Spirits Sales Surpass Beer and Wine for the Second Consecutive Year, Despite Minimal Growth
The spirits industry has maintained its market share lead over beer and wine for the second consecutive year, even though it experienced little growth in 2023. According to the Distilled Spirits Council of the U.S.’ annual economic report, U.S. spirits revenue only grew by a modest 0.2% last year, reaching $37.7 billion. Despite this minimal growth, spirits outperformed beer and wine sales by 0.4% and 26.1% respectively.
This achievement is particularly impressive considering the challenging economic environment characterized by high inflation and interest rates, which have dampened consumer discretionary spending. However, the beverage alcohol industry has shown resilience as it emerged from the pandemic boom caused by Covid-19.
Chris Swonger, president and CEO of DISCUS, stated, “The spirits sector showed resilience in 2023, navigating through the choppy wake of the pandemic and maintaining our market share lead of the total beverage alcohol market.” He acknowledged that the exceptional sales growth experienced during the pandemic was unprecedented and unsustainable, leading to a recalibration of the spirits market.
In terms of specific spirit categories, vodka remained the top-selling spirit in 2023. Tequila and mezcal, on the other hand, gained an even larger lead over American whiskey, solidifying their position as the second-highest selling category. Blended whiskey and American whiskey are among the fastest-growing spirits categories in terms of revenue.
Despite premium spirits makers such as Diageo, LVMH, and Constellation Brands reporting weakness this quarter, Swonger remains optimistic about the spirits industry’s strategy to encourage consumers to purchase pricier bottles and labels. During the Covid-19 pandemic, consumers in quarantine sought out higher-quality spirits. However, luxury spirits sales have started to dwindle since their peak growth in 2021.
The rapid rise of ready-to-drink cocktails has been a bright spot for investors in the spirits industry. Premixed cocktails were the fastest-growing spirits category in 2023, experiencing a 26.7% increase in revenue, reaching $2.8 billion. Marten Lodewijks, head of consulting at IWSR, attributes this success to the slightly more premium experience that spirits-based products offer consumers compared to malt-driven hard seltzers.
Furthermore, more beverage companies have entered the ready-to-drink cocktail market, capitalizing on its growth potential. Coca-Cola, for example, launched its ready-to-drink cocktail with Brown-Forman’s Jack Daniel’s whiskey in 2022.
In another positive development for the spirits industry, American whiskey received good news in 2023. The U.S. and the European Union reached an agreement to extend the suspension of EU tariffs on American whiskey until March 31, 2025.
While some parts of the industry have experienced weaknesses, such as premium spirits and wine, the spirits market has shown resilience and adaptability. The continued success of spirits sales, despite minimal growth, reflects consumers’ evolving preferences and the industry’s ability to navigate challenges effectively. As consumers seek out more premium experiences and convenient options like ready-to-drink cocktails, the spirits industry is poised for further growth and innovation in the coming years.
