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Spirits: The Market - US - September 2010

In this report, the second part of a two-part report on spirits, Mintel takes an in-depth market-centric view of the market. The consumer-centric view is covered in Mintel’s Spirits: The Consumer—U.S., August 2010.

The year 2009 was a challenging one for many segments of the spirits industry. On-premise consumption continued to decline, as did overall sales of certain high end spirits. At the same time, retailers in the growing off-premise sector took advantage of the at-home consumption trend by finding new ways to introduce and educate shoppers about products that they may have only been exposed to on-premise. Retailers—along with spirits suppliers—also took greater advantage of electronic media as a low cost means of directly interacting with consumers.

In order to provide purveyors with a clear picture of this multi-faceted market, Mintel conducted a comprehensive analysis of distilled spirits performance in the spirit market and included brand new sections on control state stores and digital marketing. The core themes explored in this report include, but are not limited to:

  • How the market has performed in the last five years, as well as the growth outlook for the next five years
  • How the current recession has affected the consumer brand choices
  • The consumer movement from on-premise to off-premise channels
  • Major trends in new spirits products
  • A detailed analysis of advertising strategy, including digialt marketing
  • Which segments promise growth and which ones will find it challenging to find growth in the next five years.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Advertising creative
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                    • Off-premise continues to grow
                      • Trading down
                        • Market drivers and drawbacks
                          • White spirits outperform dark
                            • White spirits
                              • Rum and vodka
                                • Gin and tequila
                                  • Dark spirits
                                    • Whiskey
                                      • Other dark spirits
                                        • Dominant brands
                                          • Advertising and promotion
                                            • At retail
                                              • Mobile and online ads & promos
                                                • Television
                                                • Insights and Opportunities—a Market-centric View

                                                    • In-store tastings
                                                      • Sunday sips
                                                        • The electronic app age
                                                        • Inspire Insights

                                                            • Trend: Healthy spirits—viable or not?
                                                              • What’s it about
                                                                • What we’ve seen
                                                                  • Implications for the spirits industry
                                                                  • Market Size and Forecast

                                                                    • Key points
                                                                      • Sales and forecast of spirits
                                                                        • Figure 1: Total U.S. retail sales and forecast of spirits, at current prices, 2005-15
                                                                        • Figure 2: Total U.S. retail sales and forecast of spirits, at inflation-adjusted prices, 2005-15
                                                                      • When(ever) the economy improves
                                                                        • General economic indicators
                                                                          • Figure 3: Total U.S. volume sales of spirits, 2005-10
                                                                      • Competitive Context

                                                                        • Consumer interest in spirits outpaces wine, beer
                                                                          • Figure 4: Trends in drinking distilled spirits, prepared cocktail, and other alcoholic beverages, January 2005-December 2009
                                                                      • Segment Performance

                                                                        • Key points
                                                                          • Total volume sales of spirits, by segment
                                                                            • Figure 5: U.S. volume sales of spirits, by segment, 2005-10
                                                                            • Figure 6: U.S. sales of spirits, by segment and sub-segment, 2008 and 2010 (est)
                                                                        • Segment Performance—White Spirits

                                                                          • Key points
                                                                            • Total volume sales of white spirits
                                                                              • Figure 7: U.S. volume sales of white spirits, 2005-10
                                                                            • White spirits—Vodka
                                                                              • Key points
                                                                                • Flavor innovation and cocktail mixability help vodka thrive
                                                                                  • Figure 8: New spirits products, by segment, 2009
                                                                                • The recession promotes price promotion in premium brands
                                                                                  • Total volume sales of vodka
                                                                                    • Figure 9: U.S. volume sales of vodka, 2005-10
                                                                                  • White spirits—Rum
                                                                                    • Flavored rums and rum-based cocktails keep the segment viable
                                                                                      • Recession slows down growth; aged rum offers opportunity
                                                                                        • Total volume sales of rum
                                                                                          • Figure 10: U.S. volume sales of rum, 2005-10
                                                                                        • White spirits—Gin
                                                                                          • Gin’s resurgence can help drive growth
                                                                                            • Total volume sales of gin
                                                                                              • Figure 11: U.S. volume sales of gin, 2005-10
                                                                                            • White spirits—Tequila
                                                                                              • Key points
                                                                                                • Fluctuations in supply and a sour economy hamper sales
                                                                                                  • Figure 12: Percentage of tequila production by case in different price tiers, 2008 and 2009
                                                                                                • Blue agave shortages predicted; prices may go up in the next five years
                                                                                                  • Tequila offers dual drinking options; still remains unexplored by many
                                                                                                    • Total volume sales of tequila
                                                                                                      • Figure 13: U.S. volume sales of tequila, 2005-10
                                                                                                  • Segment Performance—Dark Spirits

                                                                                                    • Key points
                                                                                                      • Total volume sales of dark spirits
                                                                                                        • Figure 14: U.S. volume sales of dark spirits, 2005-10
                                                                                                      • Dark spirits—Whiskey/Whisky
                                                                                                        • Key points
                                                                                                          • Whiskey/Whisky sales by sub-segment
                                                                                                              • Figure 15: U.S. volume sales of whiskey/whisky, by type of whiskey/whisky, 2005-10
                                                                                                              • Figure 16: U.S. volume sales of whiskey/whisky, by type, 2005-10
                                                                                                            • Declining on-premise consumption hits whiskey hard
                                                                                                              • Total volume sales of whiskey/whisky
                                                                                                                • Figure 17: U.S. volume sales of whiskey/whisky, 2005-10
                                                                                                              • Dark spirits—Brandy and cognac
                                                                                                                • African-Americans and Cognac
                                                                                                                  • You can mix them; Cognac in cocktails can attract the young adults
                                                                                                                    • Total volume sales of brandy and Cognac
                                                                                                                      • Figure 18: U.S. volume sales of brandy and Cognac, 2005-10
                                                                                                                    • Dark spirits—Cordials and liqueurs
                                                                                                                      • Key points
                                                                                                                        • Cordial and liqueurs suffer from stodgy reputation; shift away from on-premise
                                                                                                                          • A mixology treasure trove, consumers need more education
                                                                                                                            • Total volume sales of cordials and liqueurs
                                                                                                                              • Figure 19: U.S. volume sales of cordials and liqueurs, 2005-10
                                                                                                                          • Segment Performance—Prepared Cocktails

                                                                                                                            • Key point
                                                                                                                              • Segment capitalizes on decline in on-premise trends, but only barely
                                                                                                                                • Lousy taste; lousier appearance
                                                                                                                                  • Total volume sales of prepared cocktails
                                                                                                                                    • Figure 20: U.S. volume sales of cordials and liqueurs, 2005-10
                                                                                                                                • Retail Channels

                                                                                                                                  • Key points
                                                                                                                                      • Figure 21: U.S. sales of spirits, by retail channel, 2008 and 2010
                                                                                                                                  • Retail Channels—On-premise

                                                                                                                                    • Key points
                                                                                                                                      • On-premise sales most severely impacted
                                                                                                                                        • Store keeping unit management & discounts
                                                                                                                                          • Other creative promotions
                                                                                                                                            • On-premise targets off-premise trend
                                                                                                                                              • Figure 22: Total U.S. on-premise* dollar sales of spirits, at current prices, 2005-10
                                                                                                                                              • Figure 23: Total U.S. on-premise volume sales of spirits, 2005-10
                                                                                                                                          • Retail Channels—Off-premise

                                                                                                                                            • Key points
                                                                                                                                              • Figure 24: Total U.S. off-premise dollar sales of spirits, at current prices, 2005-10
                                                                                                                                              • Figure 25: Total U.S. off-premise volume sales of spirits, 2005-10
                                                                                                                                          • Retail Channels—Liquor/Packaged Stores

                                                                                                                                            • Key points
                                                                                                                                              • Luring shoppers
                                                                                                                                                • Beyond price promotions
                                                                                                                                                  • Web site education
                                                                                                                                                    • Figure 26: U.S. liquor/packaged stores dollar sales of spirits, 2005-10
                                                                                                                                                • Retail Channels—Supermarkets

                                                                                                                                                  • Key points
                                                                                                                                                    • A limited but viable channel
                                                                                                                                                      • Figure 27: U.S. sales of spirits at supermarkets, 2005-10
                                                                                                                                                  • Retail Channels—Other

                                                                                                                                                    • Key point
                                                                                                                                                      • More than economic factors
                                                                                                                                                          • Figure 28: U.S. sales of spirits at other* stores, 2005-10
                                                                                                                                                      • Retail Channels—Control States

                                                                                                                                                          • Figure 29: Control States, 2010
                                                                                                                                                          • Figure 30: Consumption of distilled spirits by volume, by license and control states, 2008 and 2009
                                                                                                                                                        • Store and warehouse improvements
                                                                                                                                                          • Privatization
                                                                                                                                                          • Market Drivers

                                                                                                                                                            • Key points
                                                                                                                                                              • Per capita consumption increases slightly in 2009
                                                                                                                                                                • Figure 31: Number of gallons of distilled spirits consumed annually, 1978-2009
                                                                                                                                                              • Recession continues to impede consumer spending
                                                                                                                                                                • Figure 32: Employment status of the civilian non-institutional population 16 years and over, 2000-10
                                                                                                                                                              • At-home consumption on the rise due to the recession; on-premise consumption declines
                                                                                                                                                                • Figure 33: Influence of the recession on drinking behavior, by age, March 2010
                                                                                                                                                                • Figure 34: Alcoholic beverage consumption at bars/restaurants compared to last year, by age, January 2010
                                                                                                                                                              • … but net at-home consumption lower than a year before; drinkers trading down to cheaper brands of spirits
                                                                                                                                                                • Figure 35: Alcoholic beverage consumption at home compared to last year, by beverage type, March 2010
                                                                                                                                                                • Figure 36: Alcoholic beverage consumption at bars/restaurants compared to last year, by age, January 2010
                                                                                                                                                              • Young adults aged 21-34 continue to be the biggest consumer
                                                                                                                                                                • Figure 37: Incidence of consumption of distilled spirits relative to a year ago, by age, March 2010
                                                                                                                                                              • Population growth trends favor adults ages 55-74
                                                                                                                                                                • Figure 38: Population aged 21 or older, by age, 2005-15
                                                                                                                                                              • Asians, blacks, and Hispanics offer growth potential
                                                                                                                                                                • Tequila and Mexicans
                                                                                                                                                                  • Figure 39: Population, by race and Hispanic origin, 2005-15
                                                                                                                                                              • Companies and Brands

                                                                                                                                                                • Key points
                                                                                                                                                                  • Market leaders & shakers
                                                                                                                                                                      • Figure 40: U.S. spirits sales of leading companies, by volume, 2008 and 2009
                                                                                                                                                                  • Brand Share—Vodka

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Value brands lead, but Grey Goose holds its own
                                                                                                                                                                        • Higher-end vodkas attract club goers
                                                                                                                                                                          • Smaller imports; bigger growth
                                                                                                                                                                              • Figure 41: Smaller imported Vodka Brands (under 1,500 million 9-liter cases), 2008 and 2009
                                                                                                                                                                            • Manufacturer and brand shares
                                                                                                                                                                              • Figure 42: U.S. brand sales by volume of vodka, 2008 and 2009
                                                                                                                                                                          • Brand Share—Rum

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Captain Morgan and Bacardi continue to lead
                                                                                                                                                                                • Manufacturer and brand shares
                                                                                                                                                                                  • Figure 43: U.S. brand sales of rum, by volume, 2008 and 2009
                                                                                                                                                                              • Brand Share—Gin

                                                                                                                                                                                • Key points
                                                                                                                                                                                  • Premium sales decline, value segment thrives
                                                                                                                                                                                    • Manufacturer and brand shares
                                                                                                                                                                                      • Figure 44: U.S. brand sales of gin, by volume, 2008 and 2009
                                                                                                                                                                                  • Brand Share—Tequila

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Value brands gain in tequila
                                                                                                                                                                                        • Manufacturer and brand shares
                                                                                                                                                                                          • Figure 45: U.S. brand sales of tequila, by volume, 2008 and 2009
                                                                                                                                                                                      • Brand Share—American Whiskey

                                                                                                                                                                                        • Key points
                                                                                                                                                                                          • Brown-Forman’s Gentleman Jack, value brands drive momentum
                                                                                                                                                                                            • Manufacturer and brand shares
                                                                                                                                                                                              • Figure 46: U.S. brand sales of straight whiskey, by volume, 2008 and 2009
                                                                                                                                                                                          • Brand Share—Blended Whiskey

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • Flat sales, affordable price tags
                                                                                                                                                                                                • Manufacturer and brand shares
                                                                                                                                                                                                  • Figure 47: U.S. brand sales of blended whiskey, by volume, 2008 and 2009
                                                                                                                                                                                              • Brand Share—Canadian Whisky

                                                                                                                                                                                                • Key points
                                                                                                                                                                                                  • Perfect for young adults
                                                                                                                                                                                                    • Manufacturer and brand shares
                                                                                                                                                                                                      • Figure 48: U.S. brand sales of Canadian whisky, by volume, 2008 and 2009
                                                                                                                                                                                                  • Brand Share—Scotch Whisky

                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                      • Diageo dominates
                                                                                                                                                                                                        • Manufacturer and brand shares
                                                                                                                                                                                                          • Figure 49: U.S. brand sales of Scotch whisky, by volume, 2008 and 2009
                                                                                                                                                                                                      • Brand Share—Cordials and Liquors

                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                          • On-premise consumption decline impacts liquors
                                                                                                                                                                                                            • Manufacturer and brand shares
                                                                                                                                                                                                              • Figure 50: U.S. brand sales of cordials and liquors, 2008 and 2009
                                                                                                                                                                                                          • Brand Share—Brandy and Cognac

                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                              • Recession hurts brandy and cognac
                                                                                                                                                                                                                • Manufacturer and brand shares
                                                                                                                                                                                                                  • Figure 51: U.S. brand sales of brandy and cognac, 2008 and 2009
                                                                                                                                                                                                              • Brand Share—Prepared Cocktails

                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                  • Prepared for the worst
                                                                                                                                                                                                                    • The few bright spots
                                                                                                                                                                                                                      • Manufacturer and brand shares
                                                                                                                                                                                                                        • Figure 52: U.S. brand sales of prepared cocktails, by volume, 2008 and 2009
                                                                                                                                                                                                                    • Brand Qualities

                                                                                                                                                                                                                        • Fun promotions
                                                                                                                                                                                                                          • Green consumerism
                                                                                                                                                                                                                          • Innovation and Innovators

                                                                                                                                                                                                                            • Unusual and user-friendly packaging
                                                                                                                                                                                                                              • Tequila makers underscore “100% agave” factor
                                                                                                                                                                                                                                • Vodka becomes more innovative—cola, tea, caffeine and more
                                                                                                                                                                                                                                  • New twists on favorite cordials
                                                                                                                                                                                                                                    • Distillation and aging emphasized in new products
                                                                                                                                                                                                                                    • Marketing Strategies

                                                                                                                                                                                                                                      • A targeted media world
                                                                                                                                                                                                                                        • Major player activity
                                                                                                                                                                                                                                          • Brown-Forman
                                                                                                                                                                                                                                            • Diageo
                                                                                                                                                                                                                                              • Pernod Ricard
                                                                                                                                                                                                                                                • TV and other advertising by spirits segment
                                                                                                                                                                                                                                                  • Vodka
                                                                                                                                                                                                                                                    • Figure 53: Advertising expenditure for major vodka brands, 2008 and 2009
                                                                                                                                                                                                                                                  • Feathers in Grey Goose’s Cap
                                                                                                                                                                                                                                                    • Figure 54: Grey Goose vodka, TV ad Friends rooftop terrace after midnight, 2010
                                                                                                                                                                                                                                                  • Vodka and niche marketing
                                                                                                                                                                                                                                                    • Rum
                                                                                                                                                                                                                                                      • Figure 55: Advertising expenditure for major rum brands, 2008 and 2009
                                                                                                                                                                                                                                                    • What recession?
                                                                                                                                                                                                                                                        • Figure 56: Bacardi, TV ad People on boats make an island, December 2009
                                                                                                                                                                                                                                                        • Figure 57: Captain Morgan, TV ad, September 2009
                                                                                                                                                                                                                                                      • Tequila
                                                                                                                                                                                                                                                        • Figure 58: Advertising expenditure for major tequila brands, 2008 and 2009
                                                                                                                                                                                                                                                      • Agave issues and cut in spending
                                                                                                                                                                                                                                                          • Figure 59: José Cuervo Especial Silver, TV ad, 2010
                                                                                                                                                                                                                                                        • Gin
                                                                                                                                                                                                                                                          • Figure 60: Advertising expenditure for major gin brands, 2008 and 2009
                                                                                                                                                                                                                                                        • Tanqueray and New Amsterdam are biggest TV spenders
                                                                                                                                                                                                                                                          • Figure 61: Tanqueray Gin, TV ad, August 2009
                                                                                                                                                                                                                                                        • Whiskey/Whisky
                                                                                                                                                                                                                                                          • Straight whiskey
                                                                                                                                                                                                                                                              • Figure 62: Advertising expenditure for major straight whiskey brands, 2008 and 2009
                                                                                                                                                                                                                                                            • NASCAR no more
                                                                                                                                                                                                                                                              • Canadian whisky
                                                                                                                                                                                                                                                                • Figure 63: Advertising expenditure for major Canadian whisky brands, 2008 and 2009
                                                                                                                                                                                                                                                              • Motor sports and Yuppiedom
                                                                                                                                                                                                                                                                • Figure 64: Crown Royal Whiskey, TV ad, September 2009
                                                                                                                                                                                                                                                              • Other brands
                                                                                                                                                                                                                                                                • Scotch whisky
                                                                                                                                                                                                                                                                  • Figure 65: Advertising expenditure for major Scotch whisky brands, 2008 and 2009
                                                                                                                                                                                                                                                                • The sophisticated spirit
                                                                                                                                                                                                                                                                • Appendix: Trade Associations

                                                                                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                                                                                  • Absolut Spirits Company (USA)
                                                                                                                                                                                                                                                                  • American Beverage Licensees
                                                                                                                                                                                                                                                                  • Bacardi U.S.A. Inc.
                                                                                                                                                                                                                                                                  • Beefeater
                                                                                                                                                                                                                                                                  • Diageo North America
                                                                                                                                                                                                                                                                  • Diageo Plc
                                                                                                                                                                                                                                                                  • Distilled Spirits Council of the United States
                                                                                                                                                                                                                                                                  • E.&J. Gallo Winery
                                                                                                                                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                                                                                                                                  • Heaven Hill Distilleries Inc.
                                                                                                                                                                                                                                                                  • Kantar Media
                                                                                                                                                                                                                                                                  • Kum & Go
                                                                                                                                                                                                                                                                  • Major League Baseball
                                                                                                                                                                                                                                                                  • McCormick & Schmick's Seafood Restaurants, Inc.
                                                                                                                                                                                                                                                                  • McCormick Distilling Co. Inc.
                                                                                                                                                                                                                                                                  • National Association of Beverage Importers
                                                                                                                                                                                                                                                                  • National Association of Beverage Retailers (NABR)
                                                                                                                                                                                                                                                                  • National Basketball Association
                                                                                                                                                                                                                                                                  • Old Navy
                                                                                                                                                                                                                                                                  • Organic Trade Association
                                                                                                                                                                                                                                                                  • Pernod Ricard USA
                                                                                                                                                                                                                                                                  • Red Bull North America, Inc.
                                                                                                                                                                                                                                                                  • Rémy Cointreau USA
                                                                                                                                                                                                                                                                  • Sidney Frank Importing Co., Inc.
                                                                                                                                                                                                                                                                  • Skyy Spirits LLC
                                                                                                                                                                                                                                                                  • Starbucks Corporation
                                                                                                                                                                                                                                                                  • TGI Friday's
                                                                                                                                                                                                                                                                  • Twitter, Inc.
                                                                                                                                                                                                                                                                  • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                                                                                  • U.S. Department of Agriculture
                                                                                                                                                                                                                                                                  • Walgreen Co
                                                                                                                                                                                                                                                                  • Walmart Stores (USA)
                                                                                                                                                                                                                                                                  • William Grant and Sons Distillers Ltd
                                                                                                                                                                                                                                                                  • Wine and Spirits Wholesalers of America
                                                                                                                                                                                                                                                                  • YouTube, Inc.

                                                                                                                                                                                                                                                                  Spirits: The Market - US - September 2010

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