Adapting to Change: the Spirits Industry Amidst Shifting Tendencies

February 9, 2024

The spirits industry is undergoing notable expansion and evolution, propelled by shifting consumer tastes, emerging market trends, regional influences, and macroeconomic drivers.

As the spirits category continues to flourish on a global scale, particular attention is drawn to the dynamic landscape unfolding in the United States, one of the sector's most advanced and influential markets. Come along with us as we explore the spirits market, uncovering the trends and insights!

Fundamental economic trends

The global spirits market is poised for significant growth, with projections indicating a staggering revenue of US$427.9 billion by 2024. By 2028, the market volume is anticipated to reach 34.9 billion liters. Despite modest expectations for 2025, with a projected volume growth of 0.1%, the market continues its upward trajectory. On average, each individual is expected to consume 4.42 liters of spirits in 2024. Amidst this expansive landscape, France stands out as a formidable presence, boasting iconic brandy and cognac offerings that solidify its position as a dominant force in the global spirits market.

What about U.S.? The spirits industry has demonstrated remarkable resilience, maintaining its market share lead for the second consecutive year, despite facing minimal growth. The CNBC article shares data released by the Distilled Spirits Council of the U.S. (DISCUS), where it underscores this trend, revealing that while U.S. spirits revenue experienced only a modest uptick of 0.2% in 2023, reaching $37.7 billion, it outpaced both beer and wine sales by 0.4% and 26.1%, respectively.

Chris Swonger, president and CEO of DISCUS, attributed this steadfast performance to the industry's ability to navigate through challenging economic conditions, including high inflation and interest rates, which have impacted consumer discretionary spending. Despite these headwinds, the spirits sector has emerged from the Covid-19 pandemic with resilience, maintaining its position within the broader beverage alcohol market.

Customer preferences

U.S.

Key categories within the spirits market have exhibited notable growth, with vodka retaining its position as the top-selling spirit in 2023. However, perhaps more intriguingly, tequila and mezcal surpassed American whiskey to claim the second-highest spot, signaling shifting consumer preferences.

Europe

According to Statista, consumer preferences in Europe have transitioned towards premium and craft spirits, reflecting an increasing demand for distinctive and high-quality offerings. This shift is driven by a rising interest in artisanal and locally sourced products, alongside a desire for more authentic and personalized experiences.

Trends in the market

Premiumization has emerged as a strategic imperative for the spirits industry, with efforts to encourage consumers to opt for higher-priced offerings and premium labels. Despite recent challenges reported by premium spirits makers, the industry remains optimistic about its ability to capture value through premiumization strategies.

The Covid-19 pandemic served as a catalyst for heightened consumer interest in higher-quality spirits, driving a surge in luxury spirits sales. However, since reaching peak growth in 2021, luxury spirits sales have tapered off, presenting new challenges for industry players.

In the U.S., amidst these challenges, one bright spot for investors has been the rapid growth of ready-to-drink (RTD) cocktails. This burgeoning category witnessed a remarkable 26.7% increase in revenue last year, with premixed cocktails emerging as the fastest-growing segment within the spirits market.

This shift towards premiumization has been instrumental in driving growth within the RTD category.

U.S. special circumstances

The 2023 brought positive news for the American whiskey segment, as the U.S. and European Union agreed to extend the suspension of EU tariffs on the liquor until March 31, 2025. This agreement provides a welcome reprieve for American whiskey producers, offering them greater certainty amidst ongoing trade uncertainties.

eCommerce

The online channel has indeed revolutionized the consumption of spirits, offering consumers unparalleled convenience, choice, and accessibility. With the proliferation of e-commerce platforms and digital marketplaces, purchasing premium spirits has never been easier, allowing customers to browse a vast array of products from the comfort of their homes. Moreover, the online space provides a platform for spirits brands to engage directly with consumers through immersive storytelling, educational content, and personalized recommendations. However, according to Statista, there is still significant opportunity to explore the online channel further. As indicated by the data, online sales represent less than 3% of total revenue for the category. This suggests that there is ample room for growth and expansion in leveraging the online channel to reach a wider audience and drive sales in the spirits market.

In conclusion, while the spirits industry faces its share of challenges, including sluggish growth and shifting consumer preferences, its resilience and adaptability have enabled it to maintain its competitive edge within the broader beverage alcohol market. By leveraging strategies such as premiumization and capitalizing on emerging trends like RTD cocktails, spirits brands can continue to thrive in an increasingly dynamic retail landscape. Ready to explore how these strategies can elevate your brand in the Retail Media? Reserve a demo with us today and unlock the potential for growth and innovation in the spirits market.

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