WASHINGTON, Jan. 11, 2016 – Consumers have favored small, craft distilleries as of late, but large and well-established brands of spirits are still holding their own in the market, according to a new report.
“Sales of what we call micro-spirit companies (MSCs) are growing at double-digit rates, but large spirits companies are also enjoying solid growth,” said Steve Rannekleiv, an analyst for Rabobank, who published the report.
In the bourbon/Tennessee whiskey segment, for instance, sales from MSC brands grew 42 percent in control states in 2014, while sales from major, established distillers grew 3 percent, the report found.
Still, major spirits companies generated nearly 90 percent of the category’s growth, and Rabobank doesn’t expect that market share to change dramatically anytime soon.
The report stated that the modern spirits market, although more “craft” orientated than ever before, isn’t likely to go the way of the beer market, which is now significantly influenced by small or craft breweries.
That’s because the “spirits market is far less concentrated and more diversified,” than the beer market, and the process of distilling is more complex and capital intensive than brewing beer. Even the excise taxes are more expensive for distilleries than breweries, the report noted.
In order to grow its market share, the report said MSCs – defined as companies with less than a 2 percent market share and not owned by a major international spirits company – need to be able to invest in capital needs, conquer cash flow constraints, mitigate high production costs and produce consistently high quality product.
MSCs are able to stay afloat in part due to consumer interest in new and local brands, and because the companies can charge a significant premium on their products – often twice as much as well-known premium brands and 50 percent or more than established super-premium brands.
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