Sales Of Spirits Increased As Hospitality Industry Took A Major Financial Hit In 2020

By Robert Ham / February 15, 2021

Makers and distributors of alcoholic beverages in the U.S. continued to rise in 2020, but growing the market for American spirits outside of the States has only gotten more complicated. That’s the word from the Distilled Spirits Council of the U.S. (DISCUS), the trade association that represents America’s distilled spirits industry, which recently held its annual economic briefing for members of the media and analysts.

According to DISCUS, the spirits industry saw some comfortable growth last year, with supplier sales growing nearly 8 percent for a total of $31.2 billion, and spirits now making up 39.1 percent of the total alcoholic beverage market, up 1.3 percent from 2019.

The uptick is at least partially due to the ongoing coronavirus pandemic, which has inspired many consumers to buy premium spirits as an affordable luxury. That led to an 8.2 percent increase in sales of American whiskey (rye remains an important component of the overall American whiskey category growth with sales up 16.9 percent), and a 39.1 percent increase in the sales of pre-mixed cocktails.

Rye remains an important component of the overall American whiskey category growth with sales up 16.9 percent. (image via Kenji Mizumori/The Whiskey Wash)

DISCUS also points to legislation around the U.S. that has allowed restaurants and bars to offer cocktails-to-go, retailers quickly shifting to curbside pickup and delivery, and eight states expanding direct-to-consumer delivery options for those distillers forced to shut down their tasting rooms.

Those positive trends are tempered by the financial hit that the hospitality industry has taken over the last year. According to the U.S. Bureau of Labor Statistics, restaurants and bars were forced to lay off 5.8 million people and only half of them have been recovered as of December 2020.

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In their presentation, DISCUS continued to ring the alarm bells about the effect of tariffs imposed on the export of U.S. spirits to the European Union and the retaliatory tariffs that America slapped on E.U. imports. The 25 percent tariff on American whiskey being sent across the Atlantic was first imposed in 2018 and was expanded to include other spirits like rum and vodka in 2020. In between, the U.S. returned fire with a 25 percent tariff applied to single malt Scotch whisky and single malt Irish whisky, among other spirits.

The effects of this were huge, with a 54 percent decrease in exports of American whiskey to the U.K. and a 38 percent drop of exports to the E.U. As DISCUS Chief of Public Policy Christine LoCascio put it during her presentation on the subject, “Hospitality businesses on both sides of the Atlantic have been decimated by the global pandemic, and these tariffs are a significant and unnecessary drag on their recovery.”

The hope is that the Biden administration will take up this concern in the near future because the situation is only going to get worse: the E.U. is set to increase the tariffs on American whiskey imports to 50 percent starting in June of this year.

DISCUS wrapped up their annual briefing by outlining their priorities for the year. In addition to lobbying for the elimination of tariffs on U.S. and E.U. spirits, they will be pushing to get more economic relief for hospitality businesses and protecting them from potential state tax increases, and working to expand consumer access to spirits.

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“Tariffs and the pandemic left a wake of destruction in the hospitality industry in 2020,” said DISCUS President and CEO Chris Swonger in a prepared statement. “Permanently enacting marketplace modernizations introduced in response to COVID-19, from online delivery to cocktails-to-go, will aid in the recovery of restaurants, bars and craft distilleries.”