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Analysis - Whisk(e)y wins US battle with vodka, but for how long?

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The whisk(e)y category in the US – particularly Bourbon - has been stealing a significant march on vodka in recent months, but can this be sustained?

American whisk(e)y is expected to come under threat from other categories

American whisk(e)y is expected to come under threat from other categories

In 2013, whisk(e)y saw its share of spirits sales in the US rise to 32% from 30% the prior year. Vodka, on the other hand, witnessed a slide in dollar share from 25.7% to 25.1%. The fall marks vodka's first loss of share in revenue terms in the US spirits market for five years, according to analysts at Cowen and Co, which has initiated coverage on the US alcohol sector.

Vodka still remained comfortably ahead of whisk(e)y in volume terms. However, the white spirit saw its US volume share drop marginally to 32%, while whisk(e)y's rose to 25.6%. 

The 'Bourbon boom' in the US has clearly contributed much to the overall category's impressive growth. In 2013, Bourbon and Tennessee whiskies had a 35% share of the whisk(e)y market in the US in sales by value terms, according to DISCUS figures. This was followed by Scotch (blended and single malt combined had a 28% share) and Canadian whiskey (with a 24% share).

But, can American whiskies maintain that momentum, both among the spirits sector as a whole and the category in particular?

Cowen and Co identifies threats to American whiskey not only from other whisk(e)y categories - predominantly Scotch and Irish (the latter accounts for 7% of total whisk(e)y in the US) - but also from other spirits, such as rum, Tequila and gin. The analyst also notes "more aggressive pricing" in the vodka sector, which could come into play.

“As the distilled spirits market becomes more fragmented, we believe new innovations and changing consumer preferences will remain a threat to the whiskey category going forward,” the note said. 

As Diageo's CEO, Ivan Menezes, has suggested the 'end of vodka' in the US may well have been overstated, despite lethargy around the glut of flavoured variants. 

For the American whiskey category, innovations such as Brown-Forman's Jack Daniel's Tennessee Fire means it could yet have a few tricks up its own sleeve. Indeed, as Brown-Forman's CEO, Paul Varga, boldly stated in June, flavoured whisk(e)y has the potential to be bigger than Scotch in the US

On a wider scale, Cowen and Co agrees the brown spirits category should still have plenty to smile about, going forward. "We expect whiskey to continue taking share from vodka," the analysts concluded.


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