Spirits sales flat in US as 2023 dubbed ‘reset year’

Spirits sales in the US were relatively flat in both volume and value terms in 2023 as economic challenges instilled caution among consumers.

Spirits sales in the US rose by 0.2% in 2023 to US$37.7 billion, while volume sales increased by 1.2% to 308.8 million nine-litre cases, the Distilled Spirits Council of the US (Discus) revealed.

“The spirits sector showed resilience in 2023, navigating through the choppy wake of the pandemic and maintaining our market share lead of the total beverage alcohol market,” said Discus president and CEO Chris Swonger. “The phenomenal sales growth we saw during the pandemic was unprecedented and unpredictable but also unsustainable, and now, the spirits market is recalibrating.”

The spirits segment continued to be the market-share leader by value in 2023, accounting for 42% of the total beverage alcohol sector. Beer remains the market leader by volume.

Discus described 2023 as a ‘reset year’, and attributed the flat sales to difficult economic conditions, such as high inflation and interest rates, resulting in reduced discretionary consumer spending.

Christine LoCascio, Discus chief, policy, strategy and membership, said during a webinar held on 7 February: “What contributed to this reset in 2023? It won’t be surprising to anyone on this call that the overall economic conditions, including high inflation and interest rates, led to a reduction in discretionary spending by consumers.

“So consumers had to return to more, quote unquote, normal buying habits. And as a result, retailers and wholesalers didn’t order as much so they could focus on reducing those inventory build-ups.

“This reset can also be seen when examining the employment levels in the hospitality industry, which has almost, almost, returned to pre-pandemic levels.

“While it is almost back, it is important to note that if you look at the four years prior to the onset of the pandemic, the hospitality industry actually added 1.4m jobs. So taking that into account, there is still some uncertainty there on the hospitality industry side.”

Discus cited data from the US Bureau of Labor, which showed the hospitality industry’s employment has not yet recovered to its pre-pandemic level of almost 17m. The hospitality industry added 588,000 jobs in 2023, but it needs 86,000 more to reach the seasonally adjusted employment level recorded in February 2020.

Top-selling spirits

Taking a closer look at individual spirits segments, vodka remains the top-performing category by both volume and value, however both declined. Total vodka sales dipped by 0.2% to US$7.2bn, while volume sales fell by 2.6% to 74.9m nine-litre cases.

Demand for ready-to-drink (RTD) products remained strong, with sales up by 26.8% making it the fastest-growing spirit category by revenue. LoCascio said this equated to “almost US$600m in new sales compared to 2022”.

“Not to be discounted, though, is the US$467m in new sales for the Tequila category, and the US$190.2m in new sales for American whiskeys, which of course are both growing from a much larger base compared to the RTD category.”

Volume-wise, premium Tequila sales rose by 759,000 nine-litre cases in 2023, while high-end premium volumes grew by 1.024m nine-litre cases. While value sales rose marginally, super-premium Tequila sales declined.

In contrast, super-premium American whiskey sales rose by 220,000 cases, and high-end American whiskey rose by 947,000 cases. Premium and value sales declined.

“Premiumisation does continue to be part of the story in 2023,” LoCascio added.

RTDs proving to be ‘robust’ in the US

Adding some extra insight into RTDs, Marten Lodewijks, head of consulting Americas at IWSR Drinks Market Analysis, noted growth here was particularly strong for spirits-based products.

Lodewijks said: “The shift for consumers [from malt-based to spirits-based] who did have a slightly better understanding of those category dynamics, was considered a premiumisation. They came in at a higher price point, where consumers are looking for a better product – drink less, but better – as a common sentiment that we’ve seen throughout the industry.

“So while RTDs as a whole is a large section of the market, and as a whole might be considered flat, the devil’s in the detail. When you really unpack that, that alcohol base, you see the enormous growth that is coming out of the spirits-based portion underneath it.

“This massive shift of volume from vodka to [Tequila-based RTDs] might be a little bit misleading because there’s an important underlying product shift that happened in the market. So 2017/2018, the dominant spirit was Tequila in the RTDs. But the dominant product was pre-mixed Margaritas.

“In 2019, you started to see the entrance of your spirit-based [RTDs] and those tended to be vodka-based. And that was an entirely different product that was a single serve in a can.

“What you’re seeing is not only a shift in category, but a shift of category driven by the emergence of a new subcategory within the space. So that shift from Tequila into vodka doesn’t suggest that Tequila isn’t preferred because Tequila has shown enormous growth, and we know that it’s a massive growth engine, it’s that actual product type.”

He added that all alcohol bases within the RTD segment were growing.