While 2019 was yet another strong year for U.S. spirits sales, the Distilled Spirits Council of the United States (DISCUS) is also sounding the alarm that tariffs imposed by the European Union are causing a “significant slump” for American exports.
“The data is clear,” said DISCUS president and CEO Chris Swonger at DISCUS’s annual economic briefing on Wednesday. “These tariffs are chipping away at American whiskey’s brand equity in our top export markets.”
Spirits Sales Climb for 10th Consecutive Year
In 2019, spirits gained market share versus beer and wine, with sales rising half of a point to 37.8% of the total beverage alcohol market. This represents the 10th straight year of market share gains for spirits overall, where each point of market share is worth $770 million in supplier sales revenue.
A strong U.S. economy has “put wind in the sails of the super-premium spirits category,” said David Ozgo, DISCUS Senior Vice President, Economic and Strategic Analysis, meaning that consumers are continuing to spend on higher-priced spirits bottlings.
American whiskey, up 18.8% to $4 billion, continued to be a key driver of sales growth. Rye sales were especially strong, surging 14.7% to $235 million.
Vodka remains the spirits sector’s largest category, representing 31% of all volume. The category rose 2.9% to $6.6 billion, driven by strong growth in high-end premium products.
Tequila and mezcal were up 12.4% to $3.4 billion, and the mezcal category surpassed $100 million in sales for the first time, totaling $105 million. Irish whiskey (+5.6%) and Single Malt Scotch (+9.6%) had strong years once again, and the new category of ready-to-drink or premixed cocktails also had a strong showing, with $351 million sales.
Yet, Ozgo stressed that these categories are threatened the longer the U.S. tariffs remain in place.
E.U. Trade: “We are now gravely concerned”
New data released this week from the U.S. International Trade Commission shows that the European Union’s 25% retaliatory tariff on American whiskey has had a chilling effect on exports to the European Union, the U.S. spirit’s largest export market.
In 2019, exports of American whiskey to the European Union tumbled by 27% percent compared to 2018. Global exports of American whiskey have declined 16% and global spirits exports are down 14.3% over the same timeframe.
Further, the data shows major export declines in top individual European Union. countries such as the UK (-32.7%), France (-19.9%), Germany (-18.2%) and Spain (-43.8%).
“These tariffs are devastating,” Swonger said. “We are now gravely concerned that the U.S. tariffs on European Union spirits imports will have the same deleterious effect in the United States.”
Time is of the essence, Swonger said. “If this trade dispute is not resolved soon, we will more than likely be reporting a similar drag on the U.S. spirits sector, jeopardizing American jobs and our record of solid growth in the U.S. market.”
Impact on U.S. craft distillers
Tom Potter, president of New York Distilling Company, also commented on how the tariffs have affected his business. In 2018, the Brooklyn-based producer of whiskey and gin had projected 25% of sales to come from exports.
“Then the tariffs came from out of the blue,” Potter said. “It was like an asteroid hitting your planet and changing everything. Nobody ordered anything, they were waiting to see what happened.”
In addition, while American whiskey was poised to compete in international markets with Scotch or Irish whiskey, the introduction of tariffs halted that momentum. Overall, he projects the lost opportunity for his company at “$100,000 and counting.”
“The longer this goes on, we’re likely to be forgotten,” Potter said.