Spirits Industry Outpacing Wine and Beer

CHICAGO -- The spirits industry hit a milestone in 2012, exceeding 200 million cases, and it is positioned for ongoing growth this year. Flavor innovation, in particular, propelled the spirits industry to reach these new heights, according to Technomic Inc.'s newly released 2013 Spirits TAB (Trends in Adult Beverage) Report.

"Despite the moderate pace of the economic recovery, the spirits industry continued to grow in volume and dollars," said Eric Schmidt, director of research at Technomic, a Chicago-based research and consulting firm. "Spirits was actually the fastest-growing segment of adult beverage in 2012, outpacing wine and beer, and we anticipate that trend continuing in 2013."

The fastest-growing segments of spirits were vodka (up 5.8 percent), American straight whiskey (5.2 percent) and tequila (3.8 percent). Vodka increased its share to account for one-third of total spirits volume and remain the largest segment, while the smallest, Irish whiskey, once again posted a double-digit gain (21.6 percent), according to the Spirits TAB Report.

The premiumization trend in spirits ramped up in 2012, indicating that consumers explored and indulged in high-quality drinks, even in the slow economy. The higher price tiers outperformed the lower ones in every segment except blended American whiskey and cordials and liqueurs. This shows a willingness among consumers to spend more to experience the premium end of the spirits spectrum.

Flavors also remain of great importance in spirits. Among the fastest-growing brands of 2012 were five vodkas of varying price points; two whiskey-based liqueurs with on-trend flavor profiles; a cream rum liqueur; a spiced rum entry; and a premium-priced blue agave tequila.

“Many of the trends that drove the spirits market in 2011 continued in 2012, such as premiumization and consumer interest in exploring different categories,” observed Donna Hood Crecca, senior director at Technomic. “But the real driver was product innovation, particularly around flavor. Spirits suppliers came to market with compelling products featuring interesting and sometimes unexpected flavor profiles. Consumers were intrigued, especially the all-important Millennial consumer group.”

Flavor innovation last year ranged from the rich complexity of single-malt Scotch to candy- and dessert-inspired flavored vodkas, as well as spicier selections of rum and cordials and liqueurs.

The flavors trend is continuing in 2013. According to Technomic's DRINK database, 120 new spirits products were introduced in the first quarter of this year, of which 21 were flavored vodkas, 23 were cordials and liqueurs, seven were flavored rums and six were flavored whiskeys.

“We’re seeing unexpected flavors, such as Pernod Ricard’s Mama Walker’s line of breakfast-inspired liqueurs, involving flavors like Maple Bacon and Blueberry Pancake," Crecca said. "The dessert trend is continuing in vodka, with Smirnoff Sorbet Light in Mango Passionfruit and Raspberry Pomegranate launching, and Beam adding Rainbow Sherbet to the already extensive Pinnacle lineup. Spice is showing up in whiskeys and liqueurs, and exotic fruit and floral flavors are also still on trend.”

Technomic projects ongoing growth for flavored vodka, whiskey, tequila and rum, as well as expansion in cordials and liqueurs in 2013.

Looking at on-premise spirits sales vs. off-premise, on-premise dollar sales grew faster, driven by consumers trading up and operators taking modest price increases. However, volume grew faster in grocery, liquor stores and other off-premise outlets. As has been the case in recent years, on-premise generated nearly a quarter of spirits volume, but approximately half of dollar sales.

The SpiritsTAB Report also revealed that consumers regard price, variety, promotions and brand of alcohol beverages more for on-premise than when purchasing spirits at retail outlets.