Spirits industry bucking weak global economy

NEW YORK -- A weak economy may be wreaking havoc on many industries, but the distilled spirits industry experienced growth in 2011 while taking more market share again from beer.

That was among findings released by Distilled Spirits Council President and CEO Peter Cressy at the industry’s annual briefing for Wall Street analysts and reporters on Tuesday. But, he warned, uncertainty about the economic recovery and the impact of new taxes could derail future growth.

Distilled spirits exports exceeded $1 billion for the fifth consecutive year, reaching a projected record $1.34 billion in 2011 (based on 11-month totals). Total spirits exports grew 16.5% over the preceding year, while American whiskey -- which constitutes 69% of total exports -- grew 13.6%.

An ongoing trend towards open markets and sensible transparent regulations, as well as a focus on communicating the heritage of the products in new markets, contributed to the trade growth. Among significant trade victories in 2011 were the passage of the U.S.- Korea Free Trade Agreement, which will eliminate the 20% tariff on bourbon/Tennessee whiskey upon implementation of the agreement, and the World Trade Organization’s final ruling that the Philippines’ excise tax on distilled spirits is discriminatory and in violation of WTO rules.

"As countries around the world lower tariffs and other barriers, American spirits products are finding new audiences fascinated by the rich heritage and unique character of these great brands," Cressy said.

He attributed the market share growth to industry innovation and the consumer return to a preference for premium-priced spirits. Other significant factors contributing to the positive outcome, he said, were ongoing national market modernization trends and a willingness by policymakers to hold the line on taxes.

In other points of the report:

  • Federal government data showed that underage drinking and drunk driving fatalities are at historic low levels. 
  • Industry suppliers saw year-to-year volume growth of 2.7% to 195.8 million 9-liter cases, and sales growth of approximately 4% to $19.9 billion, reflecting a consumer return to premium products.
  • Vodka, which accounts for 32% of industry volume, was up 5.9% to 63 million 9-liter cases, but in the super premium category, volume rose 12.7% and revenue rose 15.9%, $160 million now totaling $1.16 billion.
  • In the largest whiskey category, bourbon and Tennessee whiskey, overall volume was up 3.9% to 16 million 9-liter cases, and revenue was up 3.9% to $2.0 billion. But, again, the largest growth occurred in the super premium category where revenue was up 11.4% for a total of $180 million. "These results show that the hospitality industry is helping drive the national recovery and job creation, but it remains critical that legislators don’t derail future economic growth through higher taxes,” Cressy said. 

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