This article was updated in February 2023 to reflect changing conditions, prices and trends.
The distilled spirits industry is not for the faint of heart. For newcomers, it can cost hundreds of thousands of dollars just to get set up, and potentially millions more to get to market.
Even for old hands, competition, legal changes, and shifts in consumer behaviour can make distilled spirits a rocky business indeed. And of course, like many other industries, it was not immune to the downward pressure of the Covid-19 pandemic.
But for those willing to brave the market, it can be a dynamic and exciting space to be a part of. For those keen to dive in – or expand into new territory – understanding the lay of the land is key to success, and it’s that overview that we’ll take here.
The global spirits industry in numbers
6.2% drop in sales volume
Like many food and beverage manufacturing industries, the alcohol industry worldwide took a hit from the pandemic – whether from restaurant and bar closures, or restrictions on valuable export and import markets – global sales volume dropped 6.2% as the world locked down.
Luckily, the wider market, along with spirits sales, started to bounce back in 2021 as restrictions eased. Sales for the alcohol market overall are projected to have grown 2.9% in 2021. Spirit sales are estimated to have grown 0.6% in 2021, and it’s predicted they’ll grow at a compound annual growth rate (CAGW) of 1.5% until 2025.
In 2018, the spirits market worldwide was worth US$1.47 trillion. By 2024, it’s forecasted to grow to US$1.75 trillion.
The UK distilled spirit market in numbers
The average cost of a bottle of spirits in the UK was US$19.48 (£13.08) as of 2019 – a 97% percent rise across the previous decade. In 2020 the average cost rose to US$22.12 (£14.85).
$8 billion in revenue
The market in the UK is worth approximately US$8 billion (£5.7 billion). Despite hits from the pandemic, medium-term forecasts for the sector look positive, with revenue expected to hit $9.3 billion (£6.6 billion) by 2026.
23% profit margin
As more craft producers flood the market and squeeze the competition, profit margins in the country are expected to show a drop of 4.5 percentage points for the 2016–2021 period, to 23% down from 27.6% in the five years prior.
39.4% drop in export revenue
Due to the pandemic and resulting trade restrictions, spirit exports have taken a hit over the last year in the UK. The impacts are predicted to have resulted in a 39.4% drop in export revenue in 2021. The combination of new Brexit conditions and lockdowns meant spirits exporters from the UK were hit particularly hard in the first part of 2021. On the other hand, exports may start getting a boost from demand in Asia, where markets are starting to open up.
$564 million in tariff losses
The Scottish Whiskey Association reckons the industry has lost US$564 million (£400 million) in sales due to the hefty 25% import tariff imposed in the US. The tariff was put in place in 2019 as part of wider tariffs on European products.
The Australian spirit market in numbers:
Revenue for the spirits market in Australia is $2.1 billion, and is expected to rise to $2.4 billion by 2026.
Avoiding some potentially major Covid-related impacts, spirit exports from Australia to the US shot up by 50% in 2019-20. In terms of imports, spirits from other countries are expected to make up more than 30% of customer demand in 2020-21.
11.5% profit margin
Spirit profit margins in Australia sit at 11.5% – half that of its UK counterpart. For SMEs, the profit margin is 5.2%.
A new free-trade agreement between the UK and Australia means that a 5% tariff on Scottish whisky exported from Britain will become a thing of the past. Exports of Scotch whisky to Australia has nearly doubled over the past decade, and the trade agreement is expected to drive more.
The New Zealand spirit market in numbers:
15.5 million litres
From 2003 to 2020, the volume of spirits available to drink across New Zealand shot up by nearly 65% to 15.5 million litres. When spirit-based drinks are added to the mix, the volume rises to just under 90 million litres.
31.6% of total alcoholic drinks consumed
Of the alcohol that New Zealand dwellers consume overall, the percentage of spirits-based drinks has grown from 23% in 2005, to 32% in late 2020 – likely in part because of the popularity of ready-to-drink products (RTDs) with younger consumers.
7% ABV limit
The industry avoided government legislation back in 2010 to limit the alcohol percentage of spirit-based ready-to-drink RTDs to 5%, instead setting a self-imposed limit of 7% per bottle or can, with labels clearly showing how many drinks were in each.
3.4% retail margin
Liquor retailers in New Zealand have a profit margin of 3.4%.
$1000 per bottle
The cost of a bottle of tequila made by the only tequila producer in New Zealand, TeKiwi 100% Blue Agave Tequilana Spirit, is a hefty NZD$1000. The play on words comes from the fact that the word Tequila is reserved for producers in certain regions of Mexico.
The US spirits market in numbers
The spirits market in the US was valued at US$68 billion in 2020. Bourbon, Tennessee whiskey, and rye whiskey sales rose by US$327 million (8.2%) in the same year.
39% of online sales
By 2024, spirits are expected to make up 39% of web-based alcohol sales, with trends such as online cocktail-making courses on the rise, particularly during the pandemic.
281 million cases of hard seltzer
The number of nine-litre cases of hard seltzer drinks sold in the US is expected to triple by 2023 to 281 million, driven in part by its appeal for more health-conscious consumers with its lower calorie count and sugar content.
7.6% rise in premium spirits
The trend towards quality spirits in recent years has seen a corresponding rise in revenue, with the intake from high-end premium products growing by 7.6% in 2019, and super-premium products by 7.9%.
Japanese whisky has become one of the most popular spirits for US consumers, making up 23% of overall spirit consumption, second only to mezcal (40%) and ahead of Irish Whiskey, Tequila, and Cognac.
92.38 million gallons
In 2020, the number of gallons of distilled spirits exported from the US reached 92.3 million gallons, up from 80.7 in 2015.
The Chinese spirit market in numbers
604 million litres
In April of 2021, Chinese distillers made 604 million litres of spirits, down 2.4% from last year, potentially because of a trend away from the low-end baijiu market.
Chinese manufacturer Kweichow Moutai, the company which surpassed industry giant Diageo as the world’s most valuable liquor firm in recent years, was expected to make US$17.6 billion in revenue in 2021.
96% of market share
The most popular spirit in China by far, baijiu – a clear fiery liquor made popular by Chairman Mao in the 70s – made up 96% of sales in China in 2019. In comparison, brandy and whisky made up just 4% of the market combined.
In 2020, revenues for the spirits market amounted to US$133.8 billion in China. By 2025, they are forecasted to reach US$167.2 billion.
22% of global sales
The Chinese market accounts for a sizeable chunk of the global market. In 2019, it accounted for 22% of spirit sales worldwide.
Global spirits by type: value, imports, and exports
The vodka market was valued at US$46 billion in 2019 and is expected to rise by 8.81 billion by 2024. The largest importer of Vodka is the US, and the largest exporter is Sweden.
In 2018, the global rum market was worth US$15.2 billion. This is expected to rise by nearly 20% by 2026. Germany is both the largest importer and exporter of the spirit. Italy is the second largest importer, and the US is the second largest exporter.
The whisky market worldwide was worth US$61.7 billion in 2019 and is expected to reach nearly US$96 billion by 2026. The US is the largest importer in the market, and the UK is the largest exporter.
In 2020, the global tequila market was valued at more than US$5 billion. That figure is expected to rise by US$1.6 billion by 2026. The largest importer of the spirit is the US, followed by Germany.
The gin market was worth around US$9 billion in 2019 and is expected to rise to more than US$11 billion by 2024. The US is the largest importer of the spirit, and the UK is the largest exporter.
In 2020 the brandy market reached a value of US$21 billion. The US was the world’s largest importer of grape-based spirits, and France was the biggest exporter.
Global spirit trends
Craft spirits growing rapidly
As with the beer market, craft distillers are now an important part of the overall industry, as more and more consumers seek out custom and premium beverages, with new, interesting, and organic ingredients. In the US alone the number of craft distilleries in 2018 rose by 15% to 1,835. Over the next four years it is expected to see a CAGR growth of more than 18%.
High-end and super-premium products
Similar to craft spirits and the move toward more boutique products, there is a notable trend in the market toward luxury spirits, with many consumers choosing these over lower-end drinks. Between 2014 and 2018, higher-end spirits grew at a CAGR of 7%, compared to the spirits market overall, which grew by 2%.
Profit and brand opportunities in the spirits market have become a huge draw to celebrities in recent years. A-listers like George Clooney (Casamigos tequila) and Ryan Reynolds (Aviator Gin) have pulled in top dollar for their products. Respectively, the stars have sold their businesses for US$1 billion and US$610 million. The trend doesn’t look likely to slow, with other big names like Kendall Jenner, Dwayne ‘The Rock’ Johnson, Ellie Goulding, Bruno Mars, and ex-basketball star Scotty Pippin all entering the space.
The global pandemic drove people around the world even further online where many consumers did their grocery shopping, socialising, work, and of course, drinking. Spirits brands and their wider alcohol industry counterparts were sure to find opportunities in the space while revenues from restaurants, bars, and shops dropped, such as cocktail making classes, virtual distillery tours, and online tastings. While the future of these avenues remains to be seen post-pandemic, like many of the changes brought on by the crisis, it’s likely that at least some of these will continue to stick.
The RTD market has seen huge growth over the last several years. Everything from hard seltzers and pre-mixed cocktails are gaining popularity as consumers look for products that are light, drinkable, and portable – and that can be enjoyed over longer periods of time. Producers have been taking note; between 2019 and 2020 alone, nearly 2,000 new RTD drinks were introduced to market. Innovation in the space will likely continue with the introduction of new flavour combinations and ingredients added to the mix. In the US, sales of hard seltzers, which have enjoyed particular popularity in recent times, are set to more than triple by 2023.
Several years ago, millions of dollars were poured into the cannabis-based drinks market. The excitement seemed to have been tempered by the pandemic, but investors are keeping an eye on opportunities as more of the US and countries around the world legalise the drug and open up market space for it. Big brands like Molson Coors, and Heineken-owned Lagunitas and Pabst have launched cannabis infused drinks in recent years. With the sales of cannabis beverages expected to reach US$210 million in 2021 in the US alone, it’s certainly a space to watch.
Look in any liquor store and it’s not hard to see that herb-, flower-, and spice-flavoured drinks are all the rage. Mixing drinks with different flavours has become something of a fascination for cocktail enthusiasts, and the market is drinking it up. Gin has been one of the most dominant spirits in the botanicals space, with drinks flavoured with everything from lavender and orange blossom to mint and rosemary. But other markets like rum are hot on the trail with a huge mix of flavour combinations and spiced drinks.
In the UK alone, sales of spiced and flavoured rums were up 80% from 2014-2019. And the trend is continuing outwards, with the global plant-based drinks market forecasted to hit US$33.9 billion by 2026. Hard kombucha is another RTD which has gained popularity in recent years, benefitting from a growing consumer focus on health and wellness. The fermented tea-based drink is expected to reach sales of US$7 billion by 2027.
Potentially a pandemic-only trend, distillers struggling with the impacts of the crisis soon cottoned on to an opportunity to use their products for something the world just couldn’t do without over the last year – hand sanitiser. Many businesses – including big names like Diageo and Pernod Ricard, rushed to contribute to the alcohol-based products market, with many donating at least a portion of the goods as global supplies dwindled. Whether businesses continue making these products post-pandemic remains to be seen, but the trend will be looked back on as an interesting example of how the world changed in 2020.