Irish Whiskey, Tequila Led Spirited Sales Growth in '06

Americans continue to exhibit a growing thirst for hard liquor, with Irish whiskey and tequila showing particularly marked jumps in popularity. Total U.S. spirits consumption rose 3.7% last year to 176.7 million nine-liter cases, marking the ninth consecutive year of heady growth, according to the just-released "Adams Liquor Handbook 2007."

Irish whiskey--while still small in terms of total market share, at 732,000 cases--showed the largest volume percentage gain last year: 19%. Nor was this a fluke. U.S. sales of the potent libations doubled between 2000 and 2005, and America now looks to have surpassed Ireland itself as the world's largest market for these whiskies.

Irish whisky's appeal has also been growing worldwide, with sales increasing at a 3.8% CAGR since 1998, according to Diageo plc. Diageo jumped into the category big-time in 2005 when it acquired the #2 brand, Bushmills, from Pernod Ricard. Meanwhile, Pernod Ricard's Jameson, the #1 brand, became the world's fastest-growing whiskey in 2004, and hit the two million-case mark last year.



While whiskey sales in general have been on the rise--total U.S. sales rose 1.2%, to 45 million cases last year--Irish varieties in particular have benefited from the youth-oriented skew of increased spirits consumption. "Irish whiskey is lighter in body and less harsh than most other whiskies, and so tends to be an entry point into these spirits," says Eric Schmidt, research director for the Adams Beverage Group, publishers of the handbook.

Jameson's heavy marketing in recent years hasn't hurt. "Jameson is responsible for a lot of the growth," confirms Schmidt. "It's really taken off with the younger consumer." (Jameson has about 55% of the U.S. Irish whiskey market, to Bushmills' 25%.)

Furthermore, Jameson, like virtually all premium brands, has benefited from Americans' increasing propensity to trade up--most often sticking with their favorite categories, but opting for higher-priced and super-premium brands. "Price sensitivity isn't a barrier anymore," sums up Charles Forman, vice president, group publisher for Adams. Young adult consumers are fueling the trend by seeking status-symbol association, as well as flavor appeal, he adds.

Of course, Americans aren't just drinking their liquor neat. In fact, the apparently unabating cocktail craze continues to be the major driver of spirits sales.

Tequila is a perfect case in point: Much of the category's phenomenal growth in recent years is tied directly to the popularity of the margarita. The margarita is the most popular cocktail in the U.S., accounting for approximately 17% of all mixed drinks sold on-premise, according to Brown-Forman Corp. (which, by no coincidence, has this year alone acquired the Casa Herradura tequila brand and full global rights to the Don Eduardo super-premium brand). Some experts estimate that margaritas account for 70% of all tequila consumed in the country.

The youth factor, the "premiumization" of tequila and the growing Mexican population are also spurring U.S. tequila sales. Adams reports that sales jumped 10.8%, to 10 million cases, last year. And while the category is still eighth-largest--representing less than 6% of the total distilled spirits market--its sales increased by about 30% between 2000 and 2006, according to AC Nielsen. (Nielsen notes that there were 40 premium tequila brands in the U.S. as of 2006, compared to 13 in 2004.)

As for the future, Marc Scheinman, author of "The Surging Global Tequila Market," predicts that the liquor's U.S. sales will continue to grow by 8% in volume and 10% in value annually until at least 2010--at which point, the U.S. will represent over 54% of the total global tequila market.

Liquor-wise, the old standbys are also doing just fine. Number one choice vodka chalked up 6.8% volume growth last year, to reach 49.4 million cases; rum consumption rose 3.8%, to 22.9 million cases; and cordials and liqueurs grew 3.2% to 21.4 million cases, the Adams data shows.

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