Big Distillers Monitoring Growth of Craft Spirits

September 3, 2015 – Big distillers are keeping an eye on the growth of craft distillers, determined not to be caught off guard like the beer industry.

The Wall Street Journal reports that while craft spirits are only one percent of the market now, they could corner eight percent by 2020.  Craft is the operative word these days with craft beer, bread, cheese, chocolate and so on in demand and realizing premium prices.  For spirits it implies more care and quality over quantity.

So what does a company the size of Diageo, the biggest distiller in the world, do to offset the threat to their business?  They adopt the old adage “if you can’t lick ‘em, join ‘em” and get into the craft spirits business too.  They’ve come up with some “crafty” brands of their own – Old Blowhard Whiskey, which they say is hand bottled in Tullahoma, Tennessee, Barterhouse Whiskey and a bourbon called Blade & Bow.

Like craft brewing, craft distilling has its rules.  The distillery cannot have more than 25 percent ownership by an alcoholic beverage company that is mass marketed; production must be hands on; and sales must be less than 100,000 proof gallons.  That 25 percent rule doesn’t quite fit Diageo but they do claim production of less than 100,000 gallons for Old Blowhard and Barterhouse.

Diageo’s goal, stated in 2013, is to be the Number One distiller of North American craft whiskey in the USA.  Since their market share for mass marketed brands has dropped every year since 2011, it is probably a good idea.  Aspirational drinkers eschew mass marketed brands, a longtime truism in the wine industry, a fact of life for today’s beer industry, and now the trend for the spirits industry.