How important is the craft distilling industry becoming?
According to a report just released, it’s bigger than you think and growing rapidly. As of August 2016, there were 1,315 craft distillers active in the US. The craft spirits market reached 4.9 million cases and $2.4 billion in retail sales in 2015, growing at a compound annual growth rate (CAGR) of 27.4% in volume and 27.9% in value between 2010 and 2015. Significantly, the market share hit 2.2% in volume and 3.0% in value in 2015, a boom from 0.8% and 1.1%, respectively, five years before.
The Craft Spirits Data Project, which was announced earlier this year, is a research initiative to provide a solid and reliable fact base for evaluating performance and trends in the US craft spirits industry, jointly developed by the American Craft Spirits Association (ASCA), International Wine and Spirits Research (IWSR), and Park Street, and presented at the inaugural Craft Spirits Economic Briefing.
The boom, as reported at the briefing, is showing no signs of stopping, at least in terms of new distillers and their work force. In 2016, the industry employed over 12,000 full-time employees, and last year investments by craft distillers approached $300 million in 2015, according to the report.
The report also shows that the craft distilling market is regionally concentrated. The top 5 states by number of craft distilleries – California, New York, Washington, Colorado and Texas - make up more than 35% of the US craft distiller universe, with the next 5 largest states - Oregon, Pennsylvania, North Carolina, Ohio and Florida - making up an additional 16.5% of the market.
Even more importantly for the future, many retailers and wholesalers believe there is potential for craft spirits to achieve market share parity with craft beer. While bars and restaurants have been very important in developing an awareness of craft spirits, direct sales are crucial, especially for small craft producers where direct sales account for 25 percent. Home states are crucial as well; about half of all craft sales occur within the distillers’ home markets.
On-premise retailers who were surveyed want producers to invest more resources to reach out to consumers in terms of tastings, other consumer pull strategies, and branding. Investments in staff training as well as more frequent market visits are also highly recommended. From a product perspective, operators recommend a focus on fewer products and higher quality, and they are seeking better deal pricing, special promotions, and more buybacks.
To read more about The Project, including methodology, click here.