External Influences Affecting the Spirits Sector: Economic
The spirits industry is deeply influenced by a variety of economic factors that shape both production and sales. Shifts in consumer spending, changes in taxation and regulations, and global market trends all play a role in determining the success of spirits producers. Additionally, fluctuations in supply chain costs and international trade policies can impact everything from pricing to the availability of certain products on store shelves.
Based on market reports provided by Statista, an independent market research organization, beer generates the most revenue across all alcoholic beverages, China is the most revenue generating country in the world for spirits, yet India is currently the most revenue generating country in the world for whiskey.
Within the U.S., distilled spirits sales had been stable for several years due to high beer consumption. In 2019, distilled spirits gained more market share than beer and wine sales. For every percentage point in market share this equated to approximately $770 million in additional revenue to the alcohol beverage industry.
Tequila/mezcal as well as pre-mixed cocktails also experienced growth in 2019, resulting in $3.4 billion and $351 million in annual sales respectively. Mezcal had a historic year, reaching $105 million in annual sales on its own accord, the highest to date. Within the whiskey category, rye had impressive sales in 2019 of 14.7% or approximately a $30 million increase, resulting in $235 million annual sales. Nevertheless, vodka remains the leader within the spirits industry with 31% overall volume share. To put into perspective the variance of vodka versus whiskey sales in the U.S., whiskey sold 69.3 million 9-liter cases with $10.3 billion dollars in revenue while vodka sold 74.15 million cases resulting in $6.6 billion in revenue.
Due to the advocacy of organizations such as DISCUS, the federal excise tax (FET) provisions in the Craft Beverage Modernization and Tax Reform Act were initially extended through 2020 and subsequently enacted into law on December 27, 2020. The Act reduces the FET on spirits, beer, and wine for the first 100,000 gallons from $13.50 per proof gallon to $2.70 per proof gallon. A proof gallon is defined as a gallon of spirit with an alcohol by volume (ABV) of 50%. This legislative measure substantially lowers the excise tax burden for craft producers, thereby enabling increased revenue retention within the industry.
In 2018, off-trade distribution or exported sales made up 70% of the total alcoholic beverage industry market share. The U.S. spirits market is expected to grow to $494 billion by 2025. Globally, spirits are forecasted to increase from $655.3 billion in 2025 to $847.4 billion by 2032, showing an average annual growth rate of 3.7% between 2025 and 2032. Nonetheless, factors like trade tariffs, shifting alliances, and political changes could influence these trends either positively or negatively.
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