Distilled Spirits Council
2015 Category Briefing
New York City
February 2, 2016
@DistilledSpirit
#USspirits
Distilled Spirits Steady Growth in U.S. Market
2015 Economic Overview
 Volume growth up 2.3 percent
 Revenue growth up 4.1 percent
 Export volume growth up 3.4 percent
 Market share continues to rise
 Total market share gain up 6.7 points since 2000
 Total supplier revenue increased from $11.7 billion in 2000 to $24.1 billion in 2015
 Spirits gains tied to product innovation, improved access & consumer premiumization
2
Significant Policy Progress for Distilled Spirits
 Market Access and Tax Restraint
 Defeated every major state tax hike; Congress considered tax cut
 Expanded tastings and wet-dry victories
 Social Responsibility Gains
 Achieved record lows for underage and binge drinking
 New Dietary Guidelines Released
 Reinforced and strengthened drink-equivalents
 American Whiskey Boon Boosts Farmers & Exports
 Bright spot in otherwise sluggish farm economy
3
U.S. Hospitality Tax Scorecard
 “Hospitality Tax” rejected by policymakers
 All major state tax threats defeated in 2015
 Defeated in 18 out of 18 states
 Defeated 373 out of 402 major tax threats since 2001
 Wyden-Blunt tax cut seriously considered in Congress
 Major shift as lawmakers look to cut taxes on spirits, beer and wine
Distillers Seeking Lower Excise Taxes Ginning Up
More Support in Congress
BIPARTISAN BILL WOULD
SLASH DISTILLER TAX RATE.
4
U.S. Market Access Modernization Continues
Bloody Mary law goes into effect in
Minnesota
 Spirits tastings expansions in CT, ME, MS, NY, WI
 Tastings laws key to premiumization
 46 states now allow some form of spirits tastings
 Texas consumers vote for modernization
 26 out of 27 wet-dry alcohol elections passed in 2015
 645 out of 806 alcohol elections have passed since 2004
 2 million more adult consumers now have access to spirits
 Local Sunday sales spreads
 16 states and D.C. have passed Sunday sales since 2002 for total of 38 states
 Four states have passed Sunday brunch bills since 2013
 Indiana repeals prohibition on Christmas sales
5
Greater Progress on Social Responsibility
2015 Federal Data
 Underage and binge drinking at record lows
 Downward trend in drunk driving fatalities
 Drunk driving fatalities among those under age of 21 reached record low in 2014
 Spirits community contributes to progress through responsibility programs and
support for tough laws
12th Graders Reporting Binge Drinking Declined 42%
from 1991 to 2015
12th Graders Reporting Monthly Use Declined 35%
from 1991 to 2015
32%
54.0%
54%
52.7%
52.0%
51.3%
49%
51.3%
50.8%
50.1%
31.5%
31.3%
30.8%
29.8%
51.0%
30.2%
50.0% 49.8%
29.8%
48.6%
48.6%
28%
48.0%
28.6%
27.9%
47.5%
47.0%
29.2%
30.0%
29.7%
28.2%
27.9%
27.5%
27.1%
25.9%
25.2%
45.3%
25.4%
44%
44.4%
24%
43.5%
43.1%
41.2%
23.7%
24.6%
23.2%
41.5%
22.1%
40.0%
21.6%
39.2%
20%
39%
37.4%
19.4%
2015 Monitoring the Future
2015 Monitoring the Future
34%
35.3%
16%
17.2%
6
New U.S. Dietary Guidelines: Moderate Drinking
Can Be Part of a Healthy Adult Diet
 Defines moderation as up to one drink per
day for women and up to two drinks per day
for men
 Adopts new “drink-equivalent” terminology
 1.5 oz. of 80-proof distilled spirits (40%)
 5 oz. of wine (12%)
 12 oz. of regular beer (5%)
 Drink-equivalents of beer, wine and spirits
contain same amount of alcohol
 Defines calories for drink-equivalents
 Distilled spirits has 98 calories
 Beer has about 150 calories
 Wine has about 120 calories
7
American Whiskey Boom Boosts
America’s Farmers
 Corn production used in spirits up 176 percent; rye production used in spirits
up 64 percent from 2010-2014
 USDA small grains report shows rye production up 60 percent in 2015
 Rye whiskey sales up 609 percent from 2009-2014
 From $15 million to $106 million in supplier revenue (over $300 million retail)
 Rye whiskey sales up another nearly 20 percent in 2015
 Fueling American whiskey boom
 Trend of classic cocktails expands
 Millennials of legal drinking age like authenticity and flavor
 Consumers around world acquiring taste for American whiskey
8
Distilled Spirits Economic Overview – 2015
David Ozgo
Senior Vice President
Economic & Strategic Analysis
9
Economic Review - 2015
 Sector growth
 Market share
 Growth by price segment
 Growth drivers
 Category performance
 Trends to watch
10
Supplier Gross Rev (Bil.)
U.S. Spirits Supplier Revenues Up 4.1% to $24.1B
$950 Million Gain
26
24
22
20
18
16
14
12
10
8
6
4
2
0
$16.0
$17.2
$18.2 $18.7 $18.7 $19.2
$20.4 $21.3
$22.2
$23.1
$24.1
$11.7
Source: DISCUS MSDB
11
9-Liter Case Shipments (Mil.)
U.S. Volume Up 2.3% in 2015
Up 4.9 Million to 215 Million Cases
220
200
180
160
2.7%
4.1%
1.4%
2.2% 1.7%
2.0%
2.9%
3.0% 1.9%
2.2%
2.3%
3.0%
140
120
100
Source: DISCUS MSDB
12
Spirits Market Share – Revenue
Up 6.7 Points Since 2000, Worth $4.6 Billion
36%
35.2% 35.4%
Spirits Market Share
35%
34.1% 34.3%
34%
34.7%
33.1% 33.0% 33.1%32.9% 33.3%
33%
32.1%
32%
31%
30%
29%
28.7%
28%
27%
26%
Source: Beverage Information Group Handbooks, Company Financial Reports
and DISCUS Estimates
13
Spirits Market Share – Volume
Spirits Market Share
Up 6.1 Points Since 2000, Worth 39 Million Cases
34%
33%
32%
31%
30%
29%
28%
27%
26%
25%
24%
23%
22%
21%
20%
30.9%
29.7%
29.0%29.3% 29.5%
31.7% 31.9%
32.5%
33.0%
33.5%
30.2%
27.4%
Source: Beverage Information Group Handbooks, DISCUS Estimates
14
Price Segments
 Products are segmented on supplier prices
 Range varies by product category
 Use market leaders to define segments
 Average supplier gross revenue per case
Revenue/9-Liters
Retail Bottle Price
Value $53
<$12/bottle at retail
Premium $100
$12 - $20/bottle at retail
High End $169
$20 - $30/bottle at retail
Super Premium $262
$30+/bottle at retail
15
Volume Share by Price Category
Share of U.S. Spirits Volume
8.8%
18.9M
20.5%
41.1M
% - Industry volume in
price category
M – millions of 9-Liter
cases in price category
Value
Source: DISCUS MSDB
34.9%
75.1M
35.8%
77M
Premium
High End
Super Premium
16
Revenue by Price Category
U.S. Supplier Gross Revenues
$5B
20.6%
$7.5B
31%
% - Industry revenue in
price category
B – Gross revenue in
price category, billions
Value
Source: DISCUS MSDB
Premium
$4B
16.7%
$7.6B
31.7%
High End
Super Premium
17
Volume Growth by Price Segment
7.1%
8.0%
6.5%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
0.1%
1.0%
1.0%
0.0%
Value
Source: DISCUS MSDB
Premium
High End
Super
Premium
18
Volume Growth by Price Segment
4.9 Million New Cases in 2015
Incremental Supplier Shipments
(000, 9-Liter Cases)
2938
2500
2000
1154
1500
760
1000
500
68
0
Value
Source: DISCUS MSDB
Premium
High End
Super
Premium
19
Revenue Growth by Price Segment
$950 Million in New Supplier Revenue
Incremental Supplier Revenues
(millions)
$600
$509
$500
$395
$400
$300
$200
$100
($6)
$50
$0
Value
-$100
Source: DISCUS MSDB
Premium
High End
Super
Premium
20
Factors Contributing to Steady Growth
 Demand for American Whiskeys – Bourbon & Rye – booming in U.S. and abroad
 Millennials of legal drinking age interest in discovery driving innovation and
premiumization
 State legislatures show hospitality tax restraint protecting jobs, consumers
 Modernized alcohol laws expanding consumer access and choice
 Focus on craft-style, artisanal products benefiting both large and small producers
 Consumer fascination with provenance dovetailing with spirits’ authentic heritage
 Growth of micro-distilleries generating excitement in spirits category
 From 92 in 2010 to more than 750 in 2015
 133 leading micro-distillers in 35 states belong to Distilled Spirits Council
21
Whiskey: A Strong Sales Driver
All Whiskeys – 12.3 million cases added since 2010
9-Liter Cases (millions)
60
50
47.1
47.9
52.8
49.7
56.6
59.4
40
30
20
10
0
2010
2011
2012
2013
Source: Beverage Information Group Handbooks, DISCUS MSDB
2014
2015
22
Whiskey: A Strong Sales Driver
Supplier Whisky Revenues (Bil.)
All Whiskeys – $2.7 billion added since 2010
$8.1
$9
$8
$7.0
$7
$6
$6.0
$7.5
$6.4
$5.4
$5
$4
$3
$2
$1
$0
2010
Source: DISCUS MSDB
2011
2012
2013
2014
2015
23
Bourbon, Tennessee, Rye & White/Corn
 Volume up 5.2 percent to 20.4M Cases (+1M cases)
 Revenue up 7.8 percent to $2.9B (+$210M)
 Strength across most price categories




Value volume up 4.8% (3.3M), revenue up 6.2% to $192M
Premium volume down 2.6% (5.4M), revenue down 0.4% to $556M
High End volume up 6.8% (9.9M), revenue up 7.7% to $1.7B
Super volume up 25.2% (1.8M), revenue up 26.5% to $411
 Growth in both flavored and traditional products
 Traditional products grew 565K cases
 Flavored products grew 445K cases
24
Bourbon, Tennessee, Rye & White/Corn
9-Liter Cases (millions)
671K
2.2M
17.4M
Bourbon/Tenn
Source: DISCUS MSDB
White/Corn
Rye
Other
25
Bourbon, Tennessee, Rye & White/Corn
 Bourbon/Tennessee
 Volume up 5.9 percent to 17.4M
 Average revenue per case $144
 Supplier revenue $2.5B
 Rye
 Volume up 19.5 percent to 671K
 Average revenue per case $192
 Supplier revenue $129M
 White/Corn
 Volume down 3.7% to 2.2M
 Average revenue per case $111
 Supplier revenue $248M
26
Canadian Whiskeys & Blends
 Canadian
 Volume up 2.5 percent to 16.7M cases
 Total volume growth 408K cases
 Revenue up 8.1 percent to $1.8B ($110 average revenue per case)
 Growth came from Super Premium price points
 Super Premium volume up 17.8 percent to 5.6M cases
 Flavored products up 930K cases
 Canadian Rye up 100K cases
 Blended
 Volume up 8.8 percent to 9.5M cases (766K new cases)
 Revenue up 9.7 percent to $633M ($67 average revenue per case)
 More than 900K new flavored cases
27
Irish Whiskey
9-Liter Cases
 A great year for Irish Whiskey
3500
3000
 Volume up 16.1 percent to 3.2M
cases
 Six-fold volume increase since
2005
Cases (000)
 Revenue up 19.9 percent to
$664M
2500
2000
1500
1000
500
0
2005
2010
2015
28
Scotch Whisky
 Single Malt Scotch
 A great year for Single Malt
 Volume up 13.0 percent to 2.1M cases
 Revenue up 13.5 percent to $732M
 Blended Scotch
 Volume down 1.3 percent to 7.5M cases
 Revenue flat at $1.4B
 Strength in Super Premium volume up 11.1 percent
29
Tequila and Cognac
 Tequila
 Volume up 7.4 percent to 14.8M cases
 Revenue up 9.4 percent to $2.3B
 Strong growth across price categories, but High End volume up
17.2 percent and Super Premium up 12.5 percent
 Cognac
 Volume up 14 percent 4.5M cases
 Revenue up 16.2 percent to $1.3B
 Super Premium volume grew by 20.3 percent
30
Vodka and Rum
 Vodka
 Volume up 1.8 percent to 68.2M cases
 Revenue up 0.5 percent to $5.8B
 Flavored vodka down 1.1M cases, but solid growth in
traditional (+/- 2.5%)
 Rum
 Volume down 1.5 percent to 24.8M cases
 Revenue down 2 percent to $2.3B
 Super Premium volume up 2.8 percent
31
Overview Summary
 Volume & Revenue
 Supplier revenue up 4.1 percent to $24.1B
 Supplier volume up 2.3 percent to 215M 9-liter cases
 Bourbon & Tennessee whiskey significant growth drivers along with
Rye, Flavored Whiskey, Irish, Single Malt Scotch, Tequila & Cognac
 Solid growth in traditional Vodka market
 Market share gains increase relative to beer
 35.4 percent revenue market share, 33.5 percent volume market share
32
2016 Trends to Watch
 Continued modernization of alcohol laws driven by consumer
demand
 Grocery stores’ interest in selling spirits gains steam
 Distilled Spirits Council opposes wine-only proposals
 27 states permit grocery sales of spirits
 Control states take steps to modernize stores; privatization
debate continues
 Wholesaler realignment and consolidation
33
2016 Trends to Watch
 Consumers’ quest for spirits knowledge drives premiumization,
innovation and authenticity
 Expansion of delivery services including Drizzly, Minibar and
Amazon
 Growth of micro-distillers: Some will flourish, some will fail,
some will be acquired
34
International Trade Update
Christine LoCascio
Senior Vice President
International Issues & Trade
35
U.S. Distilled Spirits Exports Remain Strong
Despite Stronger Dollar
350
2
VALUE
VOLUME
300
0.1%
1.5
Billions (USD)
250
200
-1.5%
+5.4%
1
150
Millions (PFL)
+4.0%
100
0.5
50
0
0
U.S. Spirits Exports
2014
U.S. Whiskey Exports
2015
U.S. Spirits Exports
U.S. Whiskey Exports
2014
2015
36
Top 10 U.S. Spirits Export Markets
A Decade of Tremendous Growth
% Growth
over the
Decade
2005 Value
2015 Value
(USD millions)
(USD millions)
UK
135.1
231
71%
Canada
95.7
193.5
102%
Germany
77.4
130
68%
Australia
77
125.4
63%
Japan
62.6
110.2
76%
France
39.6
87.8
122%
Spain
33.2
85.5
158%
Netherlands
23.2
58.9
154%
Mexico
12.9
47.1
265%
Latvia
3.4
44
1194%
Country
Source: U.S. Department of Commerce, Compiled by U.S. International Trade Commission (FAS Value) (FAS value – Free Alongside
Ship is the value of exports at the U.S. port, based on transaction price including inland freight, insurance and other charges)
37
Top Six Export Growth Markets
Value Growth 2014-2015
(USD millions)
2015 Total Value
(USD millions)
52.3
231
19
44
Vietnam
11.8
16.8
Japan
10.4
110.2
Panama
3.5
20
Brazil
3.2
12.2
Percentage Growth
2014-2015
2015 Total Value
(USD millions)
Vietnam
+234.1%
16.8
Latvia
+76.2%
44
Brazil
+35.3%
12.2
United Kingdom
+29.3%
231
Dominican Republic
+27.9%
13.7
+21%
20
By Dollar
United Kingdom
Latvia
By Percentage *
Panama
*Among countries whose U.S. imports exceed $10 million
38
10 Markets to Watch in 2016
Current Export
Market Ranking
Percent Increase in 2015
from 2014
Total Exports in
2015
(USD millions)
UK
1
29.3
231
Japan
5
10.4
110.2
Latvia
10
76.2
44
Panama
13
21
20
Vietnam
17
234.1
16.8
South Africa
19
.2
15.7
China
22
6
15.2
Dominican Republic
23
27.9
13.7
Brazil
24
35.3
12.2
Taiwan
27
5.7
9.6
Country
39
USDA Partnership Continues to Promote
American Spirits Exports
 U.S. spirits exports more than doubled over past decade from
$743M in 2005 to $1.56B in 2015
 Promotions in 16 markets since 2005
 China, Russia, Brazil, India, Hong Kong, Korea, Thailand, Vietnam,
Singapore, Chile, Bulgaria, Romania, Czech Republic, Germany,
Austria & Colombia
 2015 promotions
 Colombia, India, Germany, France, Belgium
 2016 promotions planned:
 South Africa, Thailand, Vietnam, China, Taiwan, Germany, Brazil
40
Trade Negotiations Provide
Opportunities to Expand U.S. Exports
 Trans-Pacific Partnership
 Regional trade agreement with 11 countries
 Will eliminate tariffs on U.S. spirits (Malaysia and Vietnam)
 Recognition for Bourbon and Tennessee Whiskey
 Trans-Atlantic Trade and Investment Partnership
 U.S.-EU trade agreement
 Opportunity to address non-trade barriers
 Eliminate and prevent barriers to trade
 Labeling, standards, import policies, discriminatory taxes
41
Distilled Spirits Council
2015 Category Briefing
New York City
February 2, 2016
@DistilledSpirit
#USspirits