Spirits on display in a bar in Cardiff, Wales, UK.
Matthew Horwood | Getty Images News | fake images
The spirits industry maintained its market share lead over beer and wine for the second year in a row in 2023, even as it showed little growth, according to new data released Wednesday.
US spirits revenue grew just a modest 0.2% last year to $37.7 billion, according to the annual economic report of the Distilled Spirits Council of the United States. Although the industry earned little in total revenue, it outperformed beer and wine sales by 0.4% and 26.1%, respectively.
Although high inflation and interest rates have decreased consumer discretionary spending, the alcoholic beverage industry has maintained its strength as it emerged from the rise of the Covid-19 pandemic, said Chris Swonger, president and CEO of DISCUS.
“The spirits sector showed resilience in 2023, weathering the turbulent wake of the pandemic and maintaining our leading market share of the total alcoholic beverage market,” Swonger said. “The phenomenal sales growth we saw during the pandemic was unprecedented and unpredictable, but also unsustainable, and now the spirits market is recalibrating.”
Vodka remained the best-selling spirit in 2023, while the second best-selling category, Tequila and mezcal gained even more advantage over American whiskey. Tequila and mezcal, blended whiskey and American whiskey are among the fastest-growing spirits categories in terms of revenue.
Swonger was also optimistic about the spirits industry's strategy to drive consumers to more expensive bottles and labels, despite the weakness reported this quarter by premium spirits makers such as Diageo, LVMH and constellation marks.
During the Covid-19 pandemic, quarantined consumers sought higher quality spirits. Since peaking growth in 2021, luxury spirits sales have begun to decline.
Diageo shares plunged in November when the European spirits giant cut its guidance amid an expected slowdown in growth for the first half of its fiscal year. Weakness in premium wines and spirits will also hit LVMH in 2023. It was the company's only business segment to report a year-over-year organic revenue decline, down 4%.
Although some parts of the industry have weakened, the rapid rise of ready-to-drink cocktails has been a bright spot for investors.
Premixed cocktails were the fastest-growing spirits category last year, rising 26.7% to $2.8 billion in revenue, DISCUS reported.
“Despite the malt-driven hard seltzer craze we witnessed between 2017 and 2021, spirit-based products have actually grown faster, albeit from a smaller base,” said Marten Lodewijks, head consultancy for IWSR, a beverage market analysis firm.. “Spirit-based products, including the vodka- and tequila-based hard seltzers that came on the scene later, offer consumers a slightly more premium experience, and that has been key to their success.”
More beverage companies have entered the market. Coca Cola launched its ready-to-drink cocktail with Diageo Jack Daniel's whiskey in 2022.
During another year of growth, American whiskey received more good news in 2023. The United States and the European Union reached an agreement to extend the suspension of EU tariffs on the liquor until March 31, 2025.
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