18 Oct, 2017
New Trends Shaping The Alcohol Industry in US
Consumers today want to know more about the history and production methods behind what they drink. And they enjoy experimenting across categories and styles. As a result, they are less brand-loyal than ever before.
Certain categories did stand out for having strong performances, in particular craft beer (14.1% growth last year, up to 276.5 million 2.25-gallon cases) and whiskey (up 4.6%, to 52.8 million 9-liter cases). The craft beer boom has helped nurture interest in two other flourishing categories: hard ciders (up 9.6% to 30.8 million cases) and hard sodas (up 6.7%). White spirits were a mixed bag last year. Vodka was relatively flat at +1.1% (to 72.8 million 9-liter cases), while rum dropped 1.5% to 24.7 million 9-liter cases. But tequila took off with a 4.4% gain.
Whiskey Diversifies and Grows
Millennials love Bourbon, and are now drinking rye and Scotch. The popularity of flavored whiskeys has spread at a blazing pace thanks to the tremendous success of Sazerac’s Fireball Cinnamon Whisky. This innovative, industry-altering spirit grew 65% in sales last year, to nearly 4 million cases. Jägermeister and Jack Daniel’s have already responded with spiced variants, along with many other spirits producers, big and small.
The other red-hot trend right now in American whiskey hails from Ireland.
Irish whiskey has risen in sales, (up 8.2% in 2015) thanks in part to a broad demographic of consumers. Perhaps more so than any other segment within brown spirits, it counts women among loyal drinkers. Approximately 40% of Irish whiskey consumers are female. Part of this owes to the spirit being sweeter and smoother than most other whiskeys. It’s a natural ingredient for craft cocktails. Moreover, the category boasts one of the world’s top alcohol brands. Long established as a global giant, Jameson gained 17% in sales last year. The spirit contributes 76.3% of Irish whiskey sales worldwide.
Craft Beer: Boom or Bubble
In 2014, this burgeoning category reached an 11% volume share of the overall beer industry. The Brewers Association (which claims to represent 70% of the brewing industry) believes that craft can grab a 20% volume share by 2020. Consumers like the «local feeling» of buying from nearby breweries. In 2015, regional breweries accounted for 77.8% of the craft beer industry’s production volume. Drinkers also enjoy the great variety of styles and flavors — from porter to sour, from gose to Belgian, through experimental hops and beyond.
This desire for extensive experimentation has helped sustain the category and its many new breweries and beers. Of drinkers who purchased at least one beer per week, 22% bought more than 10 brands last year. Of craft drinkers in general, 33% more are willing to experiment across brands than those who prefer non-craft beer.
The losers in that scenario would be the mainstream beer companies. They, in turn, have recently responded by investing in craft themselves. Will this blurring of lines between macro and micro help prevent a craft beer bubble? Much remains to be seen.
Wine Holds Strong
Millennials consumed 36% of all wine purchased last year, amounting to 159.6 million cases. This tops any other generation. Baby Boomers accounted for 114.1 million cases, Gen X 74.5 million, and over-69 consumers 31.6 million nine-liter cases. Millennials drink 3.1 glasses of wine per occasion — compared to just 2.4 for Gen X and 1.9 for Baby Boomers.
And what wine people drink now tends towards premium. The top 20 U. S. premium-plus brands had a growth of 4% to 64.7 million nine liter cases last year. The average cost of table wines purchased in 2015 rose to $9.33, according to Wine Market Council data, up from $8 five years ago.
Prosecco sales volume was up 34.3%, which helped lift the entire sparkling category to 11.7% growth. Of customers who purchased Prosecco last year, 31% did not buy any sparkling wine in 2014. And 72% of Prosecco purchasers who had bought it before reported buying it in greater quantities in 2015. Rosé enjoyed 31.8% growth in 2015. Even more promising, Rosés priced above $11 gained 59.9% in volume last year.
The good news about the sparkling boom: more consumers consider these wines to be every-day drinks, rather than just for holiday celebrations.
Tequila’s Sunny Rise
All whiskey drinkers are tequila drinkers; they just don’t know it yet. Millennials in particular have embraced tequila as a premium product. This is helped by the generation’s appreciation for all things craft. Many tequila brands (such as Patrón) have done an excellent job of highlighting the artisanal traditions and handmade qualities behind this ancient Mexican spirit.
Vodka Wonders What’s Next
Vodka remains a tricky category to define. On one hand, its growth was relatively flat in 2015. On the other, vodka still represents 33.7% of all spirits sales, which is more than any other category. Consumers tend to be less excited about premium vodka, compared to top-shelf products in other categories. After the flavored-vodka craze died down, the category has struggled adjusting to today’s craft-driven market.
Grey Goose sales declined 7.6% last year, while Absolut shrunk 2.2%. Meanwhile, mid-level brands Svedka and Skyy grew 2.9% and 2.0%, respectively. Consumers seem to prefer non-premium vodka. However, there are exceptions. The premium brand New Amsterdam increased 17.5% in sales last year. Burnett’s Vodka showed that craft focus could help resuscitate flavored vodka, as the brand grew 9.7%. Both vodkas were successful in promoting their craft and handmade qualities. A vodka brand that enjoyed a robust 2015 is perhaps the perfect combination of mid-level pricing and craft qualities. Tito’s Handmade Vodka continued its meteoric rise up the sales chart with a 25.7% gain in 2015.
Spikes In Cider and Soda
Cider exploded in 2014 to over 28 million 2.25-gallon cases. Last year, it continued to outpace the beer market as a whole, increasing 9.6% to 30.8 million cases. Those gains, and all the new craft ciders they have supported, owe much to Boston Beer’s Angry Orchard. When the craft beer giant released its own cider line, the category gained the muscle necessary to grab market share. Angry Orchard sales were up 14.3% last year (16.3 million cases), helping raise the profile of hard cider. (The second-best selling cider was Crispin, at 1.99 million cases and up 5%.)
Hard sodas have also been hot lately. At the forefront of this movement is Not Your Father’s Root Beer, which generated more than $104 million in off-premise sales last year. The sudden success of this brand has mainstream suppliers releasing their own versions, including MillerCoors' Henry’s Hard soda line and Anheuser-Busch's Best Damn hard sodas.
Both cider and hard soda have specific advantages with consumers. They are both refreshing alternatives to higher ABV products. And both categories appeal across genders. Their demographics are nearly a 50/50 split between men and women.
Consumers Like To Experiment and Learn
So many categories and brands on the rise speaks to the modern consumer’s willingness to experiment. Looking within categories, wine drinkers are the most explorative: 19% have bought 10 or more wine brands in the past year. That’s compared to 15% for overall beer drinkers, and just 5% for spirits.
What drives consumers to buy across brands and categories? Part of it owes to the adventure of trying something new — a hallmark of the younger LDA generation.
That’s behind the recent surge of flights on on-premise menus. Sampling multiple brands and styles allows consumers to experiment, while also pinpointing their personal preferences.
Education also plays a large role. Today’s consumers love to learn. They want to know more about the background of what they’re drinking: the history, how it’s made, where it’s from and the people behind it.
And it goes beyond specific categories. Today’s consumers actively expand their knowledge about the industry overall. This is why tourism has exploded at breweries, wineries and distilleries.
Out project: Winery in a well-known wine region
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