High Spirits: Distilleries in the US Industry Market Research Report Now Available from IBISWorld

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After remaining resilient over the recessionary period, industry operators will continue to experience growth due to a trend toward premiumization and the increased popularity of cocktails. Over the next five years, consumers will continue trading up to higher-quality spirits and liquor. Additionally, the industry will benefit from rising consumer sentiment and expanding budgets. For these reasons, industry research firm IBISWorld has added a report on the Distilleries industry to its growing industry report collection.

IBISWorld Market Research

IBISWorld Market Research

As incomes return, consumers will demand more premium and super-premium spirits

Although the Distilleries industry managed muted growth over the past five years, it was not immune to the economic downturn. “What kept the industry from declining during the recession was a trend toward premiumization: an increase in the consumption of higher-grade liquors and spirits. An increase in the popularity of cocktails (over beer and wine) also drove demand for lower-quality industry products that are used for mixing drinks in bars and restaurants,” says IBISWorld industry analyst Agata Kaczanowska. IBISWorld estimates that industry revenue increased at an average rate of 1.6% per year over the five years to 2012 — robust growth, given the poor consumer sentiment during the time. In 2012, revenue is expected to total $7.2 billion and display growth of 2.7%. While profit margins (i.e. earnings before interest and taxes) dipped in the past five years, they are expected to recover.
Over the past five years, the popularity of cocktails has resulted in increased liquor and spirits consumption in social drinking locations like bars and nightclubs. “Helped by advertising and promotion by the Distilleries industry’s major players, the role of the cocktail has expanded from just a drink into a symbol of class and sophistication. In response, customers have upgraded their purchases, moving from the bottom shelf toward premium tiers of quality,” says Kaczanowska. When disposable income dropped during the recession, instead of compromising the quality of the products they purchased, consumers saved money simply by drinking their preferred liquor and spirits at home.

The industry is characterized by a high degree of concentration, with major players Diageo, Brown Foreman, Beam and Pernod Ricard accounting for much of domestic production. The top players are constantly buying and selling brands among each other, leading to considerable reallocation of market share and brands. For example, Fortune Brands purchased the Cruzan Rum brand from Pernod Ricard in 2008. Fortune then sold Pernod Ricard its Absolut vodka brand later in the year. The remainder of the market share is spread out over regional and local brands. These firms have smaller distilleries, most of which will not expand beyond their regional or niche markets. Acquisition activity and consumers' trust in their brands during the recession have supported the market share dominance of the major players. Imports are anticipated to maintain their presence in the market, though, as the premiumization trend balances out the declining US dollar. In 2013, the industry will benefit from stronger consumer sentiment and expanding household budgets. Premiumization will likely become more widespread as spending increases, which will help drive up the annualized revenue growth rate. Furthermore, distilleries will also benefit from a growing population of legal drinkers. For more information, visit IBISWorld’s Distilleries in the US industry report page.

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IBISWorld industry Report Key Topics

This industry consists of distilleries that purchase a range of ingredients, such as grains and sugar, and manufacture them into spirits (i.e. not beer or wine). These spirits are then bottled and sold to liquor wholesalers, bars, casinos, restaurants, hotels and other retail stores.

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
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