Spirits Industry Outpacing Wine, Beer

The spirits industry hit a milestone in 2012, exceeding 200 million cases and positioning itself for ongoing growth in 2013.

According to the first of three Trends in Adult Beverage (TAB) reports, the just-released 2013 SpiritsTab Report from Technomic reveals that spirits volume increased by 6.3 million 9-liter cases. That 3.2 percent gain in total volume pushed the industry to a record-breaking 205 million 9-liter cases.

"Despite the moderate pace of the economic recovery, the spirits industry continued to grow in volume and dollars," said Eric Schmidt, director of research at Technomic. "Spirits was actually the fastest-growing segment of adult beverage in 2012, outpacing wine and beer, and we anticipate that trend continuing in 2013."

The premiumization trend in spirits ramped up in 2012, indicating consumers explored the spirits categories and indulged in high-quality drinks, even in the slow economy. The higher price tiers outperformed the lower ones in every spirits category with the exception of blended American whiskey and cordials and liqueurs. The growth of more expensive spirits categories such as single malt Scotch, Cognac, imported vodka and Irish whiskey attest to consumers' willingness to spend more to experience the premium end of the spirits spectrum.

The fastest-growing categories include vodka (5.8 percent), American straight whiskey (5.2 percent) and tequila (3.8 percent). Vodka increased its share to account for one-third of total spirits volume and remain the largest category, while the smallest, Irish whiskey, once again posted a double-digit gain (21.6 percent).

The collective rate of growth for whiskeys accelerated in 2012, driven by American straight whiskey, Irish whiskey and single malt Scotch. "The rise of whiskey is driven by consumers gravitating to the rich flavors and heritage of whiskey products, both of which are on trend right now," said Schmidt.

The fastest-growing spirits brands of 2012 reflect the importance of flavor and the diverse trends propelling the spirits industry. Among them are five vodkas of varying price points, two whiskey-based liqueurs with on-trend flavor profiles, a cream rum liqueur, a spiced rum entry and a premium-priced blue agave tequila.

Diageo continued to be the largest spirits marketer, accounting for slightly more than one-fifth of total volume in 2012. Diageo has sharpened its focus on its premium and above-premium brands, such as Ciroc, seeking to engage specific consumer groups through unique marketing initiatives and innovation. Beam ranked second, and concentrated its efforts against high-profile brands such as Maker's Mark, Skinnygirl, Red Stag by Jim Beam and labels with particular appeal to millennials, including Pucker, with positive results.

With an expanded portfolio due to recent acquisitions, Sazerac moved up to rank as the third-largest spirits marketer. Ranking fourth, Bacardi USA was challenged as its flagship rum brand declined, although several other labels experienced significant gains, including Bacardi Oakheart, St-Germain and Eristoff.

Pernod Ricard USA ranked fifth; its Absolut brand moved into positive growth territory, while Malibu, Jameson, Beefeater and The Glenlivet each expanded in 2012. Other leading suppliers achieving significant overall volume growth included E&J Gallo/Alto Spirits, Proximo Spirits, Phillips Distilling and Fifth Generation.

Sales of spirits in bars, restaurants and other on-premise locations increased in both dollars and volume. On-premise dollar sales grew faster than off-premise dollar sales, driven by consumers trading up and operators taking modest price increases. Spirits volume grew faster in grocery, liquor stores and other off-premise outlets. As has been the case in recent years, on-premise outlets generated nearly a quarter of spirits volume but approximately half of spirits dollar sales. Consumer insights included in the 2013 SpiritsTAB report reveal that consumers value price, variety, promotions and brand of alcohol beverages more for on-premise occasions than when purchasing spirits at retail outlets.