Spirits sales in the United States have experienced a notable decline of 4.2% during the initial six months of 2023, marking a significant drop in the $100-plus spirits category, according to recent data.
The Wine & Spirits Wholesalers of America (WSWA) released its SipSource Report, offering insights into wine and spirits distributor sales across a multitude of on-trade and off-trade establishments in the US.
The 2023 Q2 Mid-Year Report, covering data up to June 2023, revealed a 1.4% decrease in spirits sales and a substantial 6% drop in wine sales over the past 12 months. In the first half of 2023, wine sales experienced a pronounced 7% decrease, with spirits sales falling by 5.1% in the first quarter alone.
SipSource attributed these declines to the challenges posed by tough comparisons to the previous year, as well as the impact of inflation on consumer spending.
SipSource analyst Danny Brager highlighted that volume declines appeared widespread across mainstream product segments, indicating a broader issue affecting the spirits sector's performance. He suggested that the exceptionally high growth rates observed in the category over the past two years may have finally plateaued, alongside the influence of inflation on consumer budgets.
Brager further noted a significant downturn in the luxury spirits category, with spirits priced at $100 or more experiencing a decline of around 15% over the past six months. This marks a substantial shift from the approximately 14% growth recorded in the same category in the previous year.
One striking development highlighted by SipSource is the remarkable rise of the ready-to-drink (RTD) cocktail sector, which has reshaped the spirits market. These pre-mixed cocktails accounted for a mere 3% of total spirits volume in the US in 2019 but have surged to represent 13.5% today, making them the second-largest category after vodka and ahead of American whiskey and Tequila.
Canned RTD cocktails, known for their convenience, make up 75% of all RTD spirits sold in the past year. They have found a strong presence in venues such as poolside bars, movie theaters, stadiums, fast-casual establishments, country clubs, and concert venues. Additionally, pre-mixed cocktails now constitute approximately 10% of spirits sales in the on-trade sector.
However, the growth of RTDs may have had a negative impact on traditional segments within the beer, wine, and spirits categories. Vodka, serving as the base for 60% of spirit-based RTDs, and Tequila, the second-largest base, representing 20% of the segment, have felt the influence of RTD sales.
Despite some positive trends in on-trade wine and spirits sales in the past year, the past three months have seen a shift to negative growth. Factors contributing to this challenging environment include higher commodity and labor costs, as well as rising inflation rates. Consumers are increasingly considering the cost of dining or drinking out compared to home entertainment.
In summary, the spirits industry in the US has faced declines in sales during the first half of 2023, attributed to tough comparisons with the previous year and the impact of inflation. Meanwhile, the RTD cocktail sector has surged in popularity, reshaping the spirits landscape. Analysts anticipate a return to positive trends in the second half of 2023, with the effects of the pandemic on performance beginning to wane.