American craft spirits are recovering from the pandemic’s downturn, according to new data from the Craft Spirits Data Project.
Compiled by the American Craft Spirits Association (ACSA) and Parks Street, the annual report released this week shows that craft distillers are growing in number of distilleries and in sales, although employment levels are still down compared to pre-pandemic levels.
Surpassing $7.5 billion in sales in 2021, the annual growth rate in value terms for U.S. craft spirits reached 12.2% this year. The sector also broke a record in doing 13 million 9-liter cases in retail sales in 2021. Craft spirits’ market share of total U.S. spirits grew slightly as well, up from 7.1% to 7.5% in value.
Exports played an important role for craft distillers, increasing by 58% and reaching 164,000 9-liter cases in 2021. Last year, the European Union dropped tariffs on U.S. rum, brandy and vodka, which may have cleared the path for opportunities abroad.
“Removal of trade barriers perhaps helped, but also the volume of fresh spirits that’s being produced with new market channels and new countries opening to our craft spirits industry,” said Margie A.S. Lehrman, chief executive officer of the ACSA, in a briefing.
As of August 2022, the number of active U.S. craft distillers grew by 17.4% annually to 2,687. That’s a dramatic increase from past years: active craft distillers inched up by 1% in 2021 and 10% in 2020. While there is no legal definition of a craft distillery, the data project defines them as licensed U.S. distilled spirits producers that have removed 750,000 proof gallons or less from bond, market themselves as craft, are not openly controlled by a large supplier, and have no proven violation of the ACSA Code of Ethics.
The report also painted a picture of a fairly concentrated market: large craft distillers make up just 1.7% of the total number of craft producers but are responsible for 55.9% of the cases sold. Some states are craftier than others too: 50% of craft distillers are concentrated in ten states, with California, New York, Texas, Pennsylvania, and Washington leading the pack. Texas has made the most headway, up from number four last year, and number five when the data project kicked off seven years ago.
There was some less positive news for the sector. On average, producers invested $337,100 in 2021, which was a slight decrease (-2%) from 2020. However, the uptick in craft producer count bolstered the total amount invested in the U.S. craft spirits segment by 9% year-over-year to $826 million. Distillers surveyed were primarily motivated to invest in additional production to meet demand, followed by construction to increase visitor space.
Employment numbers within the U.S. craft market are trending upwards to a total of 24,255 full-time domestic employees, after a nearly 50% decrease in 2020. But that number is still not back to pre-pandemic levels, which clocked in at 30,849 full-time domestic employees in 2019.
Looking towards 2023, the membership and advocacy group pointed to advocating for direct to consumer shipping as a priority for continued craft distiller success. Other spirit industry associations have also been pushing to change direct-to-consumer shipping laws which vary by state.
“We will be looking very heavily at direct-to-consumer shipping, of course making sure that there are methods employed to keep it safe,” said Lehrman. “We will be also looking at different channels for market access by way of looking at state regulations and helping those states to also perhaps modernize their laws directly with what the 2022 marketplace looks like.”