The fast-growing craft segment of the US spirits industry is set to vastly outperform the main market in coming years, according IWSR Drinks Market Analysis data.
In 2020, despite the effects of the pandemic, craft spirits in the US registered a volume gain of almost 8%, while non-craft spirits gained approximately 5% growth. The craft segment therefore achieved a 5% volume share of the total US spirits market, and a 7% value share.
The trend for premium, artisanal spirits is gaining significant traction across the US. IWSR analysts predict that the gap between craft and non-craft spirits will widen in coming years. US non-craft spirits is expected to register a +4% CAGR for 2020-2025, compared with a predicted growth of +21% CAGR in US craft spirits in the same period.
Covid-19 caused serious challenges to the craft spirit sector. Forced closures and lack of access to pubs and bars, key revenue drivers for smaller producers, put businesses under strain. But the impact on sales was less severe than expected.
Lockdown measures forced distillers to diversify sales channels and capitalise on at-home drinking.
“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,” says IWSR analyst Ryan Lee.
There was a record 56 distillery closures in the US in 2020. But the craft segment saw the opening of 33 more distilleries than in 2019. The number of new craft distilleries is set to significantly ramp up in the next four years, with a predicted 265 set to open in 2025 alone.
All categories, even those seeing declines in the total market, are predicted to post growth in the years to 2025. A prime example, the total US rum category is expected to see a 2020-2025 CAGR volume decline of 1%, while craft rum is forecast to grow 12% in the five-year period.
Whiskey is the largest category in the US craft spirits market, making up more than a third (36%). Sub-categories such as Tennessee and blended whiskey are expected to hold the greatest volume growth potential within total US whiskey.
However, craft gin is forecasted to post the greatest growth in total spirits over the forecast period. In 2020, craft gin only possessed a 9% share of the total US craft spirits market, but the category is forecasted to register a CAGR of +23% from 2020 to 2025. This compares to a +2% CAGR for total gin in the US over the same period.
Craft gin benefits from a significant price premium: while the average retail price of a 750ml bottle of gin sold in the US last year was US$16.77, the average craft gin retails for more than US$30.
“Brands are also driving up their popularity with consumers by leveraging regional botanicals, aged expressions, flavours and other innovations,” says Lee.
“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,” says Lee.
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