Flavors, Vodka and Whiskey Fuel Growth

What’s trending in each market is always the most important information an operator can possess, but it’s also important to have a sense of the overall picture, which is why the annual presentation to journalists and financial analysts in New York by the Distilled Spirits Council of the U.S. (DISCUS) is so well-attended and scrutinized.

The top line take away: the continuing whiskey renaissance and the way consumers keep stepping up to higher priced spirits led to a 4.5 percent uptick in spirits revenue in the U.S. market last year, to $21.3 billion. Volume was up as well – now nearly 32 percent of the beverage alcohol market, and in dollars, even better off, up above 34 percent. And as DISCUS President Dr. Peter Cressy noted, the spirit side is still below its peak volume from way back in the early 1970s, so potentially there is still room to grow.

What’s leading the charge? Not much news here: vodka, American (notably rye off a very small base) and Irish whiskies, as well as the many flavored spirits now in the market. Single malt Scotch grew in double digits last year as well. Among the American whiskies, the combination of flavors, craft distillers and trading up have put that category in the sweet spot, though many chain restaurant operators have long said that their customers are loyal to the most popular brands and don’t do much experimentation at their shops. But when the craft distiller movement is growing so fast – there are now 180 distillers in the niche, twice the number in little over two years – there’s undoubtedly something happening worth watching.

While the vodka category is inching close to one-third of all spirit sales, the growth in flavored items overall, whether vodka, rum, whiskey or new categories, is now a major force in consumer preference. Making up 27 percent of spirit volume in 2012, but 46 percent of the growth and accounting for almost half of all new products introduced, flavored spirits will continue to demand more management and consideration. For instance, the annual report indicated that more than 40 percent of volume growth came from new products and many if not most of those come from the flavored area.

Many operators learned how not to do things in the previous decades, when today’s hottest spirit quickly became yesterday’s story, leaving operators with inventory that simply wouldn’t move fast enough. That’s unlikely to be repeated as chains keep a close eye on inventory and sku creep, but that doesn’t mean some new products won’t break through soon. Watching the numbers can always help when it’s time to decide what to add, though with so many choices, operators will for the foreseeable future be waiting until a spirit brand proves itself consistently.

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