Distilled Spirits Council 2017 Economic Report
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Distilled Spirits Council 2016 ECONOMIC BRIEFING February 7, 2017 • New York City @DistilledSpirit #USspirits 1 Kraig R. Naasz Distilled Spirits Council PRESIDENT & CEO 2 Spirits Sector Growth Accelerates 2016 Economic Overview • Volume growth up 2.4 percent • Revenue growth up 4.5 percent • Export volume growth up 6.8 percent • Market share continues to rise 3 2016 Key Policy Successes • Consumers want spirits in grocery stores — Colorado passed legislation allowing spirits, beer and wine • More ‘Brunch bills’ approved — Connecticut, New York and West Virginia now allow alcohol to be served earlier • Spirits tastings expand — Alabama, Arizona and Ohio expand tastings — 47 states now allow some form of spirits tastings — Tastings lead to premiumization • More wet/dry elections won — 21 wet-dry alcohol wins; expanded access for 354,000 adult consumers “Hickenlooper signs bill “BOSTON CITY “New York bars, restaurants “DISTILLED SPIRITS COUNCIL REJECTS get OK to sell booze as early expanding liquor sales in as 10 a.m. on Sundays as COUNCIL SLAMS grocery stores” NEW BOOZE TAX” Gov. Cuomo signs ‘Brunch Bill’” OREGON TAX” 4 Positive Social Responsibility Trend 2016 Federal Data: • Underage and binge drinking at record lows • Driving under the influence of alcohol falls to new low • Spirits community contributes to progress through responsibility programs and support for tough laws “New federal statistics show that the rate of drunken driving in the United States fell to a 13-year low in 2014, the latest year for which data is available.” “For all three grades, both annual and monthly prevalence of alcohol use are at historic lows over the life of the study.” “Drunken driving rates fall to new low New federal statistics show that the rate of drunken driving in the United States fell to a 13-year low in 2014, the latest year for which data are available.” 5 Encouraging Moderation • The 2016 Surgeon General’s Report reaffirms “moderate alcohol use can be part of a healthy diet, but only when used by adults of legal drinking age.” • 2015-2020 Dietary Guidelines adopts new “drink-equivalent” terminology: — 1.5 oz. of 80-proof distilled spirits (40 percent) — 5 oz. of wine (12 percent) — 12 oz. of regular beer (5 percent) — Drink-equivalents of beer, wine and spirits contain same amount of alcohol • Council partnered with National Association of Broadcasters on moderation PSA 6 Encouraging Moderation 7 New Political Landscape • A new pro-business president • GOP majority in both houses • Top administration priorities shared by spirits sector – Reform tax code – Reduce regulatory burden – Renegotiate and forge new trade agreements • Spirits sector does better when the economy is growing • We look forward to working with the administration to advance these priorities 8 2017 Legislative Outlook: Modernization Trend Continues • Craft Beverage Modernization and Tax Reform Act — Supported by majority of lawmakers in both houses last session — Lowering FET will spur investment and job creation at distilleries — First time taxes on distilled spirits could be reduced since the Civil War • Sunday sales considered in Minnesota, Tennessee & West Virginia — Consumers want it, editorial boards support, lawmakers finally catching up • Spirits tastings expansions in Alaska, Georgia & North Carolina • Even in conservative Utah, legislation introduced to modernize “Curtain call for “It’s time to repeal the “Sen. Wyden Throws Utah’s ‘Zion Curtain’ ban on Sunday liquor Alcohol Bill Into The Mix” may be at hand” sales in Minnesota” 9 Distilled Spirits Council STRATEGIC RESEARCH INITIATIVE 10 Industry Perceptions 11 Top of the Mind Phrases to Describe the Spirits Sector 12 State of Trust: Alcohol Sector Compared to other Sectors in the U.S. Trust Barometer General Population (Rated 6-9 on 9-point scale) Industry 2016 Technology 73% Food & Beverage 70% Business 64% The spirits and Spirits Industry 54% alcohol industry are in the Financial Services 54% top 50thpercentile Alcohol Industry, overall 51% Media 47% Pharmaceutical 47% Government 39% 13 Trust and Favorability of the Alcohol Sector Industry Trust Rated 6-9 Rated 1-5 (Trust) (Distrust) Alcohol industry 10% 39% 37% 14% 51% 49% Strongly trust (8-9) Somewhat trust (6-7) Somewhat distrust (3-5) Strongly distrust (1-2) Spirits industry 7% 38% 36% 19% 55% 45% Top 2 Bottom 2 Industry Favorability (Favorable) (Unfavorable) Alcohol industry 7% 16% 58% 18% 76% 24% Very Favorable Somewhat favorable Not very favorable Not at all favorable Spirits industry 6% 16% 55% 23% 78% 22% 14 Attitudes Toward Policies and Regulations 15 Perceptions of Sales and Access Regulations and Economic Impact Percent support (Strongly support, somewhat support) Total Consumers should have the choice to buy beer, wine and spirits in grocery stores, warehouse stores 65% (e.g., Costco, Sam's Club) and/or convenience stores. Regulations pertaining to the purchase of beer, wine 65% and spirits should be the same. Taxes on beer, wine or spirits should be the same. 58% Alcohol…provides tax revenue to federal/state governments (Very well, somewhat well) Alcohol Industry 78% Spirits 78% 16 David Ozgo Distilled Spirits Council SENIOR VICE PRESIDENT ECONOMICS & STRATEGIC ANALYSIS Industry Economic Review 2016 17 Economic Review 2016 • Industry growth • Market share • Growth drivers • Category performance • Trends to watch 18 U.S. Spirits Supplier Revenues Up 4.5 Percent to 25.2B – $1.1 Billion Gain $25.2 26 $24.1 $23.1 24 $21.3 $22.2 22 $20.4 $19.2 20 $18.2 $18.7 $18.7 $17.2 18 16 14 12 10 8 6 Supplier Gross Rev (Bil.) Rev Gross Supplier 4 2 0 Source: DISCUS MSDB 19 U.S. Volume Up 2.4 Percent in 2016 Up 5.2 Million to 220 Million Cases 240 2.4% 2.3% 220 1.9% 2.2% 3.0% 2.9% 2.0% 200 1.4% 2.2% 1.7% 4.1% 180 160 140 120 Liter Case Case ShipmentsLiter (Mil.) - 9 100 Source: DISCUS MSDB 20 Spirits Market Share – Revenue Each Point of Market Share Worth $700M 35.9% 36% 35.2% 35.4% 34.7% 34.3% 35% 34.1% 33.1% 33.3% 34% 33.1% 33.0% 32.9% 33% 32% 31% 30% 29% 28% Spirits Market Share Market Spirits 27% 26% Source: Beverage Information Group Handbooks, Company Financial Reports, DISCUS Estimates 21 Spirits Market Share – Volume Each Point of Market Share is Worth 6.5M Cases 33.8% 35% 33.0% 33.5% 34% 31.9% 32.5% 33% 31.7% 30.9% 32% 30.2% 29.7% 31% 29.3% 29.5% 30% 29% 28% 27% 26% 25% 24% 23% Spirits Market Share Market Spirits 22% 21% 20% Source: Beverage Information Group Handbooks, DISCUS Estimates 22 Price Segments • Products are segmented on supplier prices • Range varies by product category • Use market leaders to define segments • Average supplier gross revenue per case: Revenue/9-Liters Retail Bottle Price Value $54 <$12/bottle at retail Premium $100 $12 - $20/bottle at retail High End $170 $20 - $30/bottle at retail Super Premium $265 $30+/bottle at retail 23 Volume Share by Price Category 2016 Share of U.S. Spirits Volume 9.5% 20.9M % - Industry volume in 34.0% price category 21.1% 75.0M 46.5M M – millions of 9-Liter cases in price category 35.4% 78.0M Value Premium High End Super Premium Source: DISCUS MSDB 24 Revenue by Price Category 2016 U.S. Supplier Gross Revenues $5.5B $4.0B 22.0% 15.9% % – Industry revenue in price category B – Gross revenue $7.9B in price category, $7.7B billions 31.5% 30.6% Value Premium High End Super Premium Source: DISCUS MSDB 25 High End & Super Premium Drive Case Growth Cumulative Growth by Price Category 45 40 35 8.4 30 14.3 25 20 15 12.8 10 Liter Cases (millions) Cases Liter - 9 5 3.2 0 -5 2008 2009 2010 2011 2012 2013 2014 2015 2016 Value Premium High End Premium Super Premium Source: DISCUS MSDB 26 High End & Super Premium Drive Revenue Growth Cumulative Growth by Price Category $8.0 $7.0 $2.7B $6.0 $5.0 $4.0 $3.0 $2.9B $2.0 $1.0 $1.2B Supplier Revenues (Billions) Revenues Supplier $0.0 <$200M -$1.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Value Premium High End Premium Super Premium Source: DISCUS MSDB 27 2016 Factors Contributing to Steady Growth • American Whiskey trend has plenty of room for growth – country trending back to historic levels of whiskey consumption. • Consumer demand for brands with authentic, interesting backstories. • Local distilleries drive interest in overall spirits category and help modernize state and local laws. • Cocktails uniquely positioned to meet adult millennials’ demand for unique experiences. • Spirits are now a fixture in popular culture and have become part of the norm. 28 North American Whiskey: A Strong Sales Driver 11.7 million cases added since 2010 48.4 46.6 50 44.4 40.7 45 38.3 36.7 37.1 40 35 30 25 20 15 Liter Cases Cases Liter (millions) 10 - 9 5 - 2010 2011 2012 2013 2014 2015 2016 Includes: American, Canadian and Blends Source: DISCUS MSDB 29 North American Whiskey: A Strong Sales Driver $2.0 billion added since 2010 $5.7 $6 $5.4 $5.0 $4.5 $5 $4.2 $3.9 $3.7 $4 $3 $2 $1 Supplier Whisky Supplier Whisky Revenues (Bil.) $0 2010 2011 2012 2013 2014 2015 2016 Includes: American, Canadian and Blends Source: DISCUS MSDB 30 American Whiskey Bourbon, Tennessee, Rye, White • Volume up 6.8% to 21.8M Cases (+1.4M cases) • Revenues up 7.7% to $3.1B (+$222M) • Strength across all price categories – Value vol. up 11.4% (3.7M), rev.