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US craft spirits to surpass mainstream brands

Craft spirits in the US are expected to ‘vastly outperform’ the growth of mainstream brands in the coming years, according to IWSR Drinks Market Analysis.

Craft spirits
American whiskey leads the way for craft in the US

The beverage alcohol data analyst said craft spirits in the US grew by almost 8% in 2020, while non-craft spirits volumes grew by approximately 5%.

As a result, craft liquor now accounts for 5% volume share of the total US spirits market, and 7% by value.

IWSR said the growth gap between craft and mainstream spirits will widen in the next few years, with US craft set to experience a 21% CAGR (compound annual growth rate) between 2020 and 2025. In comparison, US non-craft labels are expected to register 4% CAGR for the same period.

However, IWSR also noted that the rate of growth for craft would decelerate compared with the previous five-year period because of the maturing market and competition.

Ryan Lee, IWSR analyst, said: “While there was a substantial deceleration in growth, craft producers and indeed the total US beverage alcohol market as a whole, performed better than projected last year due to consumption switching to the home premise.”

In 2020, 56 distilleries in the US closed because of the pandemic. On the contrary, 33 more craft distilleries opened last year compared with 2019. This is expected to increase over the next four years, with 265 craft distilleries expected to open in 2025 alone.

All craft categories are predicted to grow in the years to 2025, according to IWSR.

Craft to offset overall category decline

Craft segments are expected to offset overall category declines. For example, the US rum category is forecast to see a 1% CAGR volume decline between 2020 and 2025. However, craft rum is expected to grow by 12% during the same period.

The largest category in US craft spirits is American whiskey, which accounts for 36% of the sector.

However, craft gin is forecast to post the biggest growth in total spirits over the five-year period to 2025. By then, craft gin is expected to have grown from 9% share of the total US craft spirits market to register 23% CAGR from 2020 to 2025.

Lee added: “The craft category has benefited from premiumisation as higher average prices help US consumers become accustomed to premium-plus offerings.

“These findings suggest the US craft spirits segment has ample opportunities for evolution and growth, and continues to be an attractive investment proposition for brands.”

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