• Consumer Demand and the Blurring Lines
• Explosion of Innovative Products
• The Impact of Favorable Tax Rates
• Enhanced Market Access and Regulatory Efficiencies
• The Role of Digital Marketing and Social Media
• Direct-to-Consumer Sales Opportunities

The alcohol industry is witnessing a renaissance, marked by increased market access, consumer demand, innovative products, and favorable tax rates, painting a future of opportunity and profitability for professionals across the beverage alcohol ecosystem. John Beaudette, with over 30 years of experience in the industry, provides insights into this golden era, highlighting the pivotal developments and trends shaping the sector.

1. Consumer Demand and the Blurring Lines:

While the industry navigates the shifts between off- and on-premise due to the COVID-19 pandemic, total consumption by volume is witnessing an upward trajectory. The blurring of lines across spirits, wine, and beer categories is leading to a “tug of war,” with brands vying for the loyalty of the versatile consumer, especially the hard seltzer consumers.

2. Explosion of Innovative Products:

MHW Ltd. has observed a 36 percent increase in new brand entrants as of June 2021 compared to the previous year. This surge is attributed to the federal excise tax relief program, the Craft Beverage Modernization and Tax Reform Act, passed in 2020, offering significant economic opportunities for new and established brands, both domestic and foreign.

3. The Impact of Favorable Tax Rates:

This tax relief program represents a 70 percent reduction in taxes for qualifying producers, enabling investment in brand-building activities, people, and marketing. This unprecedented incentive has attracted foreign producers, who now view the U.S. as a lucrative marketplace, contributing to the premium segment’s rapid growth.

4. Enhanced Market Access and Regulatory Efficiencies:

The Alcohol and Tobacco Tax and Trade Bureau (TTB) has streamlined the processing of operating permits and label approvals, reducing lead times and accommodating the increasing demand for new business and brand submissions. This efficiency is crucial in maintaining the supply infrastructure needed to meet the record-breaking consumption demand.

5. The Role of Digital Marketing and Social Media:

Brands are leveraging social media and digital marketing to quickly capture customers and maintain brand loyalty in today’s competitive landscape. The power of social media is evident in how celebrities can create demand and build a brand almost overnight, leading to remarkable valuations and sales opportunities.

6. Direct-to-Consumer Sales Opportunities:

The industry is witnessing a push for limited direct-to-consumer (DTC) sales opportunities for spirits, similar to those existing for wines. This movement, supported by controlled systems ensuring compliance with state regulations, could complement the successful three-tier system, providing brands with enhanced distribution options and consumers with greater accessibility to products.

Conclusion:

The alcohol industry is poised for a new golden age, marked by innovation, consumer demand, and favorable market conditions. The convergence of enhanced market access, regulatory efficiencies, digital marketing, and direct-to-consumer sales opportunities is creating a symphony of growth and profitability for brands willing to leverage these developments.