About that 2023 Spirits Market

The 2023 number from DISCUS points to another choppy year for the spirits market

The Distilled Spirits Council of the United States (DISCUS) released sales numbers by value and volume for the Spirits Industry in 2023. The headline is that Spirit sales were pretty much flat by both volume (+1.2%) and revenue (37.7B vs 37.6B) compared to 2022. Tequila and Mezcal, the numbers are lumped together, outperformed every other category of spirits in growth, with revenue growing 7.9% year over year, and volume growing 5.7%.

Tequila and Mezcal revenue and volume growth by percentage was second only to the Cocktails RTD segment which grew by 26.8% in revenue and 24.3% in volume. Whiskey grew by 3.8% in revenue but was down .4% in volume. Vodka was down .2% and 2.6% respectively.

To break that all down by dollars:

• Vodka – $7.2 billion in revenue in 2023
• Tequila/Mezcal – $6.5 billion in revenue in 2023
• American Whiskey – $5.3 billion in revenue in 2023
• Cordials – $2.9 billion in revenue in 2023
• Cocktails/RTDs – $2.8 billion in revenue in 2023

Behind the headlines

It would be easy to read these numbers and conclude that the tequila and mezcal boom are over. But the crazy growth seen from the previous two years was not sustainable and should be seen as an aberration, not the norm. 2023 was a weird year in the spirits market driven by three factors according to DISCUS:

• Consumers returned to more normal routines and buying habits post pandemic
• Retailers and wholesalers paused reordering as they reduce inventory build ups
• Difficult economic conditions with high inflation and interest rates have reduced consumer discretionary spending

Spirits now account for 42.2% of the alcohol market by revenue vs 28.7% in 2000. Sales have been roughly equal with beer sales since 2022. Over the past 23 years, wine has remained relatively flat with market share growing from 15.7% in 2000 to 16.1% in 2023. 

Diving deeper into the numbers reveals what could be some interesting trends going forward and nowhere is that more interesting than in the so-called premiumization trend. It’s a word that gets thrown around a lot, premium, but what does it actually mean? DISCUS breaks it down into 4 categories: Value, Premium, High End Premium and Super Premium. Note that these are whole sale prices.

• Value is less than $12
• Premium is $12-$19.50
• High End Premium is $19.50-$28.30
• Super Premium is greater than $28.30

Given the price point breakdown, it is fair to assume that the bulk of sales by volume for Mezcal were in high end premium and super premium in 2023. While there was growth seen in High End premium (up 1m 9 liter cases), Super Premium sales by volume fell, but no case number was given in this report.

This corresponds to anecdotal stories I heard from store owners last year who saw more people trading down with their purchases and more of an up and down market with mezcals priced higher than $70. People continued buying well known brands that price above $120 (think the Real Minero’s, Cinco Sentidos’ and NETA’s) but new brands pricing that high struggled a bit more. The huge jumps we saw in super premium sales during the height of the pandemic had everything to do with huge discretionary spending from people stuck working at home, making the same amount of money with nowhere to spend it (no restaurants, no travel).

Overall spirit sales show every price category except for value down, or at the very least flat. And where was that value growth coming from? The RTD market.

Sales of RTDs were 6.8 million cases (9L) in 2017. In 2023, they were 65.7 million cases. Vodka based RTDs make up the bulk of product in the market, with Tequila/Agave next. What is interesting is that in 2017, Tequila/agave based RTDs made up the majority of products in the market at around 60% with vodka accounting for just 10%. In 2023, Tequila/Agave made up about 20% of the sales. Vodka? About 60%. And even with that shift in percentage, that is still growth for the agave portion of RTD sales.

So what does it all mean?

We are seeing a maturing agave spirits market that witnessed unprecedented growth over the past 15 years. To expect continued year over year growth of 30-40% would be a fool’s dream. For folks worried about an implosion of the mezcal boom, take a deep breath, there remains a strong market for mezcal. As you can see from the chart below, the premium Spirits category has been pretty resilient during two major economic downturns since 1990.

There is no doubt that the market is more competitive with so many agave spirits coming into the market and until people feel more secure in the current economy, and it being an election year, things will continue to be choppy on the retail/off premise side. And for on premise? Hopefully we’ll see some growth there as bars and restaurants strengthen as we move further from those pandemic days. But it is going to be a bumpy ride.

Finally, while it is likely we won’t see the kind of year over year growth rates in agave spirits as we’ve seen the past seven years, a larger share of a flat or a slowly growing market is still growth.

You can read the full report here.