Fighting back against anti-alcohol messaging and rediscovering industry optimism following a year of flat spirit sales were two of the major themes at the annual Distilled Spirits Council of the U.S. (DISCUS) conference in San Diego this week.
With the association’s leadership echoing woeful year-end vibes courtesy of a soft sales environment for spirits, the focus of the conference dove deep into forecasts for inventory and premiumization challenges, as well as moderation trends. Concerns over another difficult 12 months ahead come against a backdrop of potential federal policy changes and labeling requirements.
Policy Efforts Take On Anti-Alcohol Messaging, RTD Access
DISCUS still has its sights set on continuing to open more market opportunities for its members through shifting regulations, including allowing Sunday sales, permanent legislation for to-go cocktails, as well as state-level changes to RTD legislation.
All eyes are currently on Maryland, where industry advocates faced-off last month while offering testimony to the House Ways and Means Committee over HB663, a bill to reduce the tax rate for spirits-based RTDs.
Taking on the beer industry’s opposition to increased channel access or lower taxes for spirit-based RTDs, DISCUS president and CEO Chris Swonger argued that the “beer industry is trying to protect its competitive standpoint and nothing else,” as opposed to prioritizing the consumer. DISCUS unveiled its new “Cocktail Party” platform to encourage consumers to send letters and otherwise engage with policymakers around RTD policy and other legislative issues.
Among those is the newest public information campaign heating up for the organization: addressing the anti-alcohol messaging that DISCUS leadership says could influence the 2025 Health and Human Services (HHS) and U.S. Department of Agriculture (USDA) dietary guidelines. Amanda Berger, DISCUS vice president of science, aimed to debunk several recent studies and corresponding media reports moving towards the approach that there is no safe level of alcohol consumption.
“That narrative becomes concerning because it is starting to bleed into conversations around country-specific guidelines,” she said.
Of specific concern is the new process of separating the U.S. alcohol guidelines from the traditional 2025 Dietary Guidelines Advisory Committee review process, creating a “black box” in terms of transparency, according to Berger. It should be noted that although the USDA guidelines have come under scrutiny before, it’s been specifically concerning the influence of the lobbying efforts of big alcohol and food.
New Label Regulation Coming
The organization is also gearing up to support its members as changes to spirits labeling loom on the horizon.
Last November the U.S. Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) announced it would issue proposed rules for nutrient, allergen, and alcohol content labeling, as well as preliminary rules for ingredient labeling on wine, beer and spirits.
“We want to urge the TTB to engage in this process very carefully,” said Courtney J. Armour, chief legal officer. “We want to make sure we’re not creating any undue burdens on industry, particularly small craft guys.”
That may look like QR codes that point to newly required information, she added as an example.
Last month the TTB held listening sessions for the proposed rulemaking that brought in 47 speakers over the course of the two days. Electronic comments will be open until March 29, after which the TTB will review all comments and “take it from there,” said Janelle Christian, director of industry and state outreach for the TTB during a panel, adding that the implementation period will not happen overnight and will be “slow and deliberate.”
State of the Industry: Moderation, De-Premiumization and Inventory Build Up
There were no big surprises during the “State of the Industry” panel, which focused on how the industry can prepare for de-premumization trends, record-high inventory levels and the growing non-alc category.
Moderation has moved from a trend to an “embedded theme” in the industry and has spread to global markets, said Marten Lodewijks, head of strategy and insights for the Americas at IWSR.
“We often get asked, how much should I invest in no-and-low? And I obviously can’t answer that question, but I can tell you that it’s not zero,” he said.
Cherly Durzy, CEO and founder of LibDib, echoed that non-alc category’s growth was one of the biggest changes over 2023 and that buyers from big chains from independent retailers “are “dedicating a lot of space to that category.” Retailers are also beginning to have buyers dedicated to the adult no and low-alc category and developing expertise, she added.
Meanwhile, new BevAlc brands may continue to face challenges finding space on the shelf after record-volume flowed into the industry during the pandemic consumption boom.
“It’s harder and harder for smaller, new brands to get to market because they don’t have any history, and there’s less and less brick and mortar distributors that are going to be willing to take that chance on that because of the inventory situation,” said Durzy.
In 2023, wholesaler inventories became larger than ever amid a widening gap between sales and inventory. Durzy said that wholesalers are making changes to avoid build-up in the future, and new brands should expect to see smaller initial orders.
Panelists also dove into the recent reversal of premiumization trends as consumers tightened their belts last year. While there was a trade-down, much of that was happening via incremental price bracket dips, rather than consumers switching from high-end products to a value offering, according to Hasan Bakir, director of economic studies for DISCUS.
“There was evidence of marginal trade down but that trading down was mostly among segments: maybe people were not buying the $50 bottle but they were buying a $45 bottle,” he said.
But for Clase Azul, which fits in the higher end tequila segment now possibly facing a dry spell in the U.S., recent drivers of growth have been positive agave spirit trends in Europe and Asia, pointing to where other brands may expand.
“There are some good tailwinds to the U.S. economy, with rates potentially coming down,” said Juan Sanchez, Clase Azul partner and chairman. “I think consumers outside of the U.S. are also excited about the category and that’s super positive.”