Whiskey still gets most of the attention, but brandy, gin and other spirits are grabbing more seats at the table.
Anytime someone mentions the American spirits market, it’s more than likely that the first thing that comes to mind is whiskey. And that, for the most part is justified. However, other categories have been aggressively inserting themselves into the conversation and whiskey, increasingly, has been ceding some of the spotlight.
The Whiskey Wave
The most consistent growth story has been whiskey and there are no signs that that’s going to change any time soon. Total whiskey revenue in most off-premise channels grew more than 7 percent, while volume grew 5 percent in 2018, according to market research company IRI.
Technically, whiskey isn’t a “growth story” per se, but a collection of stories. American whiskey—particularly bourbon and Tennessee whiskey—has been a juggernaut unto itself, to the point where major international spirits marketers are reopening long-defunct distilleries, as well as building new ones. And bourbon is what got so many of the new wave of craft spirits producers to get into the business in the first place.
“With bourbon, [it seems] anything that goes out on the shelf will sell,” says whiskey expert Lew Bryson, author of “Tasting Whiskey” and senior drinks writer at The Daily Beast. “I’m not really seeing any changes there.”
The success of bourbon and Tennessee whiskey paved the way for the rye whiskey renaissance, which, according to the Distilled Spirits Council, has grown close to 1,000 percent over the past decade (but from a very small base. Ten years ago total rye volume was shy of 100,000 9-liter cases and now it’s hovering around 1 million cases).
Two decades ago, Bryson notes, “rye wasn’t even a thing, it was something you saw in movies—it was the whiskey people drank in cowboy movies.”
But now, the spirit is no longer an oddity.
But it’s not just American-produced whisk(e)y that’s performing well. Irish and Japanese imports have been on fire and Canadian whisky has been enjoying a resurgence. “Blended Scotch is still in the doldrums, but Irish is going strong,” Bryson notes. “No one can stop Irish.”
There has been a downside to the worldwide whiskey boom: Supply can’t keep up with demand. “The big story, the story that isn’t being talked about is that [suppliers] are still scrambling to keep up with demand,” Bryson says. “Most places just don’t have whiskey to sell.”
A Spirited Mix
The distilled spirits excitement isn’t exclusive to whiskey, as there a number of other categories having their moment. Agave-based spirits, for instance, have attracted quite a few fans. Mezcal has built quite a cult following, but the category is so small, it usually gets lumped in under the tequila umbrella. IRI reports that tequila revenue and volume were up a respective 11.5 percent and 9.8 percent last year.
Premixed cocktails also have been experiencing impressive growth, especially as craft spirits producers and craft mixologists have been getting into that game, enhancing the cachet of RTD cocktails. High-end Moscow mules, premium gin and tonics and even Old Fashioneds have been finding their way into bottles and cans. Volume and revenue for the segment were both up about 21 percent last year.
Though it’s easy to point to significant percent increases as proof of a category’s health, sometimes the numbers can be misleading. Take gin and brandy, for instance. Revenue for brandy/Cognac was up about 3.5 percent, but volume was down 0.3 percent last year, according to IRI. Though you can credit higher-priced, super-premium Cognac imports with keeping the category financially in the black as it’s volumetrically in the red, the American brandy renaissance also is playing a role.
“Brandy is gathering momentum,” says Joe Heron, co-founder of Louisville, Kentucky-based Copper & Kings, one of the distilleries leading the charge in the American brandy revival. “We’re fortunate enough to be a part of that. It’s about riding the wave—the wave has crested and we’re on the board and it’s now about staying on the board and enjoying the ride.”
The super-premium brandy segment, of which Copper & Kings and other craft brands are a part, has been growing well into the double digits, according to the Distilled Spirits Council.
Gin has been enjoying a similar phenomenon. The overall category has been pretty much flat—with off-premise revenue up about 1 percent and volume down nearly as much, according to IRI. But the super-premium segment, though small, has been up in the teens, according to recent Distilled Spirits Council data. The question is when is the gin boom that’s been conquering the U.K. and continental Europe going to arrive stateside. “The global gin revolution will crest on American shores this year,” predicts Heron, whose distillery also makes gin. “I think the move in gin is coming through craft innovation, which is inspiring bigger brands to become much more innovative.”
He’s speaking of the likes of Diageo, William Grant and Beam Suntory. Diageo last year launched Tanqueray Flor de Sevilla, an line extension from the iconic gin brand made with oranges from Seville, Spain. Meanwhile, William Grant & Sons recently unveiled Hendrick’s Orbium, which adds a bit of quinine, wormwood and blue lotus blossom to the mix.
And two years ago Beam Suntory acquired the popular British craft producer Sipsmith, the London distillery that’s largely credited with leading the U.K. gin revival.
Over on these shores, the craft spirits segment is enjoying the kind of surge that craft beer experienced a decade ago. The number of active craft spirits producers in the U.S. jumped to 1,835, as of August 2018, from 1,589 at the same point in 2017, according to the Craft Spirits Data Project (CDSP), a collaboration among the American Craft Spirits Association (ACSA), Park Street and the International Wine and Spirits Research (IWSR). That’s a 15 percent increase over the prior year. For some perspective, there were only 204 craft distillers in 2010. The ACSA defines a craft distiller as a licensed producer with no more than 750,000 proof gallons (394,317 9-liter cases) removed from bond annually. Additionally, the company must be independent, with more than a 75 percent ownership stake in the spirits-making operation—similar to the Brewers Association’s rule defining a craft brewer.
The craft spirits segment produced a total of 7.2 million 9-liter cases in 2017, up 23.7 percent from the previous year and more than double the 3.1 million cases craft distillers made in 2013.
Craft spirits still have a distance to travel to reach the same kind of market share that craft beer has. Craft beer accounts for more than 12 percent of total U.S. beer volume, according to the Brewers Association, while craft spirits share of the total U.S. spirits universe, CSDP reports, is about 3.2 percent—up from 2.6 percent the prior year. On the revenue side, craft accounts for 4.6 percent of total spirits dollar, up from 3.8 percent the previous year.
Through the rest of 2019, we can expect a lot more of craft distillers’ whiskey to come of age and give some of the larger, iconic brands a run for their money. And we’ll also see many more make a name for themselves redefining unsung categories like gin, brandy and rum. And they’re going to have to. As the number of U.S. distilleries 2,000—which it’s expected to do this year—differentiation will be key.