Signs of downtrading are appearing in some of American whiskey’s largest domestic markets.
This latest data comes from IWSR ‘US Navigator’, the industry’s only trusted source of monthly volume data for the total US beverage alcohol market – across wine, spirits, beer, cider, RTDs and no-alcohol – by price tier, for all 50 states going back to 2019, based on highly accurate local tax office data.
Nationwide trends
- Between 2019 and 2022, American whiskey volumes in the US enjoyed years of strong growth, at +5% CAGR
- The category started to struggle in 2023 when the growth rate in volume terms tipped into negative territory (-1% 2022-2023) and has since falling further, dropping 2% in the year-to-date to the end of August
How trends have changed by price tier
Last year’s decline was almost entirely driven by losses in the standard-and-below (US$22.49-and-below per 75cl bottle) price tiers, which accounted for 59% share of the category. Declines here have been substantial, with standard American whiskey declining 4% YTD and value American whiskey declining even more, at 8% YTD.
Losses at lower price tiers have been offset somewhat by strong growth in super-premium-and-above (above $30.50), which increased volumes by 6% YTD. Growth in the premium price tier has been flat, as it appears that trading down from higher price tiers into premium is being offset either by trading down from premium to lower price tiers, or by consumers leaving the category altogether.
Which states are seeing softening demand?
Signs of softening demand appear across states that are in the top ten largest domestic American whiskey markets.
States such as New York, Texas, Pennsylvania and Illinois continue to see growth in premium and super-premium-plus, albeit at a slower rate, but have seen the strongest declines in standard-and-below, suggesting that premiumisation here remains bullish.
By contrast, California, Florida and Kentucky have seen significant declines in premium while the standard-and-below price tiers have flattened, suggesting a bifurcation in the market where some consumers are continuing to trade up, while others are being forced to trade down further.
California and Texas are the two largest domestic markets for American whiskey (by volume).
What’s driving softening demand?
- Challenging prior-year comparisons for leading brands have made it difficult for American whiskey to post growth
- A slight reduction in new brands and variants into the category last year has reduced the scale of innovation
- Lower levels of consumer demand are coinciding with increased production coming on stream as companies invest in the category. In 2022, for example, a record 12.6m barrels of bourbon were maturing, according to figures from the Kentucky Distillers Association, and production is not expected to slow in the near future
What does this mean for the American whiskey category?
- Distillers are contending with increasingly price-conscious consumers as well as rising production costs. This is creating challenges – particularly for distillers who cannot benefit from the economies of scale enjoyed by larger brand owners. We could see ongoing consolidation of the market
- The current economic environment is prompting consumers to seek out brands with a good price-to-value ratio. Super-premium-plus price tiers will be under increasing pressure over the next 12 months. Growth will likely be driven by robust innovation at the higher price point without eroding equity in the category
- There will be a temptation to reduce prices in order to generate demand, but this can backfire if it is taken too far, and it eliminates the need or desire to pay super-premium-plus prices
- Innovation remains important. Current NPD trends focus, for example, on new production techniques to ‘finish’ the product, with the intention of being less reliant on the taste nuances obtained through additional ageing. Innovation is also focused on less established American whiskey blended variants; recent examples include SirDavis, unveiled in August by Moët Hennessy in partnership with Beyoncé Knowles-Carter, and Bourbon x Rye, a limited-time iteration from Suntory Global Spirits’ Knob Creek
