2003 Liquor Report

June 1, 2004
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2003 Liquor Report

by Jennifer Korolishin
A Spirited Evening The 421 visitors to the 2004 Chicago Whisky Fest savored 200 of the finest Scotch whiskies, Irish whiskies, bourbons, ryes, cognacs and rums available today. The fourth annual tasting, held at the Hyatt Regency in downtown Chicago, brought together a variety of master distillers, connoisseurs and occasional sippers to sample old favorites, rare vintages and a couple of new breeds. One of the newest entrants attracting attention was Knappogue Castle. Prompting all the interest was Knap-pogue’s single-malt status, unusual for an Irish whisky. Even more curious is that the malt is dried without the benefit of peat — a major point of difference from the Scottish malts. The Scotches, both single-malts and blends, were present in profusion and collectively attracted the most attention. One in particular, casked and bottled at the Ardbeg distillery, garnered intense interest because of the distillery’s restoration to prominence after its recent change of hands. “Ardbeg opened in 1815,” noted Stuart Thompson, master distiller in a seminar he gave during the Fest. After a decline and closure in the early ’90s, “the distillery was bought by The Glenmorangie distillery in 1997. They have invested with passion to restore Ardbeg to its former production levels and quality.” With its briny flavor and strong iodine overtones, Ardbeg is considered among the “smokiest” of all the single malts. The Bowman, especially the 17-year vintage, took kudos for being one of the smoothest malts of the Fest, and one of the boldest in flavor. On the other hand, many connoisseurs present gave high marks to the Speyside for its rich tones and robust flavor, and at $99, considered good value. Yet for full-bodied strength, Scott’s Longmore-Glenlivet 1968 won smiles all around, as did the 21-year-old Dalmore for its smoothness and the 10-year-old Speyburn, with its fresh nose, pale gold color and medium-bodied taste. Among the American single malts of interest was Old Potrero, The distillery was established on Potrero Hill in San Francisco in 1993 in an attempt to recreate the taste of the traditional whiskey produced by the early pioneers. Characterized by a youthful flavor, the 100 percent rye-mash whiskey is always light in color. This is because it was not allowed to age very long in the barrel and also because the barrel staves were roasted, not charred, as they were in Scotland. A bourbon that attracted widespread attention at the Fest was the Woodford Reserve, casked and bottled at the Labror and Graham distillery, Kentucky’s oldest working distillery. Of special interest is the use of triple copper pot still distillation process, which gives the bourbon its characteristic robust, creamy body and sweet notes of vanilla, spice and caramel. This Small Batch Bourbon secured the “Best Bourbon” award as the Double Gold Medal winner at the 2000 World Spirits Competition.
Younger consumers drive spirits growth
Spurred by growing popularity among younger consumers and numerous flavored product introductions, 2003 was a good year for distilled spirits. Led by Cognac, vodka, rum and tequila, spirits sales increased 4 percent in 2003 to more than $41.4 billion; volume grew 3.1 percent to nearly 1.4 billion liters, according to Euromonitor International.
Given the uncertain U.S. economy, consumers were expected to cut back on luxury items like spirits. However, spirits’ 2003 performance indicates that consumers are optimistic about a possible economic upturn and are retaining their preference for even super-premium priced spirits.
Spirits have also undergone an image transformation that continues to drive sales and volume. While classic cocktails enjoyed a brief 1990s revival, spirits are now positioned as a key ingredient in newer specialty drinks that are more relevant to younger consumers, particularly the 21 to 28 age group.
Cognac’s popularity surges
Thanks to hip-hop songs like Busta Rhymes’ “Pass the Courvoisier,” Cognac and brandy have experienced a sharp increase in interest from young and urban audiences. Cognac and brandy regularly appear in rap and hip-hop videos, giving those segments a trendy, sophisticated image among younger consumers. In 2003, combined brandy and Cognac volume increased 3.1 percent, while sales climbed 4.7 percent. The marriage of music and spirits is expected to strengthen during the next year. Among the deals struck in 2003, William Grant & Sons licensed the new Armadale Vodka brand to Roc-A-Fella Records, home to top-selling rap artist Jay-Z. Roc-A-Fella promotes the product while William Grant handles production.
Liqueurs also remained popular in 2003, growing 1.5 percent in volume and posting a 2.7 percent sales increase to $5.7 billion. Bailey’s Irish Cream and Jagermeister are among the strongest premium liqueur brands.
A dash of flavor propels rum sales
Rum is a star in the spirits category, as the introduction of flavored rums increased its popularity as both a mixer and a stand-alone drink among younger consumers. Rum sales grew 5.4 percent in 2003 to $4.6 billion, and volume increased 4.7 percent. Its sweeter taste and versatility in mixed drinks drives rum’s appeal among younger consumers. Last year saw the introduction of numerous flavored rums, notably Bacardi Flavored Rum Razz, Vanilla and Coco, extensions of the manufacturer’s popular Limon and orange-flavored Bacardi O brands. In terms of brands, the rum category is largely a battle for market share between No. 1 Bacardi and No. 2 Captain Morgan, with Malibu a distant third. While Bacardi’s lead remains solid, Captain Morgan has recently gained market share due to aggressive marketing and a more developed line of flavored products.
Where rum experienced great success in 2003, tequila is recovering from a dramatic shift in popularity. After growing steadily throughout the 1990s, tequila sales took a nosedive in 2001, in part because consumers switched to more au courant spirits like rum or vodka. In 2003, tequila showed improvement. Volume, spurred by a rise in sales of premium brands such as Jose Cuervo Gran Reserva and Viuda de Romero Resposado Premium Tequila, increased 8.2 percent to 72.4 million liters and sales grew 9.2 percent to reach $2.1 billion. Jose Cuervo is the largest U.S. tequila brand and the sixth-largest overall distilled spirits brand by volume.
Strong vodka performance hurts gin
Among white spirits, vodka is the clear leader. Vodka sales grew 6 percent in volume to 385 million liters and increased sales 6.9 percent to $9.8 billion in 2003, according to Euromonitor. Value growth outpaces volume gains in the vodka category as consumers increasingly trade up to premium brands such as Belvedere, Grey Goose and Stolichnaya, although general demand also lifted sales of standard-priced brands. Smirnoff, the leading vodka brand by volume and the second-largest spirits brand overall, has seen steady growth during the past two years.
Like rum, vodka is a versatile mixed drink ingredient, as evidenced by the popularity of vodka martinis, vodka gimlets, vodka tonics and Cosmopolitans. Flavored vodkas are driving the category’s surge, as they can be consumed alone or in mixed drinks. Citrus flavors such as lemon and orange are popular, as is vanilla. Notable new product rollouts in 2003 included Stolichnaya Stoli Cranberi and Stoli Citros, Skyy Flavored Vodka and Absolut Vodka Vanilia.
As vodka has grown, gin has suffered. In the United States, gin is primarily consumed in mixed drinks, but consumers are replacing gin with vodka in traditionally gin-based drinks such as gin gimlets and gin martinis. Also, due to its strong juniper berry taste, there are few flavored gins on the market. In 2003, gin volume remained largely flat, posting only a 0.6 percent gain. Sales increased 1.4 percent to $2.7 million, bolstered by the fact that consumers are choosing premium brands such as Bombay Sapphire and Beefeater.
Irish whisky a standout
In the whiskey category, premium and super-premium products such as single-malt Scotch whisky gained the most in 2003. While the category remained largely flat, Irish whisky saw a 7.8 percent increase in volume, and a 9.1 percent sales increase to $240 million. This is due in part to the fact that Irish whisky is a relatively immature segment in the United States, since its market penetration is not as great as U.S. bourbon, Canadian whisky and Scotch whisky. The segment is dominated by Pernod Ricard USA’s Jameson brand family. While it remains the single largest U.S. distilled spirits subsector, whiskey has lost ground to trendier drinks. Overall, whiskey volume increased only 0.3 percent in 2003 and posted a 1.3 percent sales increase to $11.4 billion, due mostly to premium and super-premium brand sales.
Diageo leads spirits category
Overall, Diageo plc is the spirits category leader, controlling 19.3 per-cent of volume in 2002, with brands including Captain Morgan rum, Seagram’s 7 Crown U.S. whiskey, Smirnoff vodka and Jose Cuervo tequila. Jim Beam Brands Worldwide Inc. was the second-largest U.S. distilled spirits company in 2002, accounting for 9.4 percent of volume. Round-ing out the top three, Constellation Brands, manufacturer of the Barton and Black Velvet whiskey brands, held 8.4 percent of volume in 2002.
Top 20 brand shares of spirits (% total volume)
Global brand Company Market share (2002)
Bacardi Bacardi & Co 5.3
Smirnoff Diageo North America 4.7
Absolut Vodka Future Brands LLC 3.1
Jack Daniel's Brown-Forman Corp. 2.5
Captain Morgan Diageo North America 2.3
José Cuervo Diageo North America 2.2
Jim Beam Jim Beam Brands Worldwide 2.1
Crown Royal Diageo North America 2.0
Seagram's Gin Pernod Ricard USA 1.9
De Kuyper Jim Beam Brands Worldwide 1.7
Seagram's 7 Crown Diageo North America 1.7
Gordon's Diageo North America 1.6
E & J E & J Gallo Winery 1.6
Canadian Mist Brown-Forman Corp. 1.5
Barton Constellation Brands Inc. 1.2
Black Velvet Constellation Brands Inc. 1.2
Hennessy Schieffelin & Somerset Inc. 1.2
McCormick McCormick Distilling Co. Inc. 1.2
Popov Diageo North America 1.1
Stolichnaya Allied Domecq Spirits USA 1.1
Source: Euromonitor International, Chicago
Sales of spirits by subsector: total volume 2003
Category 2003 (000 litres)
Whisk(e)y 393,602.9
Single malt Scotch whisky 7,192.9
Blended Scotch whisky 76,134.5
Bourbon/other U.S. whiskey 168,572.7
Canadian whisky 137,395.1
Irish whisky 4,307.7
Brandy and Cognac 91,701.1
Brandy 59,798.7
Cognac 31,902.4
White spirits 484,967.4
Gin 99,912.1
Vodka 385,055.3
Rum 176,556.2
White rum 98,302.1
Dark rum 78,254.1
Tequila (and mezcal) 72,425.3
Liqueurs 159,287.4
Cream-based liqueurs 23,508.4
Bitters 10,471.8
Other liqueurs 125,307.2
Other spirits 11,656.8
Total Spirits 1,390,197.1
Source: Euromonitor International, Chicago
Sales of spirits by subsector: total value 2003
Category 2003 (U.S.$ million)
Whisk(e)y 11,354.4
Single malt Scotch whisky 583.0
Blended Scotch whisky 2,502.1
Bourbon/other U.S. whiskey 4,441.5
Canadian whisky 3,587.9
Irish whisky 239.9
Brandy and Cognac 4,748.8
Brandy 1,581.5
Cognac 3,167.3
White spirits 12,505.6
Gin 2,684.4
Vodka 9,821.2
Rum 4,630.0
White rum 2,458.1
Dark rum 2,171.9
Tequila (and mezcal) 2,139.5
Liqueurs 5,662.5
Cream-based liqueurs 809.7
Bitters 426.6
Other liqueurs 4,426.2
Other spirits 442.0
Total Spirits 41,482.8
Source: Euromonitor International, Chicago

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