Exports of several global spirits slumped in 2023, what does new data say about headwinds facing rising spirits like Scotch whiskey and mezcal?
After a “bumper” year for many exports, Scotch exports were down -9.5% by value and -19% by volume according to data released last week by the Scotch Whisky Association. The U.S., which has long been Scotch whisky’s biggest market by value, saw a fall in exports of -7% compared to 2022, and -8.5% compared to 2019. The SWA cited the cost of living in the U.S. as cause for the slump. Scotch is one of the spirits that has benefitted over the past decade from Americans’ interest in super premium spirits, particularly single malt Scotch (of which volumes have grown 221% since 2002 according to the Distilled Spirits Council of the U.S.).
A similar tune can be heard in France, where French exports of wine and spirits fell -5.9% to $17.5 billion (€16.2) last year following a post-COVID peak, according to the French Association of Wine and Spirits Exporters (FEVS). Spirits were down overall 13% by volume and 12% by value. Still that dollar figure remains the second best export performance on record experienced by the sector. The downturned was largely thanks to the U.S., by far the largest export market for French wine and spirits, where destocking by distributors contributed to a 22% drop in imports.
Tequila exports also took a dip (-4.2%), as did mezcal, but the latter by only a bit, down 100,000 cases from last year according to Impact Database. Unlike other spirits, mezcal faced challenges at the outset of the pandemic as on-premise was the primary channel for the agave spirit. Export growth rose 12.5% in 2020, followed by 50% in 2021. Volume surpassed a record 900,000 cases in 2022. Overall, mezcal’s trajectory is still on an impressive rise: product bottled for export has grown from 768,014 liters in 2012 to 8,543,324 in 2022 according to COMERCAM, a government entity that oversees mezcal.
The rebound on-premise has certainly benefited agave spirits: the category is expected to outsell vodka in U.S. bars this year, according to hospitality engagement platform Union. Mezcal usage rose by 20% in 2023 at Union venues, making it the fastest-growing agave spirits subcategory. But as the spirit gains popularity, experts warn of oversaturation.
“The key thing is the competition, right?” said Ryan O’Hara, CEO of BevAlc importer and service provider MHW during a webinar this month. “The hot category is bringing a lot of new entrants, and so there’s a fight to stand out inside of it.”
Analysts are also watching trade-down trends: in sales data through August of 2023, tequila was one of the spirits where under $25 was performing better versus above $25 segments (+3.7% versus +2.6%). If the long-term trend of premiumization holds, that would benefit mezcal, where the bulk of sales has traditionally been towards the higher end of the price spectrum.
Political, Perception Challenges Ahead
Spirits coming from Europe may face more political challenges and obstacles of perception. The SWA says it expects the short-term Scotch export dip to realign over the course of 2024.
But the organization also warned that 2024 marks a halfway point for the five-year removal of tariffs on single malt Scotch which were imposed in 2019, and has urged the UK government to press the U.S. for longer-term tariff-free trade for Scotch. A 16-year trade dispute between the U.S. and E.U. over respective subsidies to Boeing and Airbus took a five-year hiatus in 2021, relieving the alcohol industry in several European countries of retaliatory tariffs on wines and spirits.
The decline demonstrates how much the sustainability of the export success of wines and spirits requires “long‐lasting support of public authorities,” according to FEVS chairman Gabriel Picard in a statement.
“New markets must be opened, and others must also be prevented from closing, in particular through trade retaliatory measures,” he said.
For French spirit exporters, the decline was also labeled by Picard as a wake‐up call to adapt to changing consumer and market demands. Possibly its most iconic spirit export, cognac, has faced competition from other high end spirits, forcing brands to appeal to new audiences.