Liquor is Winning the War versus Beer, Wine & THC Products
Derek Engles
Founder of Somm.Site - The best online resource for restaurants, hotels and hospitality organizations.
In today's rapidly changing alcoholic beverage industry, understanding the distinctions between categories like wine, beer, and spirits is more important than ever, as these sectors face growing competition from new market forces. For the modern beverage professional, success hinges not only on product knowledge but also on staying informed about industry trends and sales data. A deep grasp of both theoretical insights and market dynamics is essential to navigate this complex landscape and meet the demands of an increasingly sophisticated and competitive market.
Traditionally, wine has been positioned as a more refined, culturally rich beverage, often consumed with meals or during special occasions, while spirits have long been seen as versatile and central to social gatherings, offering a wide range of experiences from casual cocktails to premium aged products. Each category has its own strengths, with wine typically focusing on flavor complexity and pairing opportunities, while spirits offer a more dynamic, customizable drinking experience.
In recent years, however, the competitive dynamics have shifted. The spirits category, in particular, is performing exceptionally well, outpacing both beer and wine in growth across many markets. This growth is driven by increased consumer interest in premiumization, cocktail culture, and the broad range of innovations in flavors and production methods. Unlike wine, where traditional regions and varietals dominate, the spirits market has embraced trends like craft distilling, flavored spirits, and even celebrity endorsements, allowing for a more rapid evolution of product offerings.
Rising Challenges: Legalized Marijuana and Non-Alcoholic Beverages
While spirits are experiencing a boom, they are not without challenges. The rise of legalized marijuana across many U.S. states presents a direct competitor to alcoholic beverages in terms of recreational consumption. Consumers are now presented with an alternative that promises relaxation and enjoyment without the associated calories, hangovers, or perceived social stigmas of alcohol consumption. Marijuana’s growing acceptance has shifted some consumer habits, especially among younger demographics, causing alcohol companies to reassess their market strategies. Spirits, which traditionally cater to an image-conscious, experience-driven audience, face the difficult task of distinguishing their products in an environment where marijuana offers a competing form of social consumption.
In addition, the national trend towards wellness and moderation has sparked a surge in the non-alcoholic beverage market. Low- and no-alcohol alternatives are now readily available, and their appeal is expanding as consumers seek healthier lifestyles without sacrificing the ritual or enjoyment of a good drink. This trend poses another layer of competition, particularly for spirits brands, which often rely on social drinking occasions and indulgence as key selling points. To remain competitive, brands are exploring ways to adapt, such as offering lower-alcohol options or embracing innovative, wellness-focused marketing strategies.
Spirits Surpassing Wine: A Closer Look at the Numbers
The spirits category is poised to overtake wine in global sales, according to a recent report from the World Spirits Alliance. This report, backed by data from Oxford Economics and alcohol market research firm IWSR, highlights the growing popularity of spirits and the shifting dynamics in the global alcohol industry. In 2022, 2.67 billion cases of spirits were sold globally, coming close to the 2.8 billion cases of wine sold during the same year. The report predicts that, if current trends continue, spirits will soon surpass wine in volume.
A notable factor driving this trend is the shift towards premiumization. Consumers are drinking less but choosing higher-quality, more expensive options, particularly in the form of spirits like vodka, whiskey, and tequila. The rise in cocktail culture, with its emphasis on craftsmanship and creativity, has made spirits an increasingly attractive option, especially among younger demographics and in urban areas. Wine, by contrast, is grappling with several challenges, including a global supply glut, difficult weather conditions affecting harvests, and a steady decline in demand. In fact, the wine industry is facing its lowest demand in 27 years, leaving producers with excess supply that is difficult to move.
Beer is also seeing its market share challenged by the rise of spirits. In 2022, beer accounted for a dominant 75.2% of total beverage alcohol volumes, while wine held 10.4%, and spirits 9.9%. However, in terms of value, spirits are already a leading category, accounting for 40% of total beverage alcohol sales, surpassing beer at 38.1% and wine at 17.6%. This gap between volume and value speaks to the growing trend of consumers opting for premium, higher-cost spirits rather than larger quantities of lower-cost beverages.
By the Numbers
Breaking down the spirits category further, certain segments are showing particularly strong growth. Indian whisky, for example, is projected to be the fastest-growing spirits category between 2022 and 2027, with an increase of 50 million cases expected. Other popular categories, such as tequila, rum, and gin, are also forecasted to grow by 10 to 20 million cases over the same period. In contrast, more traditional and niche categories like cognac and armagnac are expected to see slower growth.
Spirits’ economic impact is also significant. The production and sale of spirits contributed an impressive $730 billion to the global economy in 2022, encompassing everything from farming and manufacturing to logistics, retail, and hospitality sectors. This broad economic contribution underscores the importance of spirits not just as a consumer product but as a driver of global economic activity.
Looking Ahead
As spirits continue to grow in popularity, particularly among premium and cocktail enthusiasts, the wine and beer industries are left navigating challenges posed by shifting consumer preferences. With spirits gaining ground both in terms of volume and value, the beverage landscape is likely to see even more competition and innovation in the years to come.
Emerging Trends Shaping the Spirits Market
The spirits industry is navigating economic challenges while seizing new opportunities, allowing it to gradually erode beer’s longstanding market dominance. Overcoming supply chain issues, inflation, and shifting consumer behavior, spirits have emerged as a powerful force, gaining market share and evolving in response to emerging trends.
According to the Distilled Spirits Council of the United States (DISCUS), spirits’ revenue market share grew from 28.7% in 2000 to 42.1% in 2022, surpassing beer for the first time. Beer’s share, in comparison, has dropped to 41.9%. This shift has been fueled by consumers’ growing interest in higher-quality, premium drinks, and the adaptability of the spirits industry in meeting evolving consumer demands.
Celebrity Brands: A Marketing Powerhouse
One of the most visible trends in the spirits industry is the rise of celebrity-backed brands. From Hollywood actors to athletes, celebrities are putting their names behind spirits brands, often playing a significant role in their promotion and development. These high-profile endorsements have proven to be incredibly lucrative, propelling smaller brands into the spotlight and driving consumer interest.
A notable example is actor George Clooney’s Casamigos tequila, which was sold to Diageo for $1 billion in 2017, setting a precedent for celebrity involvement in the industry. Mark Wahlberg's recent entry into the tequila space with Flecha Azul highlights this trend, as celebrities leverage their fanbase and influence to carve out space in an already competitive market. While name recognition plays a role, the true success of these brands often comes down to the quality of the product and the ability to resonate with consumers looking for authenticity and excellence.
Premiumization: Higher Quality, Higher Margins
The trend toward premiumization has accelerated in recent years, particularly during the COVID-19 pandemic, when consumers shifted from bar drinking to at-home consumption and began experimenting with higher-quality spirits. According to DISCUS, luxury spirits brands saw a 4% increase in sales in 2022, with tequila sales rising 21% and American whiskey climbing by 19%.
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Consumers are willing to pay more for premium products, which has driven the spirits industry’s growth in value despite stagnant or declining overall volume sales. This focus on luxury and craftsmanship extends beyond just the liquid in the bottle; packaging, brand storytelling, and exclusivity have all become critical factors in driving sales of high-end spirits.
At the same time, ready-to-drink (RTD) cocktails have also surged in popularity, offering consumers convenient, premium-quality drinks without the need for mixology skills. In 2022, spirit-based RTD sales grew by an impressive 35.8%, reflecting the growing consumer desire for premium experiences in an easy-to-consume format.
No- and Low-Alcohol Options: The Health-Conscious Consumer
With a growing focus on health and wellness, many consumers are shifting away from traditional alcoholic beverages and embracing no- and low-alcohol options. This trend is particularly strong among younger generations, who are drinking less alcohol overall and choosing to drink with more intention when they do.
No- and low-alcohol beverages grew by more than 7% in volume across key global markets in 2022, according to IWSR Drinks Market Analysis. While this might seem like a threat to traditional spirits, many companies are embracing the trend by offering sophisticated, non-alcoholic options or lower-alcohol versions of their existing brands. These options allow spirits companies to tap into the sober-curious movement and meet the demand for healthier drinking alternatives while still maintaining brand relevance.
Conscious Consumers: Values-Driven Purchases
Today's consumers are increasingly aligning their purchasing decisions with their values, seeking out brands that demonstrate a commitment to sustainability, diversity, and community. This trend is influencing spirits companies to adopt more socially conscious business practices, from using eco-friendly packaging to sourcing ingredients locally and supporting marginalized communities.
Craft spirits, in particular, are benefiting from this trend, as their small-batch production methods and focus on sustainability often resonate with values-driven consumers. Many brands are also emphasizing transparency in their production processes and working to build stronger connections with their consumers by sharing the stories behind their products.
Diversity initiatives are another area where the spirits industry is making strides. Companies like Pronghorn are working to develop Black talent within the industry, recognizing that there is a significant gap between Black consumers and representation in the sector’s workforce and executive levels. Addressing this disparity is not only a matter of social good but also makes good business sense as consumers demand more accountability from brands.
Supply Chain and Inflation: Persistent Challenges
Despite the optimism surrounding the spirits industry’s growth, significant challenges remain. Supply chain disruptions, rising costs of glass bottles, and freight shipping expenses have increased production costs, which are often passed on to consumers. While the spirits industry has shown resilience, inflationary pressures have led to price hikes that may temper growth in the coming years.
On the international stage, the removal of retaliatory tariffs on American whiskey by the EU and UK has provided some relief for U.S. producers. However, the industry remains concerned that these tariffs could be reinstated, threatening the category’s recovery in key markets.
The Future of Spirits Sales
As the spirits industry continues to expand its market share and embrace emerging trends, its future looks bright. Premiumization, celebrity involvement, and innovation in no- and low-alcohol offerings are all shaping a new landscape for the business of spirits. However, the industry will need to remain agile in addressing economic challenges, consumer health consciousness, and the rising demand for values-driven brands. If it can meet these challenges head-on, the spirits industry will not only maintain its top spot but continue to redefine what it means to sell and enjoy alcohol in the 21st century.
Education, Training & Development in Wine & Spirits
In an increasingly competitive beverage industry, knowledge is more than just an advantage—it’s a necessity. Professionals must not only understand the nuances of the products they sell or serve but also grasp the broader industry trends that influence consumer behavior and market dynamics. This combination of product and industry knowledge is crucial for standing out in today’s market.
Somm.Site offers a comprehensive education program tailored to all sectors of the beverage world, from restaurants and hotels to distribution and wholesale. Whether you're a sommelier, a distributor, or a buyer, Somm.Site equips you with the tools to stay ahead of the competition. With its in-depth courses, case studies, and real-world insights, this platform ensures that professionals are not just knowledgeable but also strategically positioned to excel in a rapidly evolving industry.
The following works were consulted in the writing of this article:
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3. Kohut, Joseph. "LCB Report Shows State, Regional Liquor Trends." The Times-Tribune, 24 Aug. 2023, https://www.thetimes-tribune.com/news/lcb-report-shows-state-regional-liquor-trends/article_e2a45b52-5a9b-530d-9583-6e56e9ccf328.html. Accessed 11 Sept. 2024.
4. Stankevicius, Tomas. "Alcohol Industry Trends: Key Insights & Emerging Innovations." Exploding Topics, 27 Mar. 2023, https://explodingtopics.com/blog/alcohol-industry-trends. Accessed 11 Sept. 2024.
5. "Alcohol Market: In-Depth Analysis, Growth Trends, Leading Innovations, and Industry Forecasts to 2031." Whatech, 2 Sept. 2023, https://www.whatech.com/og/markets-research/food-beverage/877392-alcohol-market-in-depth-analysis-growth-trends-leading-innovations-and-industry-forecasts-to-2031.html. Accessed 11 Sept. 2024.