Top spirits trends to watch in the US

With America the world’s most innovative and fast moving spirits market, Tom Bruce-Gardyne and Becky Paskin consider which trends will be leading the industry in the near future.

The US is one of the most hotly coveted spirits markets in the world – here are the top trends to watch out for

*This article was first published in the July 2015 issue of The Spirits Business magazine 

Trying to extrapolate existing trends in the US and see what new ones might be coming down the track is never easy, but the rewards for those brands that get it right are immeasurable.

On the surface, the market appears stable and relatively unchanged with total volumes up 1.5% last year to 212.5 million cases, of which over 40% is controlled by just 25 brands, according to Impact Databank. Yet things are shifting deep below among the core spirits categories, throwing up all manner of interesting opportunities.

For starters, although it remains the most dominant spirits category by far, vodka seems to be beginning to lose its momentum, particularly where the big players are concerned. Donna Hood Crecca, senior director at research consultant Technomic Inc, predicts that while the US whisky market will grow by 4.5% this year, vodka will expand by just 1.4%. “In 20 years of covering the US spirits market, I’ve never seen this before,” she says. “Vodka’s still the monster category with a third of US spirits, but it’s significant that of the brand leaders, Smirnoff is struggling and Absolut is in decline.” The category has been on such a long growth curve through its super-premium phase in the 1990s to its recent flavour boom, it has now reached 67 million cases.

Millennial influence

Meanwhile, with millennials driving innovation in spirits, the “craft” movement has reached something of a tipping point. For the country’s 600-plus micro-distillers there’s the issue of whether they can scale up to meet demand, and for those that have, like Tito’s Handmade Vodka, whether they can retain their craft credentials. “The proliferation of small-scale distillers across the US is about the post-recession need for small scale, local producers that people can trust instead of corporate beasts which they don’t,” claims Malandrakis.

And then there is the subject of flavour, which in a country with an endless demand for variety, seems to evolve faster than an Apple iPhone. The sweet dessert-inspired flavours that proliferated the vodka market just a few years ago have fallen out of favour so quickly they drove a 1.4% drop for the flavoured vodka category as a whole in 2014, according to Technomic. But before we conclude Americans have lost their sweet tooth, we need to take note of the popularity of honey and cinnamon-flavoured whiskeys, which driven by the success of Jack Daniel’s Tennessee Honey and Fireball, have risen 39.4% in the last year.

Which hot new flavours will be next to gain favour among the nation, and with which spirit base, is the question on every product development team’s mind. With more producers taking inspiration from occasion-based opportunities and innovations from other food and beverage categories, we take a look at four trends set to redefine the US spirits industry in the years to come.

Click through the following pages to discover the top four spirits trends set to take the US by storm

Flavoured malt beverages

Beer, which once virtually owned male consumers in their formative legal drinking age years, is losing favour among millennials. Tracking per-capita consumption among the age group from 2010-14, Technomic reports beer volumes down 4.3% and spirits up 6.2%. As market share divests across to spirits, whose alluring cocktails are attracting consumers, the beer giants have switched on the offensive.

Budweiser has been fighting back with its cocktail-flavoured beer, or Mixxtails, which launched in February this year in Long Island, Firewalker and Hurricane flavours. It’s a clever idea, and one that ties in nicely with the rise of beer cocktail serves in the on-trade over the past two years and demand for further variety in RTDs. Positioned as the “perfect pre-game drink”, Mixxtails are tapping into an occasion typically associated with beer but adding a touch of glamour that can only be found in a trendy cocktail.

Brand owner Anheuser-Busch’s plan is to capitalise on the booming success of Bud Light Lime-A-Rita, Straw-Ber-Rita, Mang-O-Rita, Raz-Ber-Rita and Lemon-Ade-Rita, all ready-to-drink fruit flavoured beers, as the names suggest, marketed at women. Sales of the range hit US$462 million (£294m) in 2013, up from US$150m (£95m) the previous year, sparking the group to consider a similar product aimed at men.

What do these innovations mean for the American spirits industry? Beer producers are seeking to fulfil demand for further variety in convenient serves, which if marketed in the right way could see the category move in on spirit-based RTDs and at-home cocktails. Expect a cross-category showdown any time soon.

Craft? Keep it local

The c-word is “a dubious term” says Donna Hood Crecca, and it is certainly ill-defined. As with the so-called “crafty beers” released by big brewers under distressed-looking labels, there is some suspicion out there for “craft” spirits and a few opportunistic lawsuits against Maker’s Mark and Tito’s Handmade Vodka among several others.

For many brands though the term carries the kind of weight it just couldn’t do without. “Craft is part of our DNA, though I wouldn’t put it on our label because that would be a bit tacky,” says Jean-Denis Voin of Camus Cognac. Paul Ross, CEO of Edrington Americas, feels the same way about The Macallan, saying: “With its 200 year history, it’s as crafted as anyone could imagine.”

As a concept, craft-branded products resonate with today’s consumers looking for authenticity, but confusion over the definition of the term, and some rather ambiguous labelling, is repelling custom. And besides, when every vodka, gin and whisky under the sun is now apparently “craft”, how can the industry expect consumers to understand the difference? Demand is obviously there though, so what’s the answer to dispelling the growing levels of distrust?

Take a leaf out of the food industry’s book, which has moved on from extolling the virtues of small, “craft” producers to simply communicating produce’s provenance. In a survey of 1,300 professional chefs by the National Restaurant Association, locally grown and reared produce, regardless of the size of the producer, topped the list of food trends to watch this year. Just as local beef, grains and vegetables will dominate restaurant menus in the years ahead, expect local spirits and drinks to follow suit as well.

The Latin vibe

Between 2000 and 2011, America’s Hispanic community grew 48% to 52m, and four years ago accounted for almost a quarter of all US births. Mexicans make up two thirds of the total and are particularly present in California, Texas, New York, Florida and Illinois. With Mexican beer accounting for 60.7% of US beer imports in 2014, up from 54.4% in 2010, and with Tequila growing 5.6% a year since 2002, it seems they have brought their tastes with them. This chimes with Technomic’s research that found spicy, herbal flavours are trending right now.

“Latin is very sexy and it’s an on-going trend,” says Jay Harkins, CEO of Blackheath Beverage Group that distributes independent brands like Tequila Partida. “I think we’re going to see a lot more spirits based on this, and I feel there is a lot of runway left for agave-based spirits and for South American ones in general. At some point we’ll hit that tipping point where drinks like cachaça, Pisco and mezcal will all of a sudden just click.”

Mezcal is trending right now in the US, but Raffaele Berardi, CEO of Fraternity Spirits, owner of Tequila Corralejo, reckons it will remain a niche if only due to complex supply issues from the growers. But along with indigenous drinks, Hispanics are also bringing a taste for other spirits like Scotch whisky, and this well-established trend that is helping to revitalise brands with a strong presence in Latin America looks set to continue.

At Diageo, Alex Tomlin is clearly excited about what he calls the country’s “multicultural consumer who is bringing a new angle to the way Scotch is showing in the US”.

Sceptical youth

“Millennials are going to be 40% of those over legal drinking age within five years,” says Alex Tomlin, SVP whiskey, Scotch and Tequila at Diageo North America. Among significant traits, he lists the following: “They value real experience over ownership, they’re more sceptical of top-down consumerism than previous generations, and they connect with brands in a really different way.”

Technomic calls them a “multifaceted, diverse cohort” of 68 million Americans aged 22-32, while Edrington’s Paul Ross says: “This is a generation that prides itself on understanding what’s in the glass, rather than what’s on the label, and therefore you’ve got to get both sides of your marketing right.”

He believes: “They are more interested in having a direct relationship with a brand than consumers in the past, and I think there’s a real interest in authentic, high-quality brands that have a strong personality.” As for how to engage with such a market, he reckons it’s about: “adapting stories and letting them do some of the work themselves.” Like that tenet of creative writing courses, the rule is “show, don’t tell”. Seeking to bludgeon a millennial into submission with billboards and a TV campaign is likely to prove ineffective at best.

Social media is the key, and this has opened the market up to smaller, niche brands that could never afford a traditional, above-the-line campaign. But the story needs to be credible and forever evolving to connect with millennials who are not famed for their brand loyalty. As Blackheath’s Jay Harkins says: “American consumers fall in and out of love with spirit brands very quickly.”