At current rates, the number of craft spirits suppliers will hit 3,422 by 2021 compared to 1,564 suppliers for craft beer.
“The premiumization trend continues to strengthen while the influence of the on-premise has returned,” Brian Sudano, managing partner of BMC Strategic Associates, said. “At the same time, e-commerce is beginning to take hold in beverage alcohol.”
The “trading up” mentality has accelerated within the spirits category – high-end and super-premium distilled spirits increasing 5.5% and 10.8% respectively.
Even though craft spirits may be the fastest moving segment of the alcoholic beverage market, it still represents just 2.5% of the overall distilled spirits category.
Craft spirits is also a highly concentrated market with 2% of producers responsible for 60% of cases, according to BMC.
A major trend that has fallen off for the spirits category is new flavor introductions, except when it comes to cocktails.
Flavored whiskey and vodka product introductions have dropped off considerably from a high of 90 new flavored launches in 2012 to 32 entries in 2016.
Sudano noted that this same trend is occurring in the craft beer market and a growing number of craft brewers have been left with a backstock of their flavored (usually seasonal) beer offerings due to decreased consumer demand.
However, BMC found that the majority of consumers (60%) choose cocktails based on flavor profile rather than by brand or base spirit.
Additionally, roughly two-thirds of consumers who try and like a spirits-based drink at on-premise locations such as a bar or full-service restaurant, are more likely to purchase the product off-premise at retail.
Whiskey still rising star
American and Irish whiskey are driving most of the overall growth for the category and bringing momentum back to the traditional straight spirits, BMC found.
Helped by the premiumization trend of consumers, American whiskey grew by 5% in 2016 aided by the strength of rye whiskey and small batch and single barrel offerings. It was also the fourth consecutive year where whiskey either equalled or surpassed the growth of non-whiskey spirits, which until recently outgained whiskey for over 20 years, according to BMC research.
Falling in line with this trend, Beam Suntory recently reported strong growth of its super-premium bourbon whiskey brands including Knob Creek, Basil Hayden's, and Booker's, which largely supported a mid-single-digit sales increase for Q1 2017.
Unique aging methods are also differentiating whiskey products and supporting premiumization such as whiskey fermented in Pinot age casks or single malt scotch finished in ex-IPA barrels.
Whiskey brands that highlight their “craft-like qualities with authentic brand messaging” will find more consumers embracing their product, Sudano said.