THE US SPIRITS MARKET – 2012

THE US SPIRITS MARKET – 2012

Growth driven by product innovations and sophisticated line extensions

According to the Distilled Spirits Council of the United States (DISCUS) review of the US spirits industry, distilled spirits gained market share from beer and wine in 2012 as companies innovated with new, sophisticated line extensions and as a decade of regulatory modernization continued to pay dividends for spirits.

Overall, US supplier sales grew a solid 3.0% in volume to 202 million 9-litre cases, while supplier revenues grew 4.5% to US$21.3 bn. This was as consumers continued to gravitate to higher end premium and super premium product choices. Meanwhile, the distilled spirits industry grew its market share of sales for the third straight year increasing to 34.3% and taking share from both beer and wine.

“Moderate growth driven by product innovations and sophisticated line extensions highlighted 2012 for distilled spirits companies of all sizes,” said Peter Cressy, President and CEO of the Distilled Spirits Council. “The premiumization trend continues to captivate consumers here in the U.S. and around the globe,” he added.

“Regulatory modernization over the course of the last decade, with the steady repeal of prohibition-era Blue Laws, has paid real revenue dividends for the distilled spirits industry,” Cressy said, calling the sector a key component of the hospitality industry.

He pointed out that since 2002, 16 states have adopted Sunday sales of distilled spirits, making a total of 38 nationally. This is worth US$260 million in new annual sales. In the past two years, the last northeastern state, Connecticut, repealed its Blue Law (usually referred to as the Sunday closing law), and even Georgia voted for the repeal. Cressy attributed the changes to the recognition of the economic benefits of modernization and consumer convenience.

Also, since 2002, 17 more states have passed legislation to allow distilled spirits “tastings” at liquor stores. Today 44 states allow some form of tasting. This has made a significant contribution to the consumer fascination with high end premium and super premium products. Distilled Spirits Council data shows that while supplier sales of value-priced products have grown from US$3.75 bn to US$4.08 bn between 2003-2012 (+24.5%) super premium products have grown from US$1.48 bn to US$3.90 bn, a 163% rate of growth.

“Reasonable access and modern shopping environments have certainly contributed to consumer preferences for premium distilled spirits product choices,” Cressy stated. “When added to a steady fascination with cocktail trends and a wonderfully diverse array of product innovations, the industry has charted a course for steady, sustainable growth.”

The Council also projected a third-straight record year of export growth to US$1.5 bn, showcased by the continuing strength and appeal of American Whiskeys, which represent nearly 70% of distilled spirits exports and have made solid gains in most traditional markets while growing rapidly in emerging markets. U.S. distilled spirits exports now exceed wine exports by nearly a quarter of a billion dollars and are more than triple beer exports in value terms. Policy changes, including free trade agreements that resulted in significant tariff reductions or outright tariff elimination in Korea, Colombia and Panama, and Permanent Normal Trade Relations (PNTR) with Russia in 2012, contributed to the record while providing a springboard for future export growth.

“Free trade agreements like the one in Korea, which resulted in immediate tariff elimination, improved American spirits access to the fifth largest spirits market in the world,” Cressy noted. “These are exciting developments for American spirits exports and, coupled with other market-opening measures such as PNTR for Russia, will provide a springboard for sustained export growth.

“Just as in the U.S. premium drinks are steadily gaining favor, both in traditional export markets and among the rising middle classes in newly open emerging markets,” Cressy said. “American Whiskeys are also well-positioned from a flavour perspective to take advantage of the growing sophistication in cocktail culture.”

Volume Share by Price Category – 2012 Share of U.S. Spirits Volume

Value 38.1% (76.8 million cases)
Premium 36.0% (72.8 million cases)
High End 18.0% (36.3 million cases)
Super Premium 7.9% (15.9 million cases)

Revenue by Price Category – 2012

Value 19.2% (US$ 4.1 Bn)
Premium 34.3% (US$ 7.3 Bn)
High End 28.2% (US$ 6.0 Bn)
Super Premium 18.3% (US$ 3.9 Bn)

Volume Growth by Price Segment – 2012

Value + 1.8%
Premium + 2.1%
High End + 4.8%
Super Premium + 8.9%

Volume Growth by Price Segment

Value + 1.365 million cases (23.6%)
Premium + 1.473 million cases (25.4%)
High End + 1.659 million cases (28.6%)
Super Premium + 1.294 million cases (22.4%)

Source : DISCUS MSDB

Flavours

• Cocktail/culinary trends drive experimentation. This drives product innovation and new flavours
• Flavoured products continue successful line extensions
• Over 40% of products have flavour component beyond traditional category -All categories (Vodka, Rum, Cordials, etc.)
• 220 flavours exist – from Citrus to Wasabi
• New successful flavoured expressions of iconic brands
• Industry’s strength has long been based upon ability to offer product for every taste, budget and occasion

Flavoured Products

2012 U.S. Volume – Flavoured 27%, Traditional 73%
2012 U.S. Growth – Flavoured 46%, Traditional 54%

Top 20 Spirit Flavours – 2012

Orange (163)
Cherry (98)
Coffee (87)
Peach (85)
Apple (84)
Chocolate (82)
Raspberry (82)
Lemon (77)
Anise (75)
Lime (67)
Coconut (59)
Grape (57)
Strawberry (54)
Vanilla (50)
Tea (47)
Citrus (43)
Blackberry (38)
Mango (38)
Peppermint (38)
Amaretto (34)

( )= Products

New Product Development

739 new products brought to market in 2012
–353 flavoured
–386 traditional

Accounted for 2.4 million cases – 41% volume growth
–2.2 million flavoured
–240 thousand traditional

Source : DISCUS MSDB

CATEGORY PERFORMANCE

VODKA

– Accounts for 32% of all spirits volume, 26% revenue
– Volume up 4.0% to 65 million cases, revenue up 5.1% to US$5.5B

Price category growth
Value 1.7% to 26.6 million cases, largest price/product segment
Premium up 5.7% to 19.8 million cases, revenue up 5.4% to US$1.5B
High End up 3.5% to 12.5 million cases, revenue up 4.0% to US$1.6B
Super Premium up 10.0% to 6.3 million cases, revenue up 9.5% to US$1.3B

New products
171 new products, 122 flavoured
New flavoured products accounted for nearly 1 million cases

BOURBON & TENNESSEE WHISKEY

– Largest whiskey category 16.9 million cases, US$2.2B revenue
– Volume up 5.2%, revenue up 7.3%, 46 new Bourbons / 3 flavoured whiskeys
– Recent growth shows consumer’s willingness to experiment

Performance by price segment
Value, volume up 2.9% to 2.8 million cases, revenue up 4.8% to US$157M
Premium, volume up 7.5% to 5.0 million cases, revenue up 9.4% to US$499M
High End, volume up 3.8% to 8.1 million cases, revenue up 5.7% to US$1.3B
Super Premium, volume up 12.4% to 1.0 million cases, revenue up 14.4% to US$222M

Category growth has spurred interest in other American Whiskeys
Rye volume up 50%+ to 275k (22 new Ryes)
Several white whiskeys now on market

SCOTCH WHISKY

– Volume up 13.0% to 1.6 million cases, revenue up 16.4% to US$515M
– Single Malt Scotch continues rapid growth
– Concentrated in High End and Super Premium
– 53 new product introductions in year
– Blended Scotch strong growth in High End & Super Premium

IRISH WHISKEY

– Volume up 22.5% to 2.2 million cases, revenue up 23.7% to US$415M. fastest growing category
– Pernod Ricard’s Jameson Irish Whiskey brand has passed the 4 million case mark in the past year

LIQUEURS

– Volume up 4.7% to 21.2 million cases, revenue up 3.1% to US$2.5B
– 163 new products introduced, 143 flavoured

Performance by price segments
Value, volume up 9.8% to 8.1 million cases, revenue up 9.8% to US$481M
Premium, volume 0.4% to 11.3 million cases, revenue -0.6 to US$1.6B
High End, volume up 10.7% to 1.8 million cases, revenue up 10.9% to US$421M
Super Premium, volume up double digit, less than 100,000 cases

TEQUILA

– Tequila volume grew 2.9% to 12.3 million cases
– Tequila revenue up 4.6% to US$1.9B
– 40 new tequilas introduced

Performance by price segments

Value, volume up 1.8% to 2.9 million cases, revenue up 1.8% to US$221M
Premium, volume 1.0% to 6.4 million cases, revenue flat US$749M
High End, volume up 7.0% to 1.1 million cases, revenue up 6.4% to US$205M
Super Premium, volume up 9.1% to 1.9 million cases, revenue up 10.3% to US$707M

RUM

-Rum volume up 1.5% to 25.5 million cases, revenue up 1.9% to US$2.3B
-Second largest product category after vodka
-Strong growth in Value, volume up 3.3%
-Super Premium up 8.1%, but small segment
-63 new Rums, 22 flavoured

GIN

-Gin volume up 1.5% to 10.7 million cases, revenue up 2.7% to US$873M
-Category volume concentrated in Value segment, 7.4 million cases
-Growth driven by Premium segment, 19.2%
-36 new gins introduced, 4 flavoured
-Popular product with craft distillers

Source : DISCUS MSDB

SUMMARY

– Revenue up 4.5% to US$21.3B
– Volume up 3.0% to 202 million 9-litre cases
– Premium+ products driving revenue growth
– Super Premium volumes up 8.9%
– 34.3% revenue market share, 31.9% volume market share
– Strong product development meeting consumer demand

Source : DISCUS MSDB

Adapted/Reproduced by: BFP Beverage Research a UK based boutique market consultancy specialising in the international beverage industry

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