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Spirits - US - August 2009

The recession is driving some subtle, and not so subtle, changes in consumer behavior. Indeed, in virtually every category of consumer packaged goods, evidence of lifestyle change and adaptive behavior can be observed. The category of spirits is no exception. Not only has the amount of alcohol being consumed on an annual basis changed considerably during the recession, it is also evident that consumers are increasingly consuming at home rather than in bars and restaurants. Given that a significant change has occurred and is under way, it is important to closely examine trends in consumer lifestyles and spirits usage in order to optimize marketing and product development efforts.

This report provides a comprehensive analysis of the off-premise/at home distilled spirits market in the US. More specifically, the report addresses the following questions:

  • How has the use of distilled spirits changed in recent years?
  • How do current usage trends compare to past recessions, and what does this mean for the future?
  • How have sales of distilled spirits fluctuated in recent years, and how are they expected to change between 2009 and 2014?
  • What are the most popular types of spirits?
  • What segments of the population consume the most alcohol, and what type of products do these segments prefer?
  • What product and brand attributes have high appeal during recession?
  • How do consumers prefer to drink spirits?
  • How do concerns about health and wellness impact drinking behavior?
  • What type of spirits do Americans prefer to consume at home versus at a restaurant or party?
  • What motivates consumers to try new types of spirits or brands?

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Table of contents

  1. Scope and Themes

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

                        • Overall growth flat but off-premise sales show growth
                          • Vodka and rum performing well as cordials decline
                            • Off-premise sales are driving market growth
                              • Overall consumption rises as many young adults report drinking more
                                • Diageo is the dominant player while Bacardi leads with iconic rum brand
                                  • A closer look at white spirits
                                    • Vodka
                                      • Rum
                                        • Gin
                                          • Tequila
                                            • On the dark side
                                              • Whiskey
                                                • Cordials and Liqueurs
                                                  • Brandy and Cognac
                                                    • Prepared cocktails
                                                      • White spirits most popular
                                                        • Liquor and grocery most commonly used channels
                                                          • Many prefer mid-range and premium brands over value and super premium
                                                            • Mixed drinks are hot but few like it “neat”
                                                              • Recommendations key driver of experimentation
                                                                • Concerns about weight gain relatively common
                                                                • Insights and Opportunities

                                                                  • Consider online bartending tools
                                                                    • Help consumers get the party started
                                                                      • Coupons are a hot item
                                                                        • Using brand to create gourmet foods and exceptional dining experiences
                                                                        • Inspire Insights

                                                                            • Trend: Death of the Middle Ground
                                                                              • Polarization appears to be relentless in its squeezing out of the middle ground
                                                                                • Not so fast
                                                                                  • Trend: Corner Store
                                                                                    • Re-imaging the role of the corner store
                                                                                      • The corner liquor store
                                                                                        • From brand to bricks and mortar
                                                                                        • Market Size and Forecast

                                                                                          • Key points
                                                                                            • Sales growth decelerates despite increased usage in 2009
                                                                                              • Figure 1: Total U.S. retail sales of spirits, at current prices, 2004-14
                                                                                              • Figure 2: Total U.S. retail sales of spirits, at inflation-adjusted prices, 2004-14
                                                                                            • Off-premise sales driving category growth
                                                                                              • Figure 3: Total U.S. retail sales of off-premise spirits, at current prices, 2004-14
                                                                                              • Figure 4: Total U.S. retail sales of off-premise spirits, at inflation-adjusted prices, 2004-14
                                                                                          • Competitive Context

                                                                                            • Wine poses primary competitive threat
                                                                                                • Figure 5: Type of alcoholic beverage consumed, by age, May 2009
                                                                                            • Segment Performance

                                                                                              • Key points
                                                                                                • Vodka and rum still most popular
                                                                                                  • Figure 6: Sales of distilled spirits, segmented by type, 2006 and 2008
                                                                                              • Retail Channels

                                                                                                • Key points
                                                                                                  • Sales at mass, club and drug rise as consumers seek better value
                                                                                                    • Figure 7: U.S. sales of distilled spirits, by channel, 2006 and 2008
                                                                                                • Retail Channels—On-Premise

                                                                                                  • Key point
                                                                                                    • On-premise sales decline as Americans party more at home
                                                                                                      • Figure 8: U.S. on-premise sales of distilled spirits, at current prices, 2004-09
                                                                                                  • Retail Channels—Liquor/Package Stores

                                                                                                    • Key point
                                                                                                      • Sales at liquor stores continue to grow as Americans entertain more at home
                                                                                                        • Figure 9: U.S. liquor/package store sales of distilled spirits, at current prices, 2004-09
                                                                                                    • Retail Channels—Drug, Mass and Other Outlets

                                                                                                      • Key point
                                                                                                        • Mass, club and drug stores post strong growth in 2008, but declined in 2009
                                                                                                          • Figure 10: U.S. drug, mass and other outlet sales of distilled spirits, at current prices, 2004-09
                                                                                                      • Retail Channels—Supermarkets

                                                                                                        • Key point
                                                                                                          • Supermarket sales continued to grow in 2009
                                                                                                            • Figure 11: U.S. supermarket sales of distilled spirits, at current prices, 2003-08
                                                                                                        • Market Drivers

                                                                                                          • Key points
                                                                                                            • Young adults much more likely to report drinking more, despite recession
                                                                                                              • Figure 12: Incidence of consumption of distilled spirits relative to a year ago, by age, May 2009
                                                                                                            • Baby Boomer segments growing much faster than young adults
                                                                                                              • Figure 13: Population aged 21 or older, 2004-14
                                                                                                            • Demographic and cultural shift drives demand for new flavors
                                                                                                              • Figure 14: Population, by race and Hispanic origin, 2004-14
                                                                                                            • Obesity and health concerns motivate some to choose low-cal options
                                                                                                              • Figure 15: Age-adjusted prevalence of overweight and obesity among U.S. adults aged 20+, 1988-2006
                                                                                                            • Spirits consumption continues to rise
                                                                                                              • Figure 16: Number of gallons of distilled spirits consumed annually, 1978-2008
                                                                                                              • Figure 17: Effect of economy on drinking patterns, by age, May 2009
                                                                                                            • Trend toward at-home consumption may be driving sales
                                                                                                                • Figure 18: Number of alcoholic beverages consumed, by age, June 2008
                                                                                                              • Brand, availability, convenience and health—primary criteria
                                                                                                                • Figure 19: Factors influencing purchasing decision, summary of extremely and very important, by age, June 2008
                                                                                                            • Leading Companies

                                                                                                              • Key points
                                                                                                                • Diageo remains dominant, Bacardi sees slight boost
                                                                                                                  • Figure 20: Select manufacturer sales of 9-liter cases of distilled spirits in the U.S., sum of leading brands only, 2007 and 2008
                                                                                                                  • Figure 21: Select manufacturer sales measured in dollars and sales of 9-liter cases of distilled spirits in the U.S., all brands, 2008
                                                                                                              • Brand Share—Vodka

                                                                                                                • Key points
                                                                                                                  • Diageo dominates with Smirnoff and value-priced brands
                                                                                                                    • Heaven Hill succeeds with positioning similar to Diageo
                                                                                                                      • Pernod Ricard, Skyy and Constellation Spirits win with mid-range premium varieties
                                                                                                                        • Figure 22: Selected brand sales and market share of vodka in the U.S., 2007 and 2008
                                                                                                                    • Brand Share—Rum

                                                                                                                      • Key points
                                                                                                                        • Bacardi and Captain Morgan remain the dominant rum brands
                                                                                                                          • William Grant & Sons wins with a new twist on the Caribbean concept
                                                                                                                            • Figure 23: Selected brand sales and market share of rum in the U.S., 2007 and 2008
                                                                                                                        • Brand Share—Gin

                                                                                                                          • Key points
                                                                                                                            • Pernod Ricard’s Seagram’s Twisted Gin shows impressive growth
                                                                                                                              • Gordon’s Gin, Bombay Sapphire and Aristocrat also post growth in 2008
                                                                                                                                • Figure 24: Selected brand sales and market share of gin in the U.S., 2007 and 2008
                                                                                                                            • Brand Share—Tequila

                                                                                                                              • Key points
                                                                                                                                • Diageo’s Jose Cuervo on top; Patrón strong in premium segment
                                                                                                                                  • Mid-range brands drive sales
                                                                                                                                    • Figure 25: Selected brand sales and market share of tequila in the U.S., 2007 and 2008
                                                                                                                                • Brand Share—Whiskey

                                                                                                                                  • Key points
                                                                                                                                    • Mid-range and premium brands drive growth in whiskey segment
                                                                                                                                      • Success of Jameson and Glenlivet demonstrate demand for high-end and premium offerings
                                                                                                                                        • Figure 26: Selected brand sales and market share of whiskey in the U.S., 2007 and 2008
                                                                                                                                    • Brand Share—Cordials and Liqueurs

                                                                                                                                      • Key points
                                                                                                                                        • Diageo achieves some growth with sweet premium/high-end liqueurs
                                                                                                                                          • Heaven Hill capitalizes on the Pomegranate craze
                                                                                                                                            • Jägermeister still among the most popular liqueurs in the U.S.
                                                                                                                                              • Figure 27: Selected brand sales and market share of cordials and liqueurs in the U.S., 2007 and 2008
                                                                                                                                          • Brand Share—Brandy and Cognac

                                                                                                                                            • Key points
                                                                                                                                              • Demand for premium declines as consumers embrace value brands
                                                                                                                                                • Figure 28: Selected brand sales and market share of brandy and cognac in the U.S., 2007 and 2008
                                                                                                                                            • Brand Share—Prepared Cocktails

                                                                                                                                              • Key points
                                                                                                                                                • Diageo furthers lead with new Seagram’s launches
                                                                                                                                                  • Figure 29: Selected brand sales and market share of prepared cocktails in the U.S., 2007 and 2008
                                                                                                                                              • Innovation and Innovators

                                                                                                                                                • “Better for you” booze?: antioxidants and vitamins mitigate health concerns
                                                                                                                                                  • Açaí fruit-infused vodka
                                                                                                                                                    • Maximizing appeal with highly-targeted cultural messages
                                                                                                                                                      • Caffeinated cocktails
                                                                                                                                                      • Brands and the Advertising Landscape

                                                                                                                                                        • Familiar, trustworthy, affordable: key elements of recession-proof brands
                                                                                                                                                          • Figure 30: Brand share comparison, 2008
                                                                                                                                                        • Diageo and Bacardi maintain top slots with large ad initiatives
                                                                                                                                                          • Figure 31: Leading brands ad expenditures, sales and agencies of record, 2008
                                                                                                                                                        • Adding value to Smirnoff: Factual competitive analysis, and cocktail convenience
                                                                                                                                                          • Figure 32: Smirnoff Triple Distilled NYT review ad, 2008
                                                                                                                                                          • Figure 33: Smirnoff Vodka Mojito, 2008
                                                                                                                                                        • Diageo’s Ciroc story: On differentiation and pitching the hip-hop community
                                                                                                                                                          • The fantasy pitch: Connecting brands with aspirations
                                                                                                                                                            • Grey Goose
                                                                                                                                                              • Figure 34: Grey Goose vodka ad, 2009
                                                                                                                                                            • Southern Comfort
                                                                                                                                                              • Figure 35: Southern Comfort SoCo and Lime ad, 2008
                                                                                                                                                          • Who’s Drinking What?

                                                                                                                                                            • Key points
                                                                                                                                                              • Most drinking the same amount as last year; young adults drinking more
                                                                                                                                                                • Figure 36: Incidence of consumption of distilled spirits relative to a year ago, by age, May 2009
                                                                                                                                                              • White spirits especially popular, particularly among heavy users
                                                                                                                                                                • Figure 37: Distilled spirits category usage, by age, October 2007-December 2008
                                                                                                                                                                • Figure 38: Distilled spirits category usage, by household income, October 2007-December 2008
                                                                                                                                                              • Vodka and rum usage in line with strong sales in these segments
                                                                                                                                                                • Figure 39: Overall incidence and average number of distilled spirit drinks consumed in the last 30 days, October 2007-December 2008
                                                                                                                                                              • Unflavored vodka more popular than flavored or most other distilled spirits
                                                                                                                                                                • Figure 40: Type of distilled spirit consumed most often, by age, May 2009
                                                                                                                                                                • Figure 41: Type of distilled spirit consumed most often, by household income, May 2009
                                                                                                                                                            • Where Consumers Purchase Distilled Spirits

                                                                                                                                                              • Key points
                                                                                                                                                                • Liquor, grocery and club are the primary channels
                                                                                                                                                                    • Figure 42: Distilled spirit channels for at-home consumption, by age, May 2009
                                                                                                                                                                  • Target affluents in the club channel
                                                                                                                                                                      • Figure 43: Distilled spirit channels for at-home consumption, by income, May 2009
                                                                                                                                                                  • Premium vs. Value—the Role of Location

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Mid-range formulations especially popular, particularly for parties and restaurants
                                                                                                                                                                        • Figure 44: Types of spirits consumed at various locations/occasions, May 2009
                                                                                                                                                                        • Figure 45: Incidence of consumption of mid-range distilled spirits on particular occasions, by age, May 2009
                                                                                                                                                                      • Premium/high-end popular for at-home consumption
                                                                                                                                                                        • Figure 46: Incidence of consumption of premium/high-end distilled spirits on particular occasions, by age, May 2009
                                                                                                                                                                        • Figure 47: Incidence of consumption of premium/high-end distilled spirits on particular occasions, by household income, May 2009
                                                                                                                                                                      • Affluent respondents no more likely to consumer super-premium
                                                                                                                                                                        • Figure 48: Incidence of consumption of super premium/top shelf distilled spirits on particular occasions, by hh income, May 2009
                                                                                                                                                                      • Young adults more likely to use inexpensive brands, especially at parties
                                                                                                                                                                        • Figure 49: Incidence of consumption of value priced distilled spirits on particular occasions, by age, May 2009
                                                                                                                                                                    • Drinking Styles

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Few consumers drink spirits “straight up,” preferring cocktails instead
                                                                                                                                                                            • Figure 50: Method of consumption for distilled spirits, by gender, May 2009
                                                                                                                                                                          • Young adults often prefer mixed drinks and shots
                                                                                                                                                                            • Figure 51: Method of consumption for distilled spirits, by age, May 2009
                                                                                                                                                                        • Generating Trial

                                                                                                                                                                          • Key points
                                                                                                                                                                            • Recommendations, free samples, low prices and packaging drives experimentation
                                                                                                                                                                                • Figure 52: Motivation for purchase of new distilled spirits, by age, May 2009
                                                                                                                                                                            • Health-related Concerns and Drivers

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Women more likely to be influenced by health and weight concerns
                                                                                                                                                                                  • Figure 53: Attitudes towards distilled spirits related to health, by gender, May 2009
                                                                                                                                                                                • Appeal to young adults with better-for-you formulations
                                                                                                                                                                                  • Figure 54: Attitudes towards distilled spirits related to health, by age, May 2009
                                                                                                                                                                              • Thinking Outside the Two-Ingredient Box

                                                                                                                                                                                • Key point
                                                                                                                                                                                  • Young adults interested in experimenting and learning how to create interesting cocktails
                                                                                                                                                                                    • Figure 55: Behavior and distilled spirits, by age, May 2009
                                                                                                                                                                                • Race and Hispanic Origin

                                                                                                                                                                                  • Asians less likely to drink liquor than whites, blacks and Hispanics
                                                                                                                                                                                    • Figure 56: Net spirit category use, by race/Hispanic origin, October 2007-December 2008
                                                                                                                                                                                  • Preferences reflect heritage, roots and relationship with pop culture
                                                                                                                                                                                      • Figure 57: Overall distilled spirit usage, by race/Hispanic origin, October 2007-December 2008
                                                                                                                                                                                    • Blacks tend to be somewhat less price sensitive
                                                                                                                                                                                      • Figure 58: Purchasing motivation for new distilled spirits, by race/ethnicity, May 2009
                                                                                                                                                                                  • Cluster Analysis

                                                                                                                                                                                      • Liquor Enthusiasts (28%)
                                                                                                                                                                                        • Moderates (36%)
                                                                                                                                                                                          • Light Drinkers (35%)
                                                                                                                                                                                            • Cluster characteristics
                                                                                                                                                                                              • Figure 59: Sprits clusters, May 2009
                                                                                                                                                                                              • Figure 60: Incidence of consuming various types of alcoholic beverages, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 61: Incidence of consuming specific types of distilled spirits, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 62: Preferred method of consumption, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 63: Spirits consumed at various locations/occasions, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 64: Amount consumed compared to last year, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 65: Channel liquor is consumed within, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 66: Influence of recommendations and marketing on purchase, by sprits clusters, May 2009
                                                                                                                                                                                              • Figure 67: Alcohol-related attitudes and behaviors, by sprits clusters, May 2009
                                                                                                                                                                                            • Cluster demographics
                                                                                                                                                                                              • Figure 68: Sprits clusters, by gender, May 2009
                                                                                                                                                                                              • Figure 69: Sprits clusters, by age, May 2009
                                                                                                                                                                                              • Figure 70: Sprits clusters, by household income, May 2009
                                                                                                                                                                                              • Figure 71: Sprits clusters, by race/Hispanic origin, May 2009
                                                                                                                                                                                            • Cluster methodology
                                                                                                                                                                                            • Custom Consumer Groups

                                                                                                                                                                                              • Demand for distilled spirits higher among 21-34s and affluent Hispanics
                                                                                                                                                                                                  • Figure 72: Incidence of consuming various types of alcoholic beverages, by custom consumer groups, May 2009
                                                                                                                                                                                                • Young males and single parents more likely to report increased drinking during recession
                                                                                                                                                                                                    • Figure 73: Change in drinking patterns during recession, by custom consumer groups, May 2009
                                                                                                                                                                                                  • Young males, affluents more likely to be influenced by advertisements
                                                                                                                                                                                                      • Figure 74: Influence of recommendations and marketing on purchase, by custom consumer groups, May 2009
                                                                                                                                                                                                  • Appendix: Other Useful Consumer Tables

                                                                                                                                                                                                    • Differences in spirit consumption among men and women
                                                                                                                                                                                                      • Figure 75: Distilled spirits category usage, by gender, October 2007-December 2008
                                                                                                                                                                                                      • Figure 76: Overall distilled spirit usage, by gender, October 2007-December 2008
                                                                                                                                                                                                      • Figure 77: Trial and research of distilled spirits, by gender, May 2009
                                                                                                                                                                                                    • The lower-income like to experiment while affluents enjoy cocktail parties
                                                                                                                                                                                                        • Figure 78: Behavior and distilled spirits, by hh income, May 2009
                                                                                                                                                                                                    • Appendix: Trade Associations

                                                                                                                                                                                                      Companies Covered

                                                                                                                                                                                                      • American Beverage Licensees
                                                                                                                                                                                                      • Bacardi U.S.A. Inc.
                                                                                                                                                                                                      • Beefeater
                                                                                                                                                                                                      • Bureau of Economic Analysis
                                                                                                                                                                                                      • Diageo North America
                                                                                                                                                                                                      • Distilled Spirits Council of the United States
                                                                                                                                                                                                      • E.&J. Gallo Winery
                                                                                                                                                                                                      • Food and Drug Administration
                                                                                                                                                                                                      • Fortune Brands, Inc.
                                                                                                                                                                                                      • Greenfield Online
                                                                                                                                                                                                      • Heaven Hill Distilleries Inc.
                                                                                                                                                                                                      • McCormick Distilling Co. Inc.
                                                                                                                                                                                                      • Moët Hennessy USA
                                                                                                                                                                                                      • National Association of Beverage Importers
                                                                                                                                                                                                      • National Association of Beverage Retailers (NABR)
                                                                                                                                                                                                      • Nokia Corporation (US)
                                                                                                                                                                                                      • Nolet Spirits Usa Inc.
                                                                                                                                                                                                      • Pernod Ricard USA
                                                                                                                                                                                                      • Red Bull North America, Inc.
                                                                                                                                                                                                      • Rémy Cointreau USA
                                                                                                                                                                                                      • Sazerac Company, Inc
                                                                                                                                                                                                      • Sidney Frank Importing Co., Inc.
                                                                                                                                                                                                      • Starbucks Corporation
                                                                                                                                                                                                      • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                      • Walmart Stores (USA)
                                                                                                                                                                                                      • William Grant and Sons Distillers Ltd
                                                                                                                                                                                                      • Young & Rubicam Brands

                                                                                                                                                                                                      Spirits - US - August 2009

                                                                                                                                                                                                      £3,174.67 (Excl.Tax)