United States sees demand for premium spirits

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Over 50m nine-litre cases of premium-and-above spirits (retail price – US$20 and above) were sold in the US in 2012, an increase of 8.5% on 2011. This represents one of the strongest growth years and the $20-plus sector now accounts for over one in four bottles in the US market.
This trend is set to continue, according to the IWSR Forecast Report 2013-2018, with the premium-and-above spirits market nearing 70m cases by 2018. The total spirits market is forecast to grow by 23.9m cases over this period with the majority of this growth coming from premium spirits.

In the categories of whisky, rum, gin and tequila the premium-and-above segments are forecast to outperform the lower price segments in percentage terms. Although sales of super-premium vodka is slowing down, overall premium-and-above vodka is forecast to gain another 4.3m cases with the trend towards flavoured vodka driving growth; the super-premium flavoured vodka market is forecast to grow by over 2m cases between 2013 and 2018. Premium-and-above whisky is forecast to see the largest growth over the five years adding 5m cases to the category. American whiskies, in particular, have benefitted from the introduction of flavours, a development that is attracting new, non-traditional consumers into the category.

Underpinning the growth in premium spirits are highly favourable demographics, with an estimated one million consumers annually reaching legal drinking age, and immigration. Many of these immigrant groups, particularly Latinos or Asians, have a preference for spirits, particularly premium aged. The market for premium plus spirits has also been buoyed by the improving economy and housing market, although unemployment remains stubbornly high by historic standards. Economist surveys (Bloomberg) forecast GDP expansions of 2.7% in 2014 and 3% in 2015, although the great unknown is the impact of the federal shutdown and the potential, albeit unlikely, prospect of a US debt default.

This higher consumer confidence is feeding through to recovery in the on-premise sector, a key driver of the spirits market – in particular, the premium sector. There is a growing connoisseurship culture, with increasing interest among many consumers, mixologists and producers in craft spirits. This has also been supported by highly effective marketing by the spirits industry and cultural changes (such as the influence of television programmes such as Mad Men). A stream of product innovation at the high-end of the market has also helped maintain and encourage consumer trade-up.