SPIRITS CATEGORY CONTINUES UPWARD

Although the spirits world hasn’t seen as high of a growth rate as the wine category, consumption increased last year for the ninth year in a row. Wine currently holds 18.9% share of the alcohol market, while beer commands 47.3% and spirits controls 32%. However, wine and spirits growth rates far outpace that of beer.

Spirits will likely continue doing well as consumers continue trading up and showing interest in flavored spirits, both huge profit drivers.

AC Nielsen reported that for 2005, flavored spirits (vodka, brand, gin, rum and tequila) were responsible for over 25% of the category volume gains, and while they account for only a small portion of overall spirits sales, they are growth drivers that command premium prices in most segments. Super and ultra premium distilled spirits continue to gain volume.

Last year tequila led the pack with a growth increase of 8.6%. Rum grew 6.8% and vodka grew 3.5%, while whiskey showed the most obvious decline. Vodka sales are dominated by value prices ($6.99 and less), while ultra and mid-brands push category growth. Tequila sales are dominated by ultra and super premium tequilas.

The average consumer generally spends over $16 on spirits brands; however, spirits have a longer purchasing cycle than other channels.

With more channels and retailers selling alcoholic beverages, customers have a much higher buying opportunity. Almost 20% of wine sales and 11% of spirits sales took place off-premise in 2005. Retail sales of all alcoholic beverages increased in all outlets – including food, drug and liquor stores – in 2005. Spirits volumes were up 2.6% in food, drug and liquor stores in 2005 vs.2004.