Perhaps Kathie Lee Gifford’s retirement is having a more detrimental effect than previously thought: Wine is falling out favor with Americans.
That’s according to a new report from industry group IWSR that found wine consumption has dropped for the first time in 25 years. Instead, Americans are drinking more spirits and ready-to-drink cocktails, like hard seltzers, following a broader trend of people seeking out less caloric beverages as they become more health conscious.
Beer also remains on the decline with sales falling 2.3% — its fourth year of decreases. Sales of domestic beer brands, like Budweiser, fell 3.1% its analysis showed. But it wasn’t all gloom for the sector because craft beer sales jumped 4.1% and low or non-alcoholic beer sales grew 6.6%.
The biggest growth across booze was in the ready-to-drink category. Sales surged 50% last year, buoyed by the apparently unquenchable thirst for spiked seltzers such as White Claw, Truly and Bon & Viv. It’s now an $8 billion industry, the firm said, with sales expected to triple within the next three years.
Spirits, the other major category to grow, has a new top brand. Smirnoff was dethroned as America’s top-selling distilled spirit with the honor going to Tito’s Homemade Vodka. Sales of the Austin-based brand jumped 20% last year. Mezcal, tequila and whiskies originating from several countries, such as Japan, Ireland and the US, also grew.
IWSR, which collects its sales figures by surveying financial releases and other proprietary data points, said that Americans consumers are paying more for premium products. Constellation Brands, which produces various well-known alcoholic brands, said sales recently slipped because of declines in its low-end wine brands. But its premium wine lines, including Kim Crawford and Prisoner, which cost more than $11 per bottle, are performing well.
Other companies, like Anheuser-Busch InBev (BUD), are diversifying their portfolios to reflect shifting taste away from highly caloric beverages to lighter alternatives. For example, Bud Light Seltzer is launching this month, which is Anheuser Busch’s third spiked seltzer brand, joining a beer-and-fruit flavored Natural Light seltzer and its original Bon & Viv brand. The company has also been on a buying spree of craft breweries.
Tariffs also pose another problem for wine and spirits. President Donald Trump recently proposed a 100% tariff on French wine and champagne in addition to an already imposed 25% tariff on most European wine and whiskies. That was in retaliation for the subsidies Europe provided to aircraft maker Airbus (EADSF).
Tariffs are being felt by Brown-Forman (BFA), the maker of Jack Daniel’s. In its most recent earnings report, the company said it’s paying the costs of higher tariffs from the European Union without passing them onto customers by raising prices for now. It was forced to reduce its 2020 income growth outlook by one percentage point because of the “uncertainty in the current economic and geopolitical environment in certain emerging markets and the travel retail channel as well as higher input costs.”