The Alcohol Market Could Have a New No. 1—Spirits

Beer is currently the market leader, but RTD cocktails are helping spirits take gains.

October 31, 2022

ALEXANDRIA, Va.—Spirits have been taking market share away from beer for the past 12 years, reports CNBC, and much of that loss can be attributed to the entrance of new drink categories including ready-to-drink (RTD) cocktails.

The beer category, which includes hard seltzer, was 42% of the U.S. beer market in 2021, and spirits were right behind beer at 41%. Spirits could overtake beer in market share over the next few years at this rate of growth. When hard seltzer is not included, beer only has an 11% market share.

“Spirits consumers are willing to spend a little extra for a fine spirit because they are choosing to drink better, not more,” Lisa Hawkins, spokeswoman for the Distilled Spirits Council, a national trade organization, told CNBC.

Drizly, an alcohol delivery platform, also sees the beer market share losing ground to spirits. Over the past 12 months, beer had a 14% share, which is two percentage points down year over year, while spirits had a 45% share and grew 1 percentage point year over year.

“The beer share decline in recent years on Drizly is mostly a result of share shift toward the spirit category, driven by the surge in categories, like tequila and ready-to-drink cocktails,” Liz Paquette, head of consumer insights at Drizly, told CNBC.

“The pandemic has certainly accelerated the RTD category,” said Don Duebler, CEO of Atomic Brands, marketer of the Monaco brand, in a recent NACS Magazine article on the subject. “Consumers have engaged in the ease that these products offer, and that fits their new reality. The projection is that the category will continue to grow.”

The single-serve cocktails are ideal for c-stores, Duebler continued. “For this channel, the shopping mission of the consumer is something for the moment or on the go,” he explained. Still, multipacks are beginning to advance. “Today, we now have over 50% of c-stores selling four-packs,” he reported.

(NACS State of the Industry Report of 2021 Data revealed that one of the biggest movers and shakers in the overall liquor category is canned RTD cocktails.)

Even beer companies are getting into the RTD space. Samuel Adams just released its Loma Vista Tequila Soda, an RTD tequila cocktail that comes in lime and mango. It’s available in select markets, including Austin, Texas; Fort Collins, Colorado; Wichita, Kansas; and Kansas City. Anheuser-Busch InBev also offers canned cocktails and canned wines, and in 2019 Molson Coors removed “Brewing Co.” from its name to reflect a similar expansion into spirits.

C-stores are getting in on the canned cocktail trend, too. This summer, Wawa and Cape May Brewing Company announced its first collaboration and release of a limited-edition “Shore Tea,” a hard tea beverage. Rutter’s also launched its Spiked Tea Cooler in partnership with Lancaster Brewing Co.

Despite spirits gaining ground on beer sales, the beer category has grown. Although beer is losing its market size, sales are up.

“There are pockets of growth,” Bart Watson, chief economist for the Brewers Association, told CNBC. He said beer drinkers are seeking out more premium offerings as well.

Last year, overall beer sales were $100.2 billion, up 1% year over year, and craft beer sales grew 8%. Watson told CNBC that craft beer may be the beer industry’s answer to consumers’ increased willingness to spend more on variety, flavor and quality.

“Those reaching for craft often want a variety of flavors and to try new things,” Watson told CNBC, adding that craft brews “really helped beer not lose more market share over the last decade.”

Drizly also sees changes happening within the beer categories. Beers that have lower ABVs, such as light lagers, and non-alcoholic beers are growing.

However, the Distilled Spirits Council believes that “consumers are drawn to products that have a rich heritage and an interesting back story, and that’s what spirits have to offer.”

According to CNBC, the council could be correct, as it appears the cocktail culture is primed to be dominant in the United States.

Here’s how liquor and beer performed in convenience stores during the past two years.