companies, including Heineken, Anheuser-Busch InBev And Molson Coors have joined the craze of non-alcoholic and low-alcohol drinks.
Demand for these alternatives has grown among consumers who want to drink less or abstain for health or personal reasons.
Non-alcoholic and low-alcohol beer and cider, wine, spirits and RTD products grew more than 7% in volume in 10 key global markets by 2022, according to IWSR Drinks Market Analysis.
“Younger generations, in particular, drink less and drink more intentionally when they do,” says Tobin Ludwig, co-founder of Hella Cocktail Co.
The company uses botanical flavors and herbs to kick-start its line of non-alcoholic beverages.
“You no longer need alcohol to socialize and have fun. In fact, for many, alcohol was seen or perceived as a slander and choosing non-alcoholic options is now socially acceptable and in some segments of the sober curious movement is it 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 seizing this opportunity by highlighting their sustainability efforts, contributions to local communities and commitment to diversity.
The trend will continue as consumers become more vocal about their priorities and hold companies accountable for their practices.
More brands than ever are using eco-friendly packaging for their products to reduce their carbon footprint. Craft spirits, usually produced by small distilleries using locally sourced ingredients and materials, have also gained popularity in recent years.
In addition, brands are doubling down on initiatives related to diversity.
Jomaree Pinkard, CEO and General Manager at pronghornsaid this is “not just a social good, but a good thing for everyone.”
The company conducts incubator and accelerator programs to develop black talent within the spirits industry. The research shows that while Black Americans represent 12% of alcohol consumers across all categories, they only make up 7.8% of the industry’s workforce and 2% of industry executives.
Pinkard said this “should be troubling to shareholders” as consumers become more aware of how brands interact with marginalized communities.
5. Supply chain and inflation issues remain
Rising costs for glass bottles, the oil used for trucking and other parts of the complex spirits industry ecosystem have been challenging for some companies. In certain cases, supply chain disruptions have resulted in price increases that consumers have absorbed.
The industry has experienced some relief following the lifting of EU and UK retaliatory tariffs on US whiskies. This has allowed distillers to regain a foothold in these important international markets, but some of the protection may soon expire.
Lisa Hawkins, head of communications and public affairs at DISCUS, said it is “critical that these rates are lifted permanently” to keep momentum going in the liquor industry.
If a deal is not reached later this year, an EU tariff of 50% will be introduced on all US whiskeys from January.