2023 – A Difficult Year for TBA

If misery loves company, there was plenty of misery to go around for Beverage Alcohol in 2023. The total servings of Beverage Alcohol shipped into the US market in 2023 declined by 5.1%. The data used by bw166 measures the total amount of Beer, Wine, and Spirits shipped into the US market; it is not a limited sub-segment such as syndicated data or SipSource. The final data can take between 30 to 90 days to be published, so the following estimates are based on bw166’s proprietary algorithms to project the nine to eleven months of data that have been published.

The declines include Beer shipments, 191.2 million barrels, down -5.5%; Wine Shipments, 394.6 million 9L cases, down -8.8%; and Spirits shipments, 289.1 million 9L cases, only up +3.0%.

Looking deeper into Spirits shipments, the TTB shows significant growth for Cordials and Cocktails, and it appears that some of the growth reported for Cordials includes a significant amount of RTDs. Cordials and Cocktails are trending up +30.8% in 2023. The other Spirits categories, such as Whiskey, Vodka, Tequila, etc., are trending down -8.9% in 2023. RTDs per 9L are not the same number of servings as a 9L case of 80-proof Spirits, so total servings of Spirits are down -2.5%. Also, from a margin perspective, it is probable that margins for RTDs are significantly lower than traditional 80-proof Spirits.

A driver of declines in 2023 is likely inventory reductions. These reductions are a result of several factors. A few examples are:

  • With elevated interest rates, both wholesalers and retailers are reducing working capital by cutting inventories.
  • The Census Bureau tracks the value of sales and inventories of Beer, Wine, and Spirits wholesalers. For the five years before the Pandemic, wholesale inventories on a monthly basis averaged 11.4% of annual sales. In 2023, inventories have averaged 13.7% of annual sales. This is a significant increase in a high-interest rate environment.
  • During the Pandemic, consumers appear to have increased purchases of Beverage Alcohol. This was seen in Wine DTC numbers in 2020 and 2021. Likewise, this was seen with significant expansion of NABCA volumes, especially in 2020. These trends can be considered pantry loading, and consumers have likely been destocking their pantries.
  • Consumer spending, especially for lower-income consumers, has been pinched. Since January 2021, grocery inflation is up 22%, while the average hourly wage for all workers is only up 12%.

A note of good news in 2023 is that consumers continued to increase spending on Beverage Alcohol. Total spending was $398.9 billion. Off-Premise beverage alcohol spending was $238.7 billion, up +2.7% versus 2022. On-Premise spending was $160.2 billion, up +10.2% versus 2022. The faster growth in the On-Premise was driven by higher inflation continuing in the On-Premise, likely driven by the need for higher markups in these channels to offset higher costs.

While some of the declines have been driven by inventory reductions there are other troubling issues. Based on Gallup survey data, a higher share of younger consumers have a less positive view of Beverage Alcohol. In addition, there are troubling signs from various government bodies with a more negative view of alcohol. The industry needs to work together to overcome these issues to make sure 2023 is not the new norm.