What’s Next For The Liquor Industry in 2018

Apr 23, 2018 in Alcohol Beverage, Retail

2017 was a good year for the beverage and alcohol industry, especially for brands selling spirits. According to the Distilled Spirits Council of the United States (DISCUS), supplier sales increased 4 percent in the U.S. spirit market, totaling $26.2 billion.

How can liquor brands maintain the strong momentum they’ve built up over the past 12 months? By reading the tea leaves and planning ahead. Let’s take a look at what 2018 has on tap for spirits and alcohol.

Premium brands continue to flourish

One of the key trends DISCUS identified was the growing demand for premium spirits. In 2007, low-cost, economical liquor brands accounted for 40 percent of U.S. spirit sales. That figure has since dropped to 33 percent, as of last year. Meanwhile, premium brand sales have increased in the same time period, reaching an overall revenue share of 32 percent in 2017.

Positioning brands to appeal to evolving consumer tastes is essential. Brands that are able to pivot toward premium-drinking demographics will be able to stay competitive in 2018. That includes revising store planograms to put more focus on high-quality products and catch the eye of discerning customers.

Much ado about whisky

Bourbon has been one of the liquor industry’s greatest recent success stories. Interest in the spirit has steadily risen over the past decade, and in 2017, the number of cases sold in the U.S. increased to 20 million.

But what about American whiskey’s counterparts across the pond? While both American and Irish distilleries have appealed to U.S. demographics with a focus on high-quality core products and experimental one-offs, Scotch whisky has yet to really reinvent itself for today’s market.

A big part of whisky’s slow response to evolving consumer trends is its adherence to strict distilling regulations that go back centuries. As such, Scotch whisky brands are at a crossroads: Do they abandon the old ways to chase today’s demographics, or do they double down on tradition and ride out the storm?

Can Scotch whisky distillers find a happy middle ground that allows for more experimentation while still upholding the traditions and standards of excellence they have become synonymous with? Time will tell.

Online channels encroach on store sales

It was only a matter of time before the e-commerce boom caught up with the liquor industry. A recent Rabobank study revealed that U.S. online alcohol sales totaled $1.7 billion in 2017. According to Nick Rellas, CEO of alcohol delivery platform Drizly, those sales may only increase in the near future. Speaking with The Spirits Business, Rellas predicted that online liquor sales could reach as high as $15 billion in the next few years.

Does that mean liquor companies should give up on brick-and-mortar channels? Not quite. Physical stores will continue to be a primary revenue channel, especially with customers who don’t want to wait for shipments to arrive or deal with stringent delivery requirements. Brick and mortar isn’t going anywhere, so although brands should address growing interest in digital sales, they need to continue making in-store revenue a focal point.

2018 will be a year of fantastic opportunity and potential disruption in the liquor industry. Brands that keep their eyes on developing trends and respond accordingly will do just fine.