Opinion: Rising Spirits - Things are looking good for the whisky business

Opinion: Rising Spirits - Things are looking good for the whisky business

Liza discusses the rising stock of spirits...

Thoughts from... | 02 May 2022 | Issue 182 | By Liza Weisstuch

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A funny thing happened on the way to 2022. Americans’ relationship with Tequila and mescal escalated from a flirty love affair to a full-blown obsession. This announcement came in early February at the Distilled Spirits Council of the United States’ (DISCUS) annual economic briefing, a presentation that delivers meticulously researched and measured data that reveal Americans’ spirits consumption over the past calendar year. I am the furthest thing from a business or finance journalist, but I’ve found that having quantifiable information about what and how people drink gives me a clear lens through which to view the industry.

A top-line breakdown of what’s going on in the USA is this: the industry’s economic health is exceptional. America, the second-largest market in the world, after China, saw revenue in spirits sales grew 12 per cent to US$35.8 billion, while volume grew 9.3 per cent to 291.1 million nine-litre cases. That translates into a key fact: Americans aren’t drinking more, we’re drinking better. Spending has increased because people are trading up. That’s been a trend for the past decade or so, but the pandemic amplified it. When people aren’t going out as much to bars and restaurants or spending cash on vacations and entertainment, they can splurge on an ultra-luxe, super-premium bottle of spirits. It’s a reasonable and ‘affordable’ luxury.

We’ve got so enthusiastic about spirits that 2021 marked the 12th straight year of market share gains, meaning people are turning their attention from beer and wine, and instead they are stocking their liquor cabinets with whisky, vodka, Tequila, gin and the rest. In the overall alcohol industry, spirits accounted for 41 per cent of the revenue and 38 per cent of the volume of sales in 2021.

I find it nothing short of incredible to think that retail purchases of individual bottles can compensate for the volume that bars and restaurants typically buy, but a friend recently made an excellent point: you can spend US$50 or $60 or more in a few hours in a bar in New York City, where I live, or you can buy a US$60 or $70 bottle of whisky and drink it over the course of many nights. Or entertain a handful of people and ensure they walk away with a smile.

Now, here’s where things get really interesting. Vodka, as usual, maintained its leading rank as the most popular spirit in the US by orders of magnitude. Sales clocked in at US$7.3 billion (for 78.1 million nine-litre cases). Compare that to American whiskey’s US$4.6 billion (29.7 million nine-litre cases). Canned cocktails – or ready-to-drink, as they’re known in the trade – took the lead as the fastest-growing category, up almost 60 per cent over 2020 thanks to an increase of 13.1 million nine-litre cases, while Tequila grew by nearly 21 per cent, or by 4.6 million cases. Irish whiskey, meanwhile, increased about 891,000 cases, or 18 per cent.

Of course, the habit of the shot-and-a-beer ritual will never go away. I have long thought of whisky – all kinds of whiskies – to be slow, pensive drinks or bases for cocktails. Tequila, in my clearly biased thinking, is a party shot and the cornerstone for margaritas, which for years held steady as the most-called-for cocktail. Historically, when out with friends, I’d happily opt for a Mexican spirit. Until the past few years, however, whiskey was the go-to at home. Then I started learning about the high craft and rich heritage of agave spirits, especially mescal. And those numbers spell out how everyone else is doing the same.

Call me cynical, but I cannot help but chalk up that growth to star power. Celebrity Tequila brands have run rampant in the past few years, with no fewer than a dozen public figures having a stake in a Tequila brand. There are plenty of scholarly papers that illustrate the impact of celebrity endorsements, let alone celebrity ownership, but I think this growth is tied to all the hope of glamour the pandemic took away. This comes with a series of problems. Unlike grains, agave takes years to grow. Shortages have happened in the past. Plus, most mescals come from tiny, family producers. As commercialism grows, they’re ripe for exploitation. Hopefully, celebs will make that part of their messaging. Fans will believe a star.
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