Rising Demand For Craft Alcohol, Premium Products

SANTA MONICA, Calif.Rising taste for high-end beverages is driving demand for higher-priced craft and imported spirits. As a result, the alcoholic beverage manufacturing sector is overflowing with opportunities for crafty entrepreneurs looking to enter the beer, liquor and wine industries, according to new market data from IBISWorld.

According to the Alcoholic Drinks Sector Bubbles Over with Craft Producers" report, while a growing population of legal drinkers and rising alcohol consumption will contribute to the sector expansion, the rise of premiumizationa trend by which consumers gravitate toward premium and ultra-premium products, including alcoholwill likely be the key to new, independent enterprises success.

In response to increasingly exotic consumer preferences, producers will continue to cater to niche markets by picking up on emerging trends like gluten-free or organic alcoholic beverages. And, as consumers continue to explore new beverages, new entrants will be able to find their own niche in the market.

Breweries

Anheuser-Bush InBev and MillerCoors control 75.4% of the beer market; however, changing consumer preferences over the past few years have given rise to craft breweries. These enterprises have been expanding and gaining widespread popularity among curious consumers who spend an increasing proportion of their cash on premium beverages. Moreover, increasingly health-conscious drinkers are substituting higher-volume purchases of value beer for lower quantities of finer brews. In the five years to 2012, the number of craft breweries is anticipated to grow at a 7.7% annualized rate to 2,017 firms.

Distilleries

Despite significant consolidation among major companies within the greater distilleries industry, including Diageo PLC and Beam, Inc., the number of industry establishments has expanded at an annualized rate of 10.3% during the five years to 2012 to reach 191 locations. The robust growth has been underpinned by a flurry of craft distilleries entering the market as consumer demand for locally produced and crafted beverages has increased. The establishments have popped up nationwide, offering consumers unique new flavors and options of vodka, whiskey, cognac and liqueurs, among others.

According to IBISWorld, the vodka distilleries industry has benefited the most from this trend. From 2007 to 2012, the number of industry establishments has grown at an average annual rate of 2.2% to 128. Established vodka companies also are keying in on changing consumer preferences by offering flavor-infused and low-calorie spirits.

Craft distilleries are forecast to experience success in the wake of the burgeoning craft movement in the similar wine and beer markets. New product introductions will be accompanied by extensive promotion and advertising to ensure customers take notice.

Wineries

Even when the economic recession diminished demand for higher-priced wine, sales expanded at a steady pace due to rising wine consumption. As such, outside investors are being drawn to the industry as world wine production declines and demand rises, propelling prices upward. Premiumization has led consumers to seek out premium vintages and styles of wine-making, while increasingly health-conscious consumers have substituted toward red wine for its acclaimed health benefits.

One trend that has not caught on with wine drinkers yet is the eco-friendly movement. Because consumers will continue to seek quality regardless of origin, they will likely be unwilling to pay higher prices for green" wine.

New producers are entering the industry, keeping the industry in a growth phase for at least another decade. Distribution challenges, combined with sharply falling retail and foodservice sales during the recession, led smaller wineries to find refuge in direct-to-consumer wine sales via the internet and tasting rooms.

IBISWorld anticipates consolidation to continue. Though the number of wineries is expected to rise, growth will be slower than during the past five years, increasing 2.2% annually on average to 7,880 companies in 2017.

Thirsty for more infomration about what's trending in alcohol? Check out the Classic Cocktails Make A Comeback image gallery and the Best Beers image gallery on Food Product Design.