Spirits on display in a UK bar in Cardiff, United Kingdom.
Matthew Horwood | Getty Images News | Getty Images
The spirits industry held its market share edge over beer and wine for the second straight year in 2023, even as it showed little growth, according to new data released Wednesday.
U.S. spirits revenue grew only a modest 0.2% last year to $37.7 billion, according to the Distilled Spirits Council of the U.S. annual economic report. Although the industry gained little total revenue, it outpaced beer and wine sales by 0.4% and 26.1%, respectively.
Though high inflation and interest rates have dampened consumer discretionary spending, the beverage alcohol industry has maintained strength as it emerged from a pandemic boom, said Chris Swonger, president and CEO of DISCUS.
“The spirits sector showed resilience in 2023, navigating through the choppy wake of the pandemic and maintaining our market share lead of the total beverage alcohol market,” said Swonger. “The phenomenal sales growth we saw during the pandemic was unprecedented and unpredictable but also unsustainable, and now, the spirits market is recalibrating.”
Vodka remained the top selling spirit in 2023, while the second highest-selling category, tequila and mezcal, gained even more of a lead on American whiskey. Tequila and mezcal, blended whiskey and American whiskey are among the fastest growing spirits categories by revenue.
Swonger also was optimistic about the spirits industry’s strategy to push consumers to pricier bottles and labels, despite the weakness reported this quarter by premium spirits makers like Diageo, LVMH, and Constellation Brands.
During the Covid-19 pandemic, consumers in quarantine sought out higher-quality spirits. Since peak growth in 2021, luxury spirits sales have started to dwindle.
Diageo shares plummeted in November when the European spirits giant cut guidance on an expected slowdown in growth for the first half of its fiscal year. Premium spirits and wine weakness also hit LVMH in 2023. It was the company’s only business segment to report a year-over-year organic revenue decline, down 4%.
Though some parts of the industry have weakened, the rapid rise of ready-to-drink cocktails has been a bright spot for investors.
Premixed cocktails were the fastest growing spirits category last year, rising 26.7% to $2.8 billion in revenue, DISCUS reported.
“Despite the hard seltzer craze we witnessed from 2017 to 2021 which was malt-driven, spirits-based products have actually grown faster, just off a smaller base,” said Marten Lodewijks, head of consulting at IWSR, a drinks market analysis firm. “Spirits-based products, including the vodka- and tequila-based hard seltzers that entered the picture later, offer consumers a slightly more premium experience, and that has been key to their success.”
During another year of growth, American whiskey got more good news in 2023. The U.S. and EU reached an agreement to extend a suspension of EU tariffs on the liquor to March 31, 2025.