On the Rebound

On the Rebound

News | 04 Mar 2011 | Issue 94 | By Liza Weisstuch

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If there’s anything that can be said about 2010 when we look back on the year, it’s that the economy had not quite rebounded back to tip top shape. Nations’ economies tumbled, stock mar-kets offered few promising investment opportunities and if unemployment rates declined at all, they moved with fits and starts. But take heed. There’s a ray of light amid the dreariness: the spirits market in the United States was springing back, heralding a positive sign for the years ahead.

At a recent industry briefing held by the Distilled Spirits Council of the United States (DIS-CUS), the national trade association representing the leading brands, the message was clear: recovery has begun, but it’s fragile. Confidence is on the up and consumers are spending again. The increase in sales of premium spirits is not as robust as it was after past recessions, but the growth pattern is evident just the same. Whisky categories are particularly vivid examples of this upturn. All the whisky categories combined brought in an estimated $5.6 billion, which accounts for 29 per cent of the American industry’s revenues and 25 per cent of the volume.

For those of you thirsting for more specificity, it goes like this: value brands of whiskies across the board were down by two per cent in volume of sales. High-end and premium products picked up the flack with five per cent and eight per cent growth, respectively. American whiskey sales by volume were up 2.5 per cent, but within the category, the super premium bourbons alone showed a startling jump of 16.2 per cent. Blended Scotch was down 1.4 per cent by volume, but super premium products shot up 20 per cent. These figures indicate that American whiskey and blended Scotch drinkers tended to stay within their favoured category but traded up and bought far less of the cheaper brands. Single malts were up by 11.7 per cent and Irish whiskey maintained momentum of the dramatic growth it showed last year, exploding by 21.5 per cent.

David Ozgo, chief economist for DISCUS who computes the industry data, attested to how impressive that growth is. “Irish whiskey continues its onslaught,” he said. “When I started looking at this data seven or eight years ago, Irish whiskey was around 400,000 cases. Now it’s more than a million. Several years of 20 per cent growth has started to make Irish a major player.”

Pernod Ricard’s Jameson has been the chief player in that triumph. In December, the company announced that it reached annual sales of one million cases in the US, securing its position as not only a category leader, but the fastest growing premium spirit in the country.

That’s quite a feat considering that when Pernod Ricard acquired the brand in 1988, there were 115,000 cases a year sold.

Whether rye whiskey, which accounts for a tiny part of the American whiskey segment, will see the same trend, is anyone’s guess. Rye is chugging along at a double digit growth rate, but that’s because it’s starting from an “extraordinarily small base,” said Ozgo, noting that the total volume is under a quarter million cases.

“The good thing about rye is that it’s a niche product, but it grows quickly when there’s interest in the overall category, and that’s a good sign for all of brown spirits,” he said.

The success of the higher end American whiskeys is not a simple consequence of the increased awareness of and interest in high-end bourbons and the classic cocktail renaissance in bars far and wide. According to data, the value of spirits export from the US started to exceed wine and beer exports in 2005. Every year since, it surpassed $1 billion. According to Christine LoCascio, senior vice president of international issues and trade for DISCUS, she expects spirits exports to surpass $1.8 billion this year. Bourbon and Tennessee whiskey account for 71 per cent of that sum.

Through a partnership with the United States Department of Agriculture, DISCUS promotes American distilled spirits as an agricultural export of the US. This collaborative effort has fueled growth in developing markets worldwide, and as more countries ease trade barriers, the more developing markets there are to reach. China and Vietnam, for instance, joined the World Trade Organisation in 2001 and 2007, respectively, which required them to lower their tariffs, making foreign trade a more feasible, comfortable proposition.

Peter Cressy, DISCUS president, attributed growth of spirits sales to repeals or avoidance of tax laws in many states. Another major factor is that 2010 was the first year that spirits’ revenue-based market share grew while beers’ slipped. Not only did imbibers not abandon their whisky glass or cocktail for a pint, but the increased volume of sales suggests more people moved across to spirits. “The fact that people stayed in the spirit category made it easy to get people to trade up,” said Ozgo.
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