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TL;DR Distilled Spirits Council's 2020 Economic Briefing
The pandemic didn't make things worse, it made things uneven
Welcome to TL;DR.1 This is where I provide a summary of a recent industry report or survey and share my own commentary. Think of it as Cliff Notes for wine and spirit professionals. Today we’re looking at the Distilled Spirits Council’s 2020 Economic Briefing.
What it is
Per their website, Discus, or the Distilled Spirits Council of the United States, is “the leading voice and advocate for distilled spirits in the United States.”2 In other words, they’re a well-funded lobbying organization that promotes smarter regulation, lower taxes, and economic growth for the US spirits industry. They are also an excellent resource for spirit business information including economic data. Want to know how many 9-Liter cases of vodka were sold in the US in 2012?3 Visit their website.
Once a year, DISCUS shares their “Economic Briefing” in the form of a fairly lengthy deck and an in-person presentation that lasts more than hour. Here it is in digest form.
What it says
How did 2020 look for spirits in the United States? Bizarre. Despite, or maybe because of the global pandemic, here’s what happened:
Spirit revenue in the US was up 7.7% over 2019.
Spirit volume in the US was up 5.3% over 2019.
Spirits enjoyed their 11th straight year of market share gains (sorry, wine and beer).
Destructive tariffs curtailed international trade in both directions, while the permanent passage of the Craft Beverage Modernization and Tax Reform Act extended Federal Excise Tax cuts for distillers and importers indefinitely.
The pandemic roiled the US hospitality industry, but left in its wake a number of progressive, if temporary measures, to “increase consumer convenience.” Think cocktails-to-go and increased provisions to allow for delivery.
Why it matters
Just like the pandemic exacerbated inequality for people in the United States, it’s effect on the spirits industry was diffused unevenly. The current state of the spirit industry is lumpy. Everything is not like it once was.
Overall, spirit sales are up, but more than half of US craft distillers saw their numbers down. According to a recent ADI survey, 36% of US craft distilleries reported their 2020 revenues down by more than a quarter.
How to circle this square?
Understand large, familiar brands grew, while lesser-known producers tended to suffer because they were more dependent on tasting room sales.
While some might still be basking in the uptick in off-premise sales, the precipitous drop off in on-premise sales has dramatically weakened the ability to get upstart brands into bars and in front of consumers.
Category-wise, American whiskey, Cognac, Tequila, Mezcal, and RTDs are the winners. Tariffs have Scotch sales down.
What it means for you
If you’re a distillery… it’s time to de-risk your sales strategy by creating one. The two-pronged approach of tasting room sales coupled with the hope that your few out-of-state distributors would handle the rest wasn’t likely to cut it pre-pandemic. Now it doesn’t stand a chance. Time, people, and money must be allocated to pushing product. Sales should come from diverse sources. The best time to implement such a plan would have been yesterday. The next best time is today.
If you’re a sales rep… remember that the trend is your friend. So many categories are up. Lean into them. Also, remember that vodka still pays the bills. See footnote number 3.
If you’re a portfolio manager… it’s time to stop praying the tariff issue is over and start making adjustments to your pricing and selections. The truth is that the tariff situation is just on pause and June is fast approaching. Also, that earlier referenced ADI survey “found… 77% [of craft distillers] said their out-of-state wholesaler does not give [their] brands the proper amount of attention.” Time to show our homegrown producers more care.
Too long; didn’t read
Please feel free to explain to me how the “Distilled Spirits Council of the United States” became “Discus.” It’s a stretch for an acronym; while a snappy “abbreviation,” the haphazard selection of letters constantly has me scratching my head.
65,183,000 cases. By 2020, that number had risen to 76,863,000.