Craft Spirits are Making a Splash in the Industry

The global spirits market is undergoing a dynamic evolution, driven by shifting consumer preferences, innovative marketing strategies, and the emergence of new industry players.

In the United States, the rise of small-batch craft distilleries has reinvigorated the spirits sector, with a focus on authenticity, unique flavor profiles, and direct consumer engagement. Meanwhile, on the other side of the globe, India is poised to become a key player in shaping the future of adult beverages. Indian-made spirits, particularly whiskey, are capturing international attention and fueling domestic demand in one of the world’s fastest-growing economies.

This article explores the forces propelling success in the alcohol beverage industry, delving into the sales and marketing tactics that have proven effective in the United States and India. It also examines the headwinds challenging growth in these markets, such as shifting regulatory landscapes, the rise of non-alcoholic alternatives, and evolving consumer attitudes toward health and wellness. By understanding what is working across these diverse regions, we can glean insights into how the global spirits industry can adapt and thrive in the face of changing consumer dynamics.

As the U.S. and India emerge as trendsetters in the spirits sector, this analysis highlights the importance of innovation, cultural resonance, and strategic foresight in maintaining relevance in a competitive and ever-changing market.

Adjusting in America

The American craft spirits movement represents a beacon of resilience and growth in an otherwise challenging period for the adult alcoholic beverage industry, which has experienced a decline in overall consumption in recent years. According to the latest report by the American Craft Spirits Association (ACSA), produced in partnership with Park Street, the craft spirits sector has continued to outpace the larger U.S. spirits market in both value and volume.

In 2022, the craft spirits category achieved a remarkable milestone, reaching over 14 million nine-liter cases and generating $7.9 billion in revenue. This reflects an annual growth rate of 5.3% in value and 6.1% in volume—both metrics surpassing the growth rates of the broader U.S. spirits market. Furthermore, the number of active craft distilleries increased by 2.4% over the year, totaling 2,753. The ACSA defines craft distillers as licensed producers who market themselves as craft, are not controlled by large suppliers, produce less than 750,000 proof gallons annually, and adhere to its Code of Ethics.

The sector's market presence also expanded, with its value share of the overall spirits market rising to 7.7%, up from 7.5% in 2021, while its volume share remained steady at 4.9%. Export activity for American craft spirits demonstrated resilience, surpassing pre-pandemic levels with 171,000 nine-liter cases exported in 2022, compared to 155,000 in 2019. However, this figure remains significantly lower than the 566,000 cases exported in 2017, reflecting the lingering impact of trade tariffs introduced during a U.S.-EU trade dispute in 2018.

Despite macroeconomic challenges, craft distillers have shown a commitment to reinvesting in their operations, with total investment increasing by 6.5% year-over-year to $880 million in 2022. The scale of these investments varied by the size of the producer, with smaller distilleries focusing on strengthening local sales, medium-sized producers driving growth across multiple channels, and larger distilleries placing greater emphasis on export markets.

Geographic trends in the craft spirits sector reveal a concentration of activity in key states. California leads with 245 craft distilleries, followed by New York (210), Texas (163), Washington (156), and Pennsylvania (117). Together, these five states account for 32.4% of all U.S. craft distilleries. An additional 18.5% are located in Colorado, Michigan, North Carolina, Florida, and Oregon.

Domestic sales continue to dominate the craft spirits market, with 52.6% of sales occurring outside producers’ home states and 47.4% within them. Notably, over half of these home-state sales (53%) take place at the distillery itself. This dynamic is particularly pronounced among small producers, who conduct 93.1% of their sales within their home state—a category encompassing 89% of all U.S. craft distilleries.

The American craft spirits sector stands as a bright spot in the industry, showcasing its ability to innovate, adapt, and capture consumer interest. By emphasizing local craftsmanship, unique product offerings, and strategic reinvestment, this segment not only underscores its role as a driver of economic growth but also serves as a testament to the enduring appeal of artisanal production in an evolving market.

The Largest Alcohol Market is in India

The Indian spirits market is emerging as a significant force in the global alcoholic beverage industry, with domestic producers gaining recognition on the international stage. Valued at $52.4 billion, the sector contributes nearly 2% to India’s GDP, serving as a vital economic driver that bolsters tourism, agriculture, retail, and food processing while providing employment for millions of individuals.

At the recent World Food India 2024, held in New Delhi, industry leaders convened to discuss the rapid evolution of India’s alcoholic beverage market in a session titled “Indian Spirits Brands Going Global: Promotion and Innovation.” Sanjit Padhi, CEO of the International Spirits and Wines Association of India (ISWAI), emphasized the country’s progress in producing world-class spirits, particularly single malts. India’s branded spirits market commands a domestic volume of approximately 390 million cases annually, while generating approximately $41 billion in excise revenue. From 2019 to 2023, the market achieved a compound annual growth rate (CAGR) of 2.6%, with the premium segment experiencing double-digit growth. This rise reflects increasing disposable incomes and a growing consumer preference for premium products, which have expanded their market share from 42% to 49%.

The employment impact of the Indian spirits sector is equally notable, with over 7.9 million people directly and indirectly employed in the industry. Exports have surged, with a 16% growth in volume and a 20% increase in value over the past year, signaling a shift toward higher-value offerings. With exports growing at a robust 22% and imports remaining stagnant, India is on the cusp of achieving a trade surplus in this sector.

Single malt whiskey has become a standout category, driven by the government’s Make in India initiative. Domestic sales of Indian single malts have reached approximately 350,000 cases, equaling the performance of imported alternatives. This success underscores the importance of innovation, quality, and research and development in building a strong domestic production ecosystem.

The future of India’s spirits market is poised for further growth, supported by initiatives like the Business Reform Action Plan, which aims to enhance the ease of doing business. As the fifth-largest global market for alcoholic beverages, India is not only a significant consumer but also a rising exporter of premium spirits. The sector’s transition toward premiumization and its ability to compete with international brands signal a bright future, positioning India as a major player in the global spirits industry.

By leveraging domestic talent, fostering innovation, and prioritizing quality, Indian spirits producers are setting a precedent for emerging markets worldwide, making the Indian spirits market a compelling case study in economic and industrial transformation.

The Synopsis

The global spirits industry stands at a pivotal moment, marked by both significant challenges and areas of promise. Declining overall alcohol consumption, driven by health-conscious consumers and shifts in social attitudes, presents a notable headwind for the sector. However, amidst these challenges, bright spots have emerged, offering hope and direction for sustained growth.

In the United States, the rise of craft spirits showcases the enduring appeal of authenticity, innovation, and localized production. With consistent growth in value, volume, and market share, the American craft spirits movement demonstrates that consumers are willing to invest in premium, high-quality products that tell a story. These distilleries not only contribute to the economic vitality of their communities but also position themselves as key drivers of the industry’s evolution.

Similarly, India’s spirits market is experiencing a renaissance, with domestic producers gaining both national and international acclaim. The “Make in India” initiative, combined with rising disposable incomes and a trend toward premiumization, has propelled Indian-made spirits to new heights. The country’s focus on quality, innovation, and competitive positioning in global markets highlights its potential as a future leader in the spirits space.

Together, these developments illustrate that while the spirits industry faces undeniable obstacles, opportunities abound for those who adapt to changing consumer preferences and leverage their unique strengths. Whether through the craft movement in the U.S. or India’s burgeoning spirits sector, these success stories underline the resilience and adaptability of the industry, offering a roadmap for navigating a challenging but opportunity-rich landscape.

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