Whiskey! Distilled spirits market continues to mature, craft brands continue to take notice

As we’ve mentioned before, domestic sales of distilled spirits rose a solid 4.1 percent through 2015, marking the sixth consecutive year that niche has increased market share relative to beer in the overall U.S. alcoholic beverages sector. Last year (2016), the American whiskey category in particular did well, with bourbon, rye and Tennessee variety sales up nearly 8 percent (confirmation below). Like the beer sector, Millennials are helping drive a revival of cocktail culture (and copper cup sales).

Along with corporate titles, craft spirits from craft breweries have been a part of that growth. Here are some examples: Dogfish Head Brewery invested heavily in spirits in 2015 with a new state-of-the-art distillery in the heart of its Milton, Delaware, campus, using American-made copper stills, veteran distillers and a handcrafted ethos (100 percent scratch-made spirits!). Dogfish concentrates on vodka and rums. Rogue Ales and Spirits (onus on the latter) has been making distilled goodies for years; it’s even started a cooperage to age these spirits. We caught up with president Brett Joyce a few weeks ago:

…the [spirits] business is still fun and solid. We just received a huge, huge award at the World Beverage Competition. We’re getting more and more time in the barrels. I think our quality of our whiskeys especially is improving. We have some stuff now that’s four years old, so we’re trying to find the sweet spot for the whiskeys.

Whiskey! (said like this) is the real attention grabber. Both younger, adventurous, support-local consumers and older drinkers with more money and experimental tastes are embracing premium and craft whiskeys. According to this article on Investopedia (which claims to be the largest financial education website in the world):

A recent report by the Distilled Spirits Council indicated that bourbon, Tennessee whiskey and rye whiskey sales grew about 8% to $3.1 billion in 2016. The results imply great news for whisky suppliers such as Brown-Forman Corp. (BF-B) and Diageo PLC (DEO) as 21.8 million cases of American whiskey sold in 2016 reflects a 7% volume increase year-over-year (YOY).

The Washington, D.C.-based council noted that the overall category of distilled spirits, which includes whiskey, has gained in market share against beer for the seventh consecutive year, rising 4.5% to $25.2 billion in 2016. U.S. spirits export volumes were up 6.8% last year, driven by American whiskey exports, which gained 10.2% over the same period.

It’s interesting to note that huge number in exports. American whiskey has way more prestige overseas than beer. It would definitely make an interesting complement for craft breweries looking to grow their products in foreign markets. The big guys definitely have taken notice. From that same article:

The American whiskey trend explains why craft brew leader Boston Beer Inc. (SAM) announced in late 2016 an expanded partnership with Berkshire Mountain Distillers to offer Two Lanterns American Whiskey in select liquor stores, bars and restaurants on the East Coast. We can expect more of this type of collaboration, as the Berkshire Mountain company has announced a new Craft Brewers Whiskey Project in which it aims to team up with 15 different distillers to create unique whiskey products. (See also: Is Boston Beer Brewing Up a New Direction?)

Spirits could make your craft brewery’s product portfolio more diversified — though the cost and time of serious spirit processes (like whiskey aging) could make that investment intimidating — but that’s another story.