Top Of The Line Taste
Premium products and flavor additions are hits with consumers

Hip-hop found a wine. Cristal champagne, Courvoisier Cognac, Patron tequila and Hpnotiq liqueur all have been mentioned in popular songs or have been seen in music videos, but late last year wine reaped this benefit when rapper/producer and Grammy winner Kanye West mentioned Moscato wine in an MTV show about him. In turn, Moscato stands to make large strides in 2006 as the general public learns more about the wine from celebrities. Although the wine is still uncommon in the United States, this is part of the appeal among alcohol drinks that have become status symbols to consumers.
U.S. spirits sales by volume
(millions of liters)
Category 2005 2010
Whisk(e)y 405.3 397.6
Brandy and Cognac 95.6 105.4
Gin and Vodka 533.8 743.3
Rum 202.6 243.6
Tequila (and mezcal) 82.0 118.8
Liqueurs 164.0 188.6
Other spirits 22.3 21.2
TOTAL CATEGORY 1,505.5 1,818.4
Source: Euromonitor International 2006
Top spirits by brand
Brand DOLLAR SALES (IN MILLIONS) % change vs. prior year Market Share % change vs. prior year
Smirnoff Vodka $166.1 9.0% 5.7 0.2%
Bacardi Rum $155.7 6.6% 5.3 0.1%
Captain Morgan Rum $112.7 14.6% 3.9 0.3%
Jack Daniels Tennessee Whiskey $104.4 9.4% 3.6 0.1%
Jose Cuervo Tequila $85.7 0.8% 2.9 -0.1%
Absolut Vodka $85.6 8.0% 2.9 0.1%
Crown Royal Canadian Whisky $69.7 6.8% 2.4 0.0%
Private Label DomESTIC Vodka $64.2 3.7% 2.2 0.0%
Jim Beam Bourbon $59.2 5.9% 2.0 0.0%
Skyy Vodka $54.3 10.6% 1.9 0.1%
Total Category $2,926.5 5.3%
Source: Information Resources Inc., Total food and drug outlets (excluding Wal-Mart) for the 52 weeks ending March 19, 2006.
Spirits continued their strong performance in 2005, attributed largely to the increase in flavor offerings that appeal to consumers 21 to 35 years old, according to Euromonitor International’s 2006 Alcoholic Drinks in the U.S. report. Spirit volume reached more than 1.5 billion liters in 2005, the report said.
Gains for Irish whiskey, brandy, Cognac, vodka, rum and tequila drove overall sales of spirits. While some other whisk(e)y varieties sales remained flat, Irish whiskey’s increased penetration of the U.S. marketplace contributed to its 9 percent increase in volume sales in 2005. While whisk(e)y is positioned to appeal to more established drinkers, Cognac, and even brandy, continues to benefit from marketing to younger, hip consumers.
The growing popularity of Latin culture added to rum and tequila sales in 2005. Rum, especially flavored varieties, remained popular with younger consumers. Bacardi rum continued as the largest selling U.S. spirits brand by volume in 2004, and Bacardi’s overall market share stayed at just more than 5 percent. Bacardi nevertheless lost share within the rum category as Captain Morgan increased volume share. Third place Malibu rum sales increased as well, on the strength of new tropical-flavored white rums.
Aggressive promotional support from leading manufacturers has increased tequila sales since 2001, and the growing popularity of Latin mixed drinks that use tequila, such as Margaritas, have helped as well. Jose Cuervo, the largest U.S. tequila brand and the fifth-largest overall distilled spirits brand by volume, saw sales grow by 5 percent in 2004. Patron, a smaller super-premium tequila, grew volume 67 percent in 2004, benefiting from U.S. consumers’ move toward premium and super-premium distilled spirits.
Vodka sales continued to grow in 2005 as a result of its popularity in mixed drinks such as vodka martinis, gimlets, tonics and Cosmopolitans. The increase in flavored vodkas and the growth in flavored-vodka mixed drinks also are contributing to vodka’s popularity. Current value growth continues to outpace volume gains as a result of consumers trading up from mid-priced brands, such as Smirnoff, to premium-priced brands such as Belvedere, Grey Goose and Stolichnaya.
U.S. spirits sales growth is expected to accelerate as the economy recovers and growth trends, such as the growing Hispanic population and increased interest in premium-priced products, further develop. Between 2005 and 2010, volume sales are predicted to see a compound annual growth rate (CAGR) of 4 percent, while constant value sales look set for a 5 percent CAGR, as consumers continue spending more on premium products. Tequila is forecast to see growth in volume sales of 45 percent between 2005 and 2010. Vodka is forecast to grow in volume by 47 percent during the same period.
New spirits products seem to emulate the appeal of new flavors and premium pricing. In tune with flavor trends, Jose Cuervo International released Cuervo Flavored Tequilas, a new selection of premium tequilas with hints of orange, lime and tropical fruit flavors. Citrico, Oranjo and Tropina are premium silver-styled tequilas combined with natural fruit flavors. Adding flavor to the whiskey category, Phillips Distilling Co., Minneapolis, released Phillips Union Cherry Whiskey and Phillips Union Vanilla Whiskey to its original blend of Kentucky Bourbon and Canadian Whisky. Hoping to capitalize on the income flavors brought to vodka, the cherry- and vanilla-flavored whiskeys are mixable, and offer spirit drinkers another reason to turn to whiskey, the company says.
In the rum segment, Bacardi introduced Grand Melón to its line of flavored rums. Crowned with a red cap and distinctive label, the watermelon-flavored rum pairs well in fruit juice, tonic and soda mixes. Pernod Ricard USA also expanded its Seagram’s Gin & Juice line with Purple Rage, a new prepared cocktail flavor with a grape taste and purple packaging. Absolut Vodka released its eighth flavor, Ruby Red, recently as well. With a floral aroma and notes of grapefruit, the company plans for the new vodka to become a staple ingredient in custom-made cocktails.
Premium spirits also are seeing new launches, including Beam Global Spirits & Wine Inc.’s release of Roth Vodka, a luxury California vodka made from premium wine grapes targeted at sommeliers and mixologists. Pernod Ricard USA increased its Martell Cognac offerings with Martell Noblige, adding a segment to the Cognac category – “Qualite Superieur” – that finds its place a step above VSOP’s, the company says. Jose Cuervo added to its tequila line as well, with the dark super-premium Black Medallion, and Diageo released the rarest addition to its Crown Royal family with Crown Royal XR, an ultra-premium Canadian whisky crafted from the last remaining batch of whiskies from its Waterloo Distillery.
Following the same trend as the spirits category in the United States, Wine repeated increases in both price and volume sales last year. New labels, packaging options and greater availability helped to broaden wine’s appeal to a mainstream audience. Domestic and foreign wine sales in the U.S. market grew 5 percent in 2005 to an estimated 703 million gallons, valued at $26 billion at retail, the Wine Institute reports. Of the total U.S. sales, table wine amounted to 619 million gallons, dessert wine reached 53 million gallons and champagne and sparkling wine grew to 30 million.
U.S. wine sales by volume
(millions of liters)
Category 2005 2010
Still Light Grape Wine 2,202.4 2,450.8
Sparkling Wine 116.6 129.9
Fortified Wind and Vermouth 96.6 87.0
Non-Grape Wine 15.6 17.6
Total CATEGORY 2,431.2 2,685.3
Source: Euromonitor International 2006
Still light grape wine – red, white and rosé – leads the wine category, making up more than 90 percent of volume sales and more than 80 percent of value sales in 2005, Euromonitor says. Still red and white wines are running neck-and-neck in terms of volume sales, each accounting for about 41 percent, but red wine still holds a slight lead over still white wine. Consumer interest in drinking more and different varieties of wine benefited still red wine, particularly Merlot and Cabernet Sauvignon.
Domestic California wine sales reached another record high of 441 million gallons in 2005 with a retail value of $16.5 billion, according to the Wine Institute and the Gomberg-Fredrikson Report. Total California winery shipments to domestic and international markets reached 532 million gallons last year.
“Wine has enjoyed the most positive image it has had in years from consumers, the media and government,” says Robert Koch, president and chief executive officer of the Wine Institute. “The May 2005 U.S. Supreme Court decision on direct-to-consumer sales not only benefited U.S. wineries, but had a favorable impact on public opinion and awareness of wine.”
Last May, the U.S. Supreme Court ruled that discriminatory bans on interstate, direct-to-consumers wine shipments in New York and Michigan were unconstitutional, allowing the third- and tenth-largest wine consuming states to join 27 states that allow direct shipping of wine to consumers. Another ruling on direct distribution came this year when the Washington State court came down in favor of Costco Wholesale Corp., which contended the state’s alcohol distribution law violated federal antitrust law. The state’s law allowed in-state beer and wine producers to ship directly to retailers, but required out-of-state producers to sell products through wholesalers and distributors.
Internationally, preliminary export numbers for 2005 declined 17 percent in value and 16 percent in volume, following substantial growth in 2004 of 28 percent and 26 percent, respectively, according to the U.S. Foreign Agricultural Service. The primary reasons for the decrease involve a change in European sales, the Wine Institute says. To save costs, some wineries are shipping their brands as bulk wine instead of bottled product. The bulk wine is then bottled abroad for distribution throughout Europe. The dollar’s two-year high against the Euro is also a contributing factor. U.S. wine exports – 95 percent from California – totaled $658 million, with 101 million gallons. Exports to Canada increased 16 percent in 2005 and sales to Japan were steady, following a significant increase in 2004.
Despite a consistent trend of trading up, economy priced wine – priced at less than $2.99 for a 750-ml. bottle – still accounts for almost 37 percent of off-trade U.S. wine volume sales, Euromonitor reports. But economy wines’ share of volume sales fell by 4 percentage points from 2000 to 2005. As well, the share of standard wines priced between $3 and $6.99 dropped by 2 percent during the same period. Wines priced $10 and above saw the most dramatic rise in volume sales from 2000 to 2005, as most consumers still equate higher prices with better wine. By 2005, volume sales of these wines rose by almost 50 percent.
Top still wine brands
Brand DOLLAR SALES (IN MILLIONS) % change vs. prior year Market Share % change vs. prior year
Yellow Tail (Australia) $173.8 19.3% 4.0 0.3%
Franzia (California) $160.0 6.0% 3.7 -0.1%
Sutter Home (California) $148.1 2.8% 3.4 -0.2%
Woodbridge By Robert Mondavi (California) $138.1 0.5% 3.2 -0.3%
Kendall Jackson Vintners
Reserve (California) $129.2 3.6% 3.0 -0.2%
Carlo Rossi (California) $106.2 -3.3% 2.5 -0.3%
Beringer (California) $104.3 9.1% 2.4 0.0%
Livingston Cellars (California) $103.1 -0.7% 2.4 -0.3%
EJ Gallo Twin Valley (California) $89.7 -4.5% 2.1 -0.3%
Almaden (California) $83.0 -8.0% 1.9 -0.4%
Total Category $4,554.5 9.4%
Source: Information Resources Inc., Total food and drug outlets (excluding Wal-Mart) for the 52 weeks ending March 19, 2006.
An increase in merchandising support appeared to contribute to the success of top wine brands, Information Resources Inc. reports in its 2005 Table Wine Top 30 Brand Performers study. The vast majority of its top 30 brands, 83 percent, are premium priced at $5.50 and above, and 29 of the 30 brands furthered their presence at retail with increased distribution.
One of the more persistent trends in wine sales includes the growing popularity of boxed wines, especially more upscale brands. In 2005, upscale labels such as Black Box wine and Block Wine from Kendall-Jackson made headway in boxed wine sales. Other brands such as Three Thieves, St. Helena, Calif., also are rethinking wine packaging, with its four-pack Tetra Prisma aseptic package. In April 2005, the company launched the Bandit Cabernet in a Tetra Brik aseptic package. It extended its offering with Bandit Cabernet and Bandit California Pinot Grigio in a single-serve 250-ml. carton this month. Additionally, Ironwine from Argentina launched in a 345-cm. aluminum can in a Malbec-Cabernet Sauvignon blend and a Chenin Blanc. BI