Last year, consumers gravitated to vodka, tequila, and American whiskey, especially as international tariff threats on the latter finally receded. And, for the second year in a row, the burgeoning ready-to-drink cocktail category saw stronger growth than any other spirits type.
For the 12th consecutive year, spirits sales gained market share over beer and wine, rising 1.7 points to 41.3% of the total beverage alcohol market. Supplier sales in the U.S. were up 12% in 2021 to a total of $35.8 billion, while volumes rose 9.3% to 291.1 million 9-liter cases.
Among the key categories driving sales were vodka, with revenues up 4.9% to $7.3 billion; tequila and mezcal, which surged a whopping 30.1% to $5.2 billion (98% of that number represents tequila sales, DISCUS confirmed); American whiskey, gaining 6.7% to $4.6 billion; and brandy and Cognac, up 13.1% to $3.5 billion.
Growth was particularly pronounced at the higher end of the spectrum. Sales of super-premium spirits rose 24.2% year-over-year, and high-end premium rose 11.5%, outpacing both premium and value spirits.
“Nearly 82% of the spirits sector’s total revenue increase was from the sale of high-end and super-premium spirits brands,” says Christine LoCascio, DISCUS chief of public policy. “Purchasing luxury spirits to create craft cocktails was a simple pleasure for spirits consumers who hunkered down at home and curtailed spending on vacations and dining out for a second year in a row.”
Echoing the strong overall growth in tequila sales, which accounted for nearly one-third of the total increase in spirits revenue, consumers particularly sought out high-end tequila, LoCascio notes, whether for sipping or cocktails. In 2021, sales of super premium tequila spiked 41.6%, and high-end premium tequila was up 33.8%.
Sales of spirits-based ready-to-drink (RTD) cocktails surged 42.3% to $1.6 billion in 2021, outpacing even tequila and mezcal growth, which was up 30.1% to $5.2 billion, and Irish whiskey, up 16.3% to $1.3 billion.
“We do think that it’s coming from beer and hard seltzer, though consumers, as they’re going out more, are also liking the convenience of spirits-based RTDs,” says LoCascio.
Still, spirits-based RTDs still represent a small portion of the overall spirits industry, and a fraction of the overall RTD industry, which also includes hard seltzers and malt beverages. According to IWSR, a drinks market analysis firm, spirits-based canned cocktails account for just 8% of market volume, while malt beverages account for 91%. Wine-based RTDs represent 1%.
Looking ahead, DISCUS vowed to push for states to lower excise taxes on spirits-based RTDs. In many states, taxes are substantially higher than RTDs made with wine or malt bases.
While the spirits sector has remained resilient, the “uneven economic impacts” of the pandemic on the hospitality industry over the last year remain problematic, says DISCUS President and CEO Chris Swonger. Bars, restaurants and other on-premise venues still represent a significant sales channel for spirits.
“The twists and turns of this pandemic continue to create volatility in the recovery of restaurants and bars,” says Swonger. “Restaurants showed signs of roaring back during the first half of the year, but sales stalled in the second half with the new spike in Covid cases, staff shortages and supply chain disruptions.”
Moving forward, DISCUS plans to advocate for more funding through the Restaurant Revitalization Act to help bolster these venues.
Spirits sales volumes at on-premise establishments, which represent about 20% of the U.S. market, were up 53% in 2021, likely due to nationwide restaurant and bar closures and restrictions in the year prior. Off-premise sales volumes, which saw sharp gains in 2020, were flat in 2021.
Philip McDaniel, CEO and co-founder of St. Augustine Distillery and chair of the DISCUS Craft Advisory Council, reports that many distilleries continue to face major challenges from supply chain disruptions, including difficulty securing glass bottles, closures and labels, as well as rising costs of materials and transportation.
“We’ve had to swap bottles, or not put some products out because we can’t get glass,” says McDaniel of his own Florida-based distillery.
On a positive note, McDaniel says that a recent uptick in tourism across the country will help support the recovery of small distilleries, which rely heavily on tasting room sales. Tasting rooms can account for 30–50% of sales at some distilleries, he adds.
“Tourism has picked up, but it has still been impacted due to the pandemic,” says McDaniel.