Craft Distillery Profit Margin Trends

This blog was updated in 2025

Through the COVID-19 pandemic, the food and beverage home delivery thrived, and with it, alcohol eCommerce. In 2023, at the end of the pandemic, the global online food delivery market reached $134.9 billion. In 2032, the market is expected to reach $317.7 billion. The last few years have seen an emergence of small craft distilleries entering the market to capitalise on this trend and the increase in consumer demand towards uniquely crafted, bespoke alcoholic beverages. This growing trend signals a new era in alcohol distribution, which is especially true for craft distilleries and artisanal brands.

The rise in craft distilleries has contributed to the economy through job creation. According to Craft Spirits Awards, the number of distilleries has increased by ~35% per year since 2011. In 2024, 28,628 US people where employed full-time in the craft spirits sector. 

Craft distilleries experience similar limitations as other SMEs – they’re in a competitive space and must compete with the large commercial distilleries that dominate the industry.
This article explores the state of the craft spirit industry, current trends, latest stats, and other things to watch for in the craft distillery landscape.

Table of contents

1. What is a craft distillery?
2. Are craft distilleries and micro distilleries the same? 
3. How profitable is a craft distillery? 
4. Factors affecting profit margins 
5. The state of the global craft distillery industry
6. Craft distilling in the UK
7. Craft distilling in the US
8. Craft distilling in Australia
9. Craft distilling in New Zealand
10. Distillery inventory management software to lift your spirits
11. Frequently asked questions

A craft distillery is an independently owned distillery that values quality ingredients and transparency of processes. A craft distillery usually physically distils and bottles its product on-site and has a maximum annual sale of 52,000 cases of that product. The American Distilling Institute (AMI) basis certification for craft distilleries on independent ownership and operation.

Micro distillery is not a legally defined expression in the world of distilling. Yet the term is often used to refer to small, often boutique-style distilleries established to produce relatively small quantities of beverage-grade alcohol.

The key difference is that a craft distillery uses authentic ingredients and is independently owned. A micro distillery, while small in comparison to the larger brands, can still produce large batches of product. Unlike a craft distillery, not all micro distilleries are independently owned.

Craft distilleries can be highly profitable, but success depends on several key factors, including start-up investment, product type, branding, and operational efficiency. According to Barrel Clarity, the total investment for a small craft distillery, producing between 2,000 to 10,000 proof gallons annually, can be between $1million to $3 million. These investments include equipment, facilities, licensing, initial inventory and working capital. 

It would be impossible to predict what a craft distillery could expect to make annually without considering factors such as size, location, business model and the distillery management style applied.

According to Startup Financial Projection, in the US, profit margins for craft spirits range between 40% to 60% percent and because spirit distilling is less costly than craft brewing it is reasonable to expect distilling is more profitable than craft brewing. Discounting the development of barrel-aged spirits that are left to sit for many years before drinking and therefore selling.

Which spirit distillery is more expensive to run?

The cost of running a distillery depends largely on the type of spirit being produced. Vodka and gin are typically cheaper to make; they don’t require ageing, so they can be bottled and sold quickly, helping distillers generate revenue faster.

Whiskey, on the other hand, is more expensive to produce. It needs years of ageing, specialised storage, and ties up capital for longer periods before it can be sold. This makes whiskey distilleries more costly to run, especially for small producers.

While craft distilleries can achieve healthy profit margins, several variables influence how much revenue they retain. Understanding these factors is essential for distillers aiming to maximise profitability:

1. Type of Spirit Produced

• Vodka and gin are typically less expensive to produce and do not require ageing, allowing for faster turnaround and quicker revenue.
• Whiskey and barrel-aged spirits require years of maturation, tying up capital and delaying returns.

2. Ingredient Costs

• Premium ingredients such as exotic botanicals or locally sourced grains can elevate product quality but also increase production costs.
• Sourcing efficiencies and bulk purchasing can help reduce overhead. 

3. Packaging and Branding

• Packaging is a major driver of consumer decision-making. Studies show 90% of consumers examine packaging before purchase, and 75% of decisions are made at point of sale.
• Unique, high-quality packaging can justify premium pricing and improve margins.

4. Distribution Channels

• Selling directly to consumers (DTC) via online platforms or tasting rooms typically yields higher margins than wholesale or retail distribution.
• Partnerships with local retailers or bars can expand reach but may reduce per-unit profit.

5. Regulatory and Tax Environment

• Excise taxes vary significantly by country. For example, Australia imposes $105.98 AUD per litre of pure alcohol, one of the highest globally, which can severely impact profitability.
• In contrast, US distillers benefit from progressive excise tax policies, improving revenue potential.

6. Operational Efficiency

• The use of distillery management software and inventory tracking systems can reduce waste, optimise batch production, and improve cost control.
• Automation and smart technology are increasingly essential for scaling profitably.

A growing number of consumers are looking for newer, more exciting options than the narrow range of traditional spirits on offer. Helping to drive revenue and growth in craft distilleries and the craft spirits market which is projected to realise a compound annual growth rate just shy of 30 percent between 2024 to 2030.

The North American region currently leads the global market due in part to the growing demand for premium craft spirits and artisanal varieties among consumers. This is further supported by the rising number of craft distilleries with frequent launches of new products and varietals. 

Meanwhile, the Asia-Pacific region is emerging as the fastest-growing market. The Asia- Pacific craft spirits market size is forecasted to hit $18.6m in 2030. Countries like China, Japan, and South Korea are seeing a surge in demand for craft spirits, driven by rising disposable incomes and a younger population eager to explore new flavours and premium experiences. Gin is gaining popularity across the region, with distillers experimenting with botanicals and regional ingredients.

Craft distilling in the UK has continued to grow, with the number of registered distilleries reaching 1,006 as of September 2025, increasing from 385 in 2023.

This growth has been fuelled by several factors:

• Post-pandemic entrepreneurialism, with many individuals launching small-batch distilleries during lockdowns.
• A strong consumer shift toward locally produced, premium spirits.
• The rise of direct-to-consumer (DTC) sales and online ordering, which helped distillers bypass traditional retail channels.

While on-trade sales (e.g., pubs and bars) declined during the pandemic, off-trade sales (e.g., supermarkets and eCommerce) surged. In Q2 2025, UK off-trade gin sales rose by 8.7%, with mid-range craft options outperforming value brands.

The UK craft spirits market is projected to grow at a 23.3% compound annual growth rate from 2024 to 2030, reaching a value of $4.77 billion USD by 2030. Gin remains the fastest-growing segment, while whiskey continues to dominate in terms of revenue.

UK gin for the win

The rising star in the UK craft spirit market is the gin industry.  Gin sales hit a record high in 2021 with Brits spending over £2.1 billion. That equates to around 80 million bottles, so the gin industry is a lucrative one and with flavoured gins helping to diversify the product comes greater opportunity to further drive sales. 

The US craft spirits industry continues to thrive, with 3,081 distilleries now operating nationwide, as of September 2025. Growth is driven by consumer demand for premium, locally made spirits, especially among millennials and Gen Z, who favour authenticity and flavour innovation. According to PoiData.io, “Kentucky makes up approximately 3.7% of all distilleries in the United States”

Craft distillers benefit from the Craft Beverage Modernization Act (CBMA), which permanently reduced federal excise taxes for small producers. This progressive tax environment supports profitability and encourages innovation.

Despite growth, small distilleries face challenges with distribution and scaling. Only 6.9% of small producers’ sales are out-of-state, compared to 69.1% for large producers, highlighting the need for better market access.

Whiskey wins in America

Unsurprisingly, whiskey rules the craft spirit scene in the US. In 2023, Whiskey dominated the market with 44.5% of the category. American whiskey sales are projected to hit $4.26 billion by the end of 2033, with Tennessee and blended whiskeys leading the charge.

Ten years ago, the Australian craft spirit industry comprised of a few operators primarily focussed on the production of whiskey. In 2025, there are over 700 distillershttps://drinksdigest.com/2024/04/29/australian-distillers-association-celebrates-20-years/ in Australia and gin production is the leading category. However, rum and brandy are gaining ground as distillers explore new styles and regional ingredients. Sustainability and local sourcing are key consumer drivers, with distilleries embracing native botanicals and eco-friendly packaging.

Local spirits challenging imports in Australia

Australia’s spirits excise tax, now $105.98 AUD per litre, and is indexed twice yearly. This tax burden limits profitability and competitiveness, especially for small producers.

Despite these challenges, Australian spirits are winning international awards and expanding into export markets, supported by strong consumer interest in premium, locally crafted products.

New Zealand has been distilling craft whiskey in the Hokonui Hills since the 1870s and whiskey is still a feature of the craft spirit sector. Fifteen years ago, New Zealand had about a dozen commercial distilleries. This number has grown recently to 170, mostly small, family and/or friend-owned craft distilleries. Of these, about 85 percent are following the global trend toward innovative craft gins.

Creating a unique brand identity for Kiwi spirits

The Kiwi aspiration of creating gins with a point of difference is reflected in the innovative style of the gins and evident in the distinctive packaging. The wide range of craft gins created in New Zealand speak to place by finding inspiration in their respective locations. Many use native bush pepper and mānuka leaves or honey while others draw inspiration from distinctive water sources and wild or rare botanicals.

Unleashed streamlines the back end of your spirits distillery business – so explore our inventory tools for distilleries. 

Craft distillery software

New technologies, software systems and solutions make the process of running a craft distillery more efficient. The right technology is crucial when scaling distillery operations.

• Distillery management tools help distilleries function smoothly throughout the distillation process. The right software enables customisation of product flows, batches, and tracking.
• CRM software can track and manage all lead, prospective and existing customer information.
• Sales automation software enables sales activities and performance tracking.
• Inventory management systems enable craft distillers to manage inventory of raw materials, WIP, and finished goods – tracking inventory during each phase of ageing and storage, throughout the entire product lifecycle.

In today’s market, the use of technology is essential to improve the efficiency and productivity of a craft distillery, especially as smaller operators take on the global spirits corporations. Increasing success in the craft distilling space is a function of smart technology use – combined with traditional craft skills and skillful marketing.