Beverages: DISCUS Highlights Strong Spirits Industry Trends

February 7, 2013
Morgan Stanley
We attended the DISCUS association briefing in NYC, which highlighted favorable US spirits trends.

Our key takeaways from the Distilled Spirits Council of the US (DISCUS) meeting were as follows:

(1) Spirits continue to gain share in US alcohol. The industry delivered another strong year with sales up 4.5% on 3% volume and 1.5% price/mix driven by product innovations and line extensions, including 7.3% value growth in US whiskey. However growth did slow from 6.4% in 2011. US spirits have gained 560 bps of alcohol value share since 2000 reaching 34.3% at the expense of beer, which has ceded 670 bps of share down to 48.8% during the same period. In 2012, spirits gained 20 bps of share vs. 80 bps in 2011.

(2) Premiumization, flavor proliferation, and innovation remain key industry trends. Super premium/high-end brand volumes grew 8.9%/4.8%, respectively, both well ahead of the 3% industry avg. With respect to flavors, DISCUS indicated that they now comprise 27% of US spirits volume and drove a little less than half (46%) of industry growth in 2012. Whereas the ability to innovate continues to pose a challenge elsewhere in certain CPG categories (e.g. CSDs, household products), new product development accounted for 41% of industry volume growth in 2012.

(3) Limited risk of tax increase at the federal level. The leadership at DISCUS placed a lower level of risk of a Federal Excise Tax (FET) increase, and highlighted its ability to fight back the overwhelming majority of such efforts at the state level.