US Spirit suppliers record 7.7% rise in sales despite double whammy of pandemic and tariffs

US – Supplier sales of spirits rose 7.7% in 2020 despite of the Covid-19 pandemic and new tariffs imposed by the European Union on US liquor exports, a new report by the Distilled Spirits Council of the United States (DISCUS) has revealed.

According to the report, the 7.7% rise resulted in spirit sales of US$31 billion and a gain of 1.3 percentage points in market share over beer and wine in 2020.

At the end of 2020, Spirits were ranking highly in the alcoholic beverages industry, commanding a total of 39.1% of the entire market share.

According to DISCUS, 2020 marked the 11th consecutive year of market share gains for spirits, with each point in market share representing an additional US$800 million in revenue for suppliers.

Spirits across the board saw sales increases, including American whiskey, up 8.2% to US$4.3 billion, with a nearly 17% jump in rye sales providing the momentum.

Tequila and mezcal sales grew more than 17% to US$4 billion, and cognac gained more than 21% to hit US$2.4 billion.

For the year 2020, DISCUS report credited the rise in spirit sales to a combination of consumers upgrading to super-premium spirits as “affordable luxuries” as they sheltered in place and creative approaches in states and cities to support the hospitality business.

“The increase in spirits sales revenue reflects consumers’ willingness to spend a little extra on super-premium spirits during the past year since they were not traveling, going on vacations or dining out as often,” said DISCUS’ chief economist, David Ozgo.

 “It also reflected consumers’ desire to bring that special restaurant and bar experience they were missing into their homes.”

The report noted that the growth in spirit sales came despite a series of retaliatory tariffs slapped on U.S. alcohol segments, including spirits, by the European Union that were triggered by an escalating trade dispute.

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An early spike in off-premise consumption also helped offset revenues lost from restaurant and bar closures.

Despite its spectacular gains in 2020, DISCUS is cautious about future growth as increasing health concerns among consumers drive them further away from the alcoholic beverages aisle.

The pantry stocking that typified the early months of the pandemic has for instance eased, with the growth rate for off-premise sales falling as the year advanced, according to DISCUS’ analysis.

Analysts at DISCUS also note that Premiumization which contributed 40% of revenue growth in the spirits sector may not maintain its momentum for much longer.

In a recent report, IRI predicted that consumers would increasingly shift toward value brands and private label across much of CPG as their greater mobility begins eating into their household budgets.

Moving into 2021, DISCUS notes that for distillers, the opportunity will be forging partnerships that create offerings meeting both at-home and on-the-town occasions.

That way they can take advantage of new service models, such as home delivery and subscriptions, that were tested during the pandemic, while reintroducing diners to the pleasure of an expertly poured spirit or a custom-mixed cocktail.

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