Spurred by growing popularity among younger consumers and numerous flavored product introductions, 2004 was a good year for distilled spirits. And the trend should continue for the next 10 years, during which world consumption of spirits will increase by 20 percent in terms of volume and by 22.5 percent in terms of value, reports the 2005 International Wine & Spirits Record (IWSR) study, The World Wine and Spirits Market with Outlook to 2008.

The overall spirits category has exhibited positive growth trends of 4.7 percent, driven by increases across all sub-categories except gin and Scotch whisky (-0.1 percent and -0.9 percent, respectively). Future growth opportunities lie in flavored and super-premium spirits, with the latter being the fastest-growing market, reports Information Resources Inc.

Vodka holds the biggest share of the total spirits earnings pie, tallying 27.6 percent of sales. Vodka is followed by North American whiskey and rum, with 21.6 percent and 13.3 percent of sales, respectively. In terms of dollar sales change vs. a year ago, Irish whisky ranks as the biggest mover and shaker (+13.7 percent), followed by vodka (+8 percent) and rum (+7.4 percent).

Of the new product introductions, more than 43 percent of items were concentrated within the vodka and rum categories, IRI reports. The past year has witnessed the introduction of numerous flavored vodkas and rums, approximately 36 of 58 new items, notably Malibu Mango and Pineapple flavored rums, Captain Morgan Parrot Bay Mango and Pineapple flavored rums and Smirnoff Watermelon and Strawberry Twist flavored vodka, all extensions of already popular sub-brands. An interesting side note: Smirnoff Twist flavors account for five of the Top 10 selling flavored vodkas and 50 percent of the flavored vodka share.

Consumers are also taking a keener interest in wine. Global wine volume increased by 1.9 percent in 2004 to total 26.4 billion liters, Euromonitor International reports in The World Market for Wine. Global wine value sales in 2004 rose by 10.9 percent to total $222.4 billion.

A key factor in double-digit value growth in 2004 was price inflation due to the shortage of wine in the market in correlation to poor grape harvests around the globe. A second driving factor was the consumer trend toward trading-up. Increased sales of champagne in 2004 testified to this trend, while mid-priced New World wines were increasingly substituted for cheaper domestically produced products in major wine-producing regions such as Western and Eastern Europe and North America, Euromonitor reports.

Two factors also inhibited value growth in 2004, however. The increase in private label sales through supermarkets and discounters in developed markets, and the significant drop in value sales in Japan (-15.4 percent between 1999 and 2004), Euromonitor says. The popularity of good quality “value” brands such as Bronco Wines’ Charles Shaw also posed a challenge to manufacturers of premium types of wine. This challenge is expected to increase during the next three years as the plentiful grape crush of 2004 floods the global market with inexpensive wine.

Wine sales in the United States from domestic and foreign producers grew 4 percent to 668 million gallons in 2004, reports the Wine Institute. The estimated retail value of wine shipments to the United States is $23.2 billion. Of the total, table wine amounted to 590.5 million gallons; dessert wine was 47.5 million gallons; champagne and sparkling wine, 30 million gallons, the Wine Institute says. California wines account for a 64 percent share of the U.S. wine market, or about two of every three bottles sold.  

Wine volume in U.S. supermarkets grew 2.7 percent in 2004 over the previous year, while the value grew 5.1 percent, according to ACNielsen. For the first time in recent history, red wine edged out white by volume in food stores. Red held a 40.5 percent market share; white, a 40.4 percent share; and blush a 19.1 percent share of the case volume.

All wine price segments are experiencing growth, and according to forecasts by IWSR, wines sold for more than $5 a bottle will represent 47.8 percent of the total volume consumed in the United States by 2008. Between 2003 and 2008, wines in the $5 to $10 price segment should increase the most (+30 percent), while those sold for less than $5 a bottle should witness new and significant growth after a period of decline.

IWSR also reports that the United States is poised to become the leading consumer of still light table wines by 2008. Americans are projected to drink more than 2.7 billion liters of still light wines by 2008, catapulting volume consumption ahead of Italy and France to the top position.

U.S. wine exports, 95 percent of which are from California, surged to $794 million in winery revenues in 2004, a 28 percent jump over the previous year, according to figures released by the U.S. Department of Commerce. Exports exceeded the previous year by $173 million – by far the largest yearly increase ever. By volume, exports increased 29 percent to 119 million gallons (450 million liters.)

The top market for California wine is the United Kingdom, which experienced a strong 41 percent increase in revenues to nearly $300 million and a volume jump of 20 percent to 38 million gallons. The other leading markets are: Canada, $123.8 million; the Netherlands, $85.6 million; Japan, $82.1 million; Germany, $26.8 million; Mexico, $14.5 million; Switzerland, $14 million; Denmark, $14 million; Ireland, $13.9 million; Belgium/Luxembourg, $13.4 million.

The weaker dollar has allowed California wineries to better compete at key price points in the world export market, says the Wine Institute. Nearly one in every seven bottles of wine consumed in the United Kingdom now comes from the California, and the Wine Institute reports that exports to the European continent (excluding the United Kingdom) reached a record 10.6 million cases in 2004. Packaged California table wine brands account for most of the sales, which, along with other U.S. table wine exports, total $592 million, up 19 percent. BI