CITI
Craft Spirits Industry Experts Were Optimistic about the Future of the Category
Earlier today, we attended the U.S. Craft Spirits Industry Briefing in New York City, where we heard from Brandy Rand from the International Wine and Spirits Research (IWSR) and Harry Kohlmann from Park Street Companies. The meeting offered a look at the state of the U.S. craft spirits industry and highlighted some of the expectations for the future. Herein, we provide some of our takeaways:
The Craft Spirits Category Is Showing Robust Growth. We heard that in 2017, according to data provided by the Craft Spirits Data Project, retail sales of craft spirits reached $3.7 bn (which represents a +30% CAGR from 2012 to 2017), while volumes reached almost 7.2 mm cases (which represents a +24% CAGR over the same period). The stronger growth in dollar sales relative to volumes implies that pricing is a playing a big role in craft spirits growth, which seems to be in line with the premiumization trends occurring in the overall alcohol space (where consumers are willing to pay more for a better quality or more aggressively marketed product).
Some Believe that Craft Spirits Can Reach the Same Penetration in Total Spirits that Craft Beer Reached in Total Beer. While craft spirits represented a relatively small 1.4% share of the total U.S. spirits category in dollar terms in 2012, given the strong growth that the segment has posted, its share had expanded to 4.6% by the end of 2017. This figure is still well below craft beer's share of the total U.S. beer category, which is currently at ~13%. That said, Harry Kohlmann views this as an opportunity for the craft spirits segment, as he believes it has the potential to reach the same share levels as craft beer over time. Indeed, in a recent WSWA Distributors Survey, 60% of wholesalers responded that they agree that craft spirits will eventually become more relevant to the spirits category than craft beer has become for the beer category.