Before Russia invaded Ukraine, America's most popular spirit, vodka, had already been facing challenges.

• Since the 1970s, vodka has consistently been the most popular spirit in the U.S., generating over $7.3 billion in revenue in 2021 alone.
• In recent years, the market share of vodka has decreased as other spirits such as tequila and whiskey have gained more popularity.
• The historical association of vodka with Russia is causing problems, with lawmakers and consumers shunning Russian vodka and President Biden imposing a ban on imports. However, these U.S. imports account for less than 1% of vodka consumption.

In the U.S. liquor market, vodka has long held the dominant position, as seen in characters on "Mad Men" and "Sex and the City."

Since the 1970s, vodka has been the top-selling spirit in the U.S., generating over $7.3 billion in revenue in 2021. This is $2 billion more than the second-highest selling spirit, tequila and mezcal, according to the Distilled Spirits Council of the United States. In 2021, over 78.1 million 9-liter cases of vodka were sold in the U.S., which is roughly the same number of 9-liter cases of American whiskey, tequila and mezcal, and rum combined.

In the 1940s, when World War II-era mandates forced whiskey distilleries to produce alcohol for ammunition and rubber, spirits and cocktail historian David Wondrich observed a 40-year period where vodka reigned supreme.

Wondrich stated that the spirits market was characterized by individuals either consuming vodka or opting for other beverages.

The following brands have been elevated: Smirnoff, Ketel One, Svedka, Absolut, Grey Goose, and New Amsterdam.

Impact Databank reports that Tito's, a brand produced by Fifth Generation in Austin, was the top-selling spirit in the U.S. in 2021, with over 11 million cases sold and a 6.3% growth rate year-over-year.

Over the past few years, vodka's popularity has decreased due to various reasons, including the increasing popularity of tequila and mezcal, the rise of the craft cocktail movement, and a consumer preference for spirits with more flavor.

Vodka was once on track to surpass all other products in sales, but that trend has reversed, and many other items are now gaining ground at vodka's expense, according to Wondrich. He explained that this is due to a marketing strategy that focused on promoting the least offensive product that the majority of people would accept, which eventually led to boredom among consumers.

The growth of whiskey and tequila

In 2010, vodka accounted for 33% of the entire spirits market in the U.S., while the broader whisky category made up 24.6%, and agave-based spirits like tequila and mezcal made up 6.1%, according to IWSR Drinks Market Analysis.

According to IWSR Drinks Market Analysis, vodka held a 32.1% market share in 2020, while whisky and agave-based spirits had 30.5% and 9.4% respectively.

IWSR Drinks Market Analysis COO Brandy Rand stated that vodka had a 4.2% compound annual growth rate from 2000 to 2020, while whisky grew at a rate of 3%. However, in the past five years, whisky has experienced a significant growth spurt, with a 5.1% increase compared to vodka's 1.7% growth.

Rand stated that by the end of 2022, the whisky category is expected to surpass vodka in volume sales. However, when considering revenue, whisky has been significantly higher than vodka for years, with most whiskies being premium-priced while standard-priced vodka accounts for the majority of the vodka category's value.

The surge in demand for tequila and mezcal has led to a decline in the popularity of vodka, resulting in a 12% growth in the U.S. spirits industry, worth $35.8 billion in 2021. Tequila and mezcal accounted for over 31% of the total increase in spirits revenue.

Tequila has the potential to surpass vodka in popularity because it is no longer limited to margaritas and offers a wide range of flavors for cocktails and beverages, according to John Coyle, director of sales and engagement at T Edward Wines & Spirits.

The growth of the tequila and mezcal industry can be attributed to celebrity investment and endorsement, with notable examples including Diageo's acquisition of Casamigos and the launch of tequilas by Kendall Jenner and Dwayne 'The Rock' Johnson in 2021, as well as Constellation Brands' investment in the mezcal started by "Breaking Bad" co-stars Bryan Cranston and Aaron Paul.

In the first half of its fiscal 2022, Diageo, which owns the high-end tequila brand Don Julio, reported a 56% increase in tequila sales compared to the previous year. The company forecasts that tequila sales will grow at a faster rate than the rest of the spirits industry over the next five to 10 years.

Tequila's popularity is significant and has strong multicultural growth, as Diageo CEO Ivan Menezes stated during the company's recent earnings conference call in January. Tequila appeals to various age groups, genders, dayparts, occasions, and drink types, and is no longer limited to shots and margaritas, as it used to be in the past.

Connection to Russia

Vodka is now also facing another challenge — its historical ties to Russia.

In response to Russia's invasion of Ukraine, various groups, including lawmakers, bar owners, retailers, and consumers, have urged boycotts of brands with ties to Russia or perceived links to Russia, such as vodka brands.

On Friday, U.S President Joe Biden signed an executive order prohibiting the import of various Russian products into the United States, including vodka and other alcoholic beverages.

Biden stated that the Russian economy is being severely impacted by the combined effect of our sanctions and export restrictions.

Several states, including North Carolina and West Virginia, have independently prohibited the sale of Russian-made alcohol. The Pennsylvania Liquor Control Board has removed all Russian-made products from its licensed stores, with Board Chairman Tim Holden stating, "In light of the changing political and economic landscape, it is the appropriate course of action."

Although many vodka brands market themselves as having a Russian heritage, most of the vodka consumed in the U.S. is not actually Russian.

The U.S. consumes more than half of its vodka domestically, according to IWSR Drinks Market Analysis. Meanwhile, imported Russian vodka accounts for less than 1% of the total vodka volume in the U.S., according to Rand, who considers this to be insignificant to the category's growth.

Over 90% of Russia's vodka production is consumed domestically, making it the world's largest vodka producer, accounting for more than 30% of global production.

Stoli Group, a Luxembourg-based vodka producer, officially rebranded from Stolichnaya to Stoli last week in an effort to distance itself from Russia and accurately represent its roots in Latvia. The rebrand was driven by the founder's opposition to the Putin regime, the determination of Stoli employees to take action, and a desire to accurately represent the brand's origins.

Since my opposition to Putin led to my exile from Russia in 2002, I have remained proud of the Stolichnaya brand. However, we have decided to rebrand entirely as the name no longer represents our organization. My wish is for 'Stoli' to symbolize peace in Europe and unity with Ukraine.

In recent years, the Russian government has clashed with Shefler over the global trademarks for vodka, with Russia arguing that the trademarks were incorrectly sold by a company during Russia's privatization following the dissolution of the Soviet Union.

The vodka industry has experienced fluctuations in popularity due to its ties to Russia. In the 1980s, Stolichnaya was the most imported vodka in the U.S. by a significant margin, but its popularity declined after the Soviet Union shot down Korean Air Lines Flight 007 in 1983. Meanwhile, Absolut launched in America with an ad campaign featuring Andy Warhol, which helped boost its popularity.

Although hardly any vodka in America is Russian, the Russian tie has always been a vulnerability for vodka, according to Wondrich. However, people tend to work in broad symbolism and it won't aid the situation.

Smirnoff, founded by a Russian émigré, opened a distillery in Connecticut after the end of prohibition and was later sold to Diageo. Despite this, the perception of Russian ties persists, as Smirnoff's website proudly states its American production.

While vodka is expected to remain the top-selling spirit category in the U.S. for the next several years, it is unlikely to regain its former dominance as the bulk of the market.

Coyle concurred, stating that vodka's popularity has "diminished."

Coyle stated that while visiting a cocktail bar, one can always expect to find a vodka cocktail. However, the trend of James Bond ordering a particular vodka brand is declining, and it is unlikely to be the driving force behind the growth of the spirits industry in the future.