What's on the Top Shelf Tomorrow? Upcoming Trends in the Spirits Industry
Among the Trends are Continued Industry Growth, the Rise of "Drinking In" and the Outperformance of Premium Products Versus Mid-to-Low Shelf Spirits, According to a New Report from L.E.K. Consulting
BOSTON, Oct. 8, 2018 /PRNewswire/ -- As the spirits industry booms – with U.S. consumers drinking almost $44 billion worth of product in 2017 – strategy consulting firm L.E.K. Consulting has released a new report based on their research identifying the most striking trends in the space.
Most noteworthy is that the already booming spirits market is only projected to grow. U.S. consumers are expected to consume $58 billion worth of spirits per year by 2020, at an annual growth rate of 6%. And the spirits industry is relatively unaffected by economic downturns: During the 07-08 recession, the industry still grew, though at a more modest rate.
Some of the other most noteworthy trends in the spirits industry are…
- Ecommerce and direct-to-consumer (DTC) sales are on the rise. There are a lot of different DTC business models cropping up: distilleries are selling directly to consumers at a physical location or online, third-party cocktail clubs are gaining popularity in "cocktail culture" and ecommerce delivery platforms that deliver liquor purchased from local retailers directly to consumers.
- Millennials are a key demographic. Even though only 29% of the drinking-age population are millennials, they comprise 32% of spirits consumption by value. And as the buying power of millennials increases as they advance in their careers, this trend is only set to become more relevant to the space.
- "Drinking in" is now in. There are a lot of factors going into this trend, including a wealth of deals on spirits in the retail space, and millennials refusing to pay for the mark ups that are the norm at bars.
- Premium products are outpacing their mid-to-low shelf counterparts, especially among millennials. Specifically, from 2012 to 2017, high end spirits sales grew 6%-7% per year by volume.
- Craft spirits are the next big thing. The number of craft distilleries has increased around 35% per year since 2011 and the craft spirits market has grown 19% per year since 2015.
"Additionally, major brands, such as Maker's Mark and Roca Patron, are seeing the big future opportunities in the craft spirits space and are developing products to capitalize on this trend," says Rob Wilson, Managing Director at L.E.K. Consulting and report author.
Wilson adds, "Also of note, consolidation and M&A activity in the spirits industry has been high, with over 25 deals since 2014, and this is expected to continue through 2018."
Finishing off the trends identified in the report: whiskey, tequila, brandy and cognac are outperforming other types of liquor; and smaller, more portable packaging is increasingly becoming the norm for spirits.
About L.E.K. Consulting
L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance, and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private and public-sector organizations, private equity firms and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,200 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com.
Contact:
Katarina Wenk-Bodenmiller
Sommerfield Communications
(212) 255-8386
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SOURCE L.E.K. Consulting
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