Whisky Advocate

DISCUS Briefing Confirms Surging Growth of American Whiskey

February 6th, 2014

Author - Lew BrysonAt the annual Distilled Spirits Council of the United States (DISCUS) industry review on Tuesday, February 4, the usual graphs and numbers on domestic sales of distilled spirits and export sales of American spirits were presented, and they told a great story about American whiskey producers. American whiskey is solidly on its way back, after thirty years of steeply declining sales. (see graphs 1 and 2). I started writing about whiskey in the mid-1990s, and much of what there was to write about back then was how the decline in whiskey sales was slowing down (I referred to it as “the glide path” to emphasize that it was a gradual decline, but I must have forgotten that glide paths always end on the ground!), and optimistically noting that there were some small niches in the overall category that were showing growth: single malt Scotch whisky, and small batch bourbon. Everything else was dropping.

Graph 1 shows a 30 year drop of over 50% in U.S. whiskey sales.

Graph 1 shows a 30 year drop of over 50% in U.S. whiskey sales.

Now things have turned around, and the DISCUS numbers were rosy indeed, especially in the export market for American whiskey. Exports of bourbon and Tennessee whiskey topped $1 billion for the first time, and represented 2/3 of total U.S. spirits exports. The top six markets for export growth (by dollar sales) were Japan, Germany, France, the UK, Spain, and Panama, while Canada remained the single largest export market by far. DISCUS attributed this export growth to economic recovery, a recognition of American quality, a drop in tariff barriers in key markets, and a continuing strong interest in classic cocktails. They also noted the Department of Agriculture’s promotion of American spirits overseas.

Graph 2: 13 years of accelerating growth in U.S. whiskey sales

Graph 2: 13 years of accelerating growth in U.S. whiskey sales

Here at home, total spirits sales were up 4.4%, to $22.2 billion, and a lot of that stemmed from the growth in sales in the “High End” and “Super Premium” categories, the most
expensive bottles. It was noted that whiskey provides substantially higher revenues per standard 9-liter case (an average of $133, compared to $85 for vodka), and the whiskey category’s growth of 6.2%. In volume, total spirits cases sold were up 3.9 million cases, and whiskey’s 3.1 million case increase was 80% of that growth. It’s not all American whiskey, either. While total whiskey volume was up 6.2%, Irish was up 17.5%, “Blended” (which includes flavored whiskey; more on that shortly) was up 14.3%, single malt scotch up 11.6%, bourbon/Tennessee/rye was up 6.8%, Canadian up 2.9%, and blended Scotch whisky was up 2.0%.

Flavored whiskey continued to grow strongly, with 1.4 million additional cases sold, accounting for 45% of the total whiskey category growth. Straight whiskeys, however, accounted for 80% of the revenue growth, so you can bet that the distillers won’t abandon them in a rush to flavors. There was talk of how distillers are being cautious about introducing the rainbow of flavors that has typified vodka sales, and open speculation over whether vodka has gone too far with flavors, jumped the shark; it seems doubtful to me that the bottom of that well has yet been plumbed, but whiskey is going to be a different case. Don’t expect birthday cake bourbon anytime soon.

Where is all this growth coming from? It appears that a good chunk of it is coming from the decline in sales of beer, particularly traditional major brands. The folks from DISCUS saw this as a triumph of their focus on increasing accessibility (by encouraging Sunday sales where restricted and urging modernization of control state systems) and encouraging cultural acceptance of spirits. As spirits become easier to buy, as people don’t have to make a special trip out of their way to buy them, people are choosing them more often than they have in the past. But a lot of it, clearly, is coming from the increased appreciation for whiskey, and the increased innovation and choice presented by whiskey makers, both from the traditional regions and from the increasing number of craft distillers.

You can see the full report at the DISCUS website here.

4 Responses to “DISCUS Briefing Confirms Surging Growth of American Whiskey”

  1. Gord says:

    So do i read it correctly that majority of the increase in American whiskey is:
    A) 1.4 m cases of flavored product
    B) Price increase? (or at least shifting raw material to more expensive brands)

    • Lew Bryson says:

      No, you’re mixing growth and volume figures there. 45% of the volume growth is flavored whiskey. I didn’t have numbers on what percentage of the dollar sales growth is flavored, but their pricing tends to be on the lower end, so I’m guessing it would be less than that. That means 1.6 million additional cases of non-flavored whiskey was sold. Now, if you want to work at making it look like this isn’t really growth in “real” whiskey, that it’s merely a lot of the hated flavored whiskey and price increases on “real” whiskey, I suppose you can, but that doesn’t reflect reality. If you cut the flavored whiskey out entirely, that’s still over 3% growth on volume, which isn’t bad at all. It makes sense that dollar growth was up higher than volume growth: sales of bargain/value brands were down.

      • Gord says:

        Wasn’t trying to argue the growth wasn’t real, just got wound up in their jumping back and forth between units of measure (U.S. consumption, Global growth, unit volume and $ growth)

        It’s as if they tried to make it tough to decipher that;
        – U.S. consumption growth is the slowest since 2009 (1.9% on slide 28)

        – Despite not planning for global growth like this 5-10 yrs ago all the barrels made back then seem to be “high end” and “super premium” (3.6 of 3.9 mil case growth). Granted their definition of high end seems to equal about $25/750 mL

        – The market share relative to beer/wine really hasn’t changed dramatically since 2011 despite the way they say they’re trouncing Beer (34.1 – 34.7% change in that time period)

        – Irish, Blended and Scotch are growing significantly faster than American on U.S. consumption side, but American Whiskey has 2x the volume they do in the U.S. market

        – Rev $ grew at > 2x Volume growth….meaning we’re happily paying more

        • Lew Bryson says:

          I don’t see how you can reason that “It’s as if they tried to make it tough to decipher…” It’s right there, in slide 28, as you said.

          Irish has been outpacing the category for decades, but it’s only recently that the growth has turned into significant numbers; as you note, it’s still quite a bit smaller than American (and Canadian, for that matter). Meanwhile, if you want to get twisted about revenue growth outstripping volume, don’t overlook the 2.0% growth in volume in blended scotch vs. the 7.6% growth in revenue.

          But really, there are no surprises in that angle. There is more demand than there is supply, and whiskey is popular. When that happens…prices go up. It’s how the market works, and it doesn’t just work that way for whiskey.

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