Despite little growth, spirits sales surpassed beer and wine for the second consecutive year.

• In 2023, the U.S. spirits market maintained its dominance and surpassed beer and wine for the second consecutive year.
• Supplier sales in the U.S. barely grew in 2023 to $37.7 billion.
• Despite the growth of other categories, vodka, high-end tequila and mezcal, and American whiskey remain popular among consumers. Meanwhile, ready-to-drink cocktails are experiencing the fastest growth.

In 2023, the spirits industry maintained its market share advantage over beer and wine, despite showing minimal growth, as indicated by new data released on Wednesday.

Despite a slight 0.2% increase in U.S. spirits revenue to $37.7 billion, the Distilled Spirits Council of the U.S. reports that the industry experienced minimal growth overall. However, spirits sales outperformed beer and wine sales by 0.4% and 26.1%, respectively.

Despite high inflation and interest rates, the beverage alcohol industry has remained resilient and experienced growth following the Covid-19 pandemic surge, according to Chris Swonger, president and CEO of DISCUS.

In 2023, the spirits sector demonstrated resilience in the face of the pandemic, maintaining its market share lead in the total beverage alcohol market. Despite the unprecedented and unpredictable sales growth experienced during the pandemic, the spirits market is now recalibrating.

In 2023, vodka remained the top-selling spirit, while tequila and mezcal gained a larger lead over American whiskey, which was among the fastest-growing spirits categories by revenue.

Despite the weakness reported this quarter by premium spirits makers such as Diageo and Hennessy, Swonger remained optimistic about the spirits industry's strategy to push consumers to pricier bottles and labels.

During the Covid-19 pandemic, consumers in quarantine sought out higher-quality spirits. Since the peak growth in 2021, luxury spirits sales have started to decline.

In November, Diageo's shares plummeted after the company cut guidance on a predicted slowdown in growth for the first half of its fiscal year. Additionally, LVMH experienced weakness in premium spirits and wine in 2023, resulting in a 4% year-over-year organic revenue decline, which was the only business segment to report such a decline.

Despite some industry weaknesses, the growth of ready-to-drink cocktails has been a positive development for investors.

Last year, the fastest-growing spirits category was premixed cocktails, with a 26.7% increase in revenue to $2.8 billion, according to DISCUS.

Although the popularity of hard seltzers increased from 2017 to 2021, spirits-based products have experienced even faster growth, despite starting from a smaller base, according to Marten Lodewijks, head of consulting at IWSR. Spirits-based products, including vodka and tequila-based hard seltzers, provide consumers with a more premium experience, which has contributed to their success.

In 2022, more beverage companies entered the market, including one that launched a ready-to-drink cocktail featuring Jack Daniel's whiskey.

In 2023, American whiskey received more positive news as the U.S. and European Union agreed to extend the suspension of EU tariffs on the liquor until March 31, 2025.