By the numbers

By the numbers

Sales figures don’t tell the whole story

Thoughts from... | 26 Mar 2021 | Issue 174 | By Liza Weisstuch

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The news certainly wasn’t great, but it was less harrowing than I expected. In late January, the Distilled Spirits Council of the United States (DISCUS) held its annual economic briefing – virtually, obviously. I always look forward to this winter gathering, one of the rare opportunities lifestyle writers like me have to mingle with business journalists and stock analysts. It’s sort of like talking about movies with people who watch them for their technical merits, instead of with my fellow liberal-arts types who home in on characters and plotlines.

I’ve attended the annual briefing for about a decade and every year the story plays out vaguely the same: revenues grow, but not because people are drinking more, they’re drinking better. Lesser-recognised categories can grow exponentially. Irish whiskey became the gold standard of the ‘little engine that could’ story as its popularity exploded. Rye got so trendy that DISCUS economist David Ozgo, an expert where data is concerned, had to establish it as a whiskey category in its own right for analysis. Spirits continuously gobble up market share from beer and wine, thanks in no small part to the seemingly unending growth of cocktail culture.

Spirits continuously gobble up market share from beer and wine

I anticipated this year’s briefing with dread, what with the pandemic keeping bars, restaurants and sports arenas mostly shuttered since March. New laws legalising to-go cocktails provided establishments in some states a flimsy lifeline, but a lifeline nevertheless. But the story the numbers told wasn’t as catastrophic as I expected. Revenue in the US was up 7.7 per cent, to a total of $31.2 billion in 2020, and volumes rose 5.3 per cent to 251 million 9-litre cases. Spirits saw the 11th straight year of market share gains. If an alien economist arrived from a distant galaxy and looked at the numbers, it wouldn’t necessarily guess that a deadly virus was wreaking havoc on humankind.

But those bulky numbers obscure the fine details. That growth is the sum of a very asymmetric equation. Strong retail (or off-premise) sales were counterbalanced by meagre on-premise sales, which were down by about 44 per cent.
Throughout the US, as everywhere else, the hospitality industry has been decimated. In some cities, indoor dining is only starting to tiptoe back, while it remains banned in others. Between that and the permanent closure of thousands of establishments, 2.3 million jobs – and counting – have been lost.

But people keep buying liquor. And in keeping with the ole ‘rich get richer’ principle, it was little surprise to learn that high-end premium and super-premium categories showed 7.3 per cent and 12.7 per cent year-on-year revenue growth, respectively. Value spirits showed a 0.3 per cent decline.

“This has been unlike any other recession that we’ve experienced,” Lawson Whiting, chief executive of Brown-Forman, told the Wall Street Journal in January. “In the US, ultra- and super-premium spirits are gaining share at faster rates than in the pre-Covid time periods.”

The restaurant industry isn’t the only cause for worry. Pages of analysis could be written about the damage the retaliatory tariffs have wrought. Scotch volumes are down 6.5 per cent to 2.4 million cases. Meanwhile, since the EU’s 25 per cent tariff on US whiskey in 2018, the value of American whiskey exports to the UK and EU have decreased 53 per cent and 38 per cent, respectively.

Pages will also be written about the US craft spirits industry when we come out on the other side of this. I can only hope that they’re not pages of obituaries. “Family distilleries have been holding on by a thread throughout the pandemic,” said Sonat Birnecker Hart, owner of Koval Distillery in Chicago. Those tariffs have pulled the rug out from under Koval’s growing export business. What’s more, the pandemic forced craft distillers to close tasting rooms, which serve as tourist attractions and revenue stream.

Spirits are commonly described as an affordable luxury. Decline in on-premise spirits expenditures gave consumers $20 billion to spend off-premise. I am not worried about the spirits companies. Numbers always bounce back. I just worry every working individual won’t.
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