American whiskey is in a weird place. Writing this feature in 2024, I’m tempted to recycle a similar piece I did on craft beer circa 2017.
It’s not uncommon to say that the whiskey industry is five to seven years behind craft beer in terms of trends. Some facts today do echo what the brewers faced when things started turning south for their business.
To list a few: There’s too many producers innovating with too many products while consumers have pulled back in spending. These consumers increasingly prefer a handful of favorite bottles rather than experimenting across brands. Industry growth has leveled off at a time when many suppliers have significantly expanded production. Other, trendier categories — tequila, no/low alc, THC drinks — have siphoned off consumer attention and spending. The American Craft Spirits Association reported last month that U.S. craft spirits sales are now in decline.
Does all this spell trouble for American whiskey? Will the industry fall into a similar trap as what has happened with craft beer?
Depends. Critically, not all the facts are perfect parallels. While similar headwinds certainly exist, American whiskey is not in the exact same precarious spot as what previously befell craft beer.
“You have to be careful when comparing our industry with others,” says David Mandell, co-founder and CEO of Whiskey House, a newly built whiskey manufacturing facility that specializes in sourcing, capable of producing 112,000 barrels per year (with the potential to expand to more than 224,000 barrels). “We have very different circumstances.”
“You have also got to be careful when proclaiming current negative things permanent,” he adds. “The whiskey industry is subject to fluctuations in spending, like anything else. But cocktail culture isn’t going anywhere. And there’s no question that premiumization is a thing now.”
So how best to describe the current state of the U.S. whiskey industry?
“I want to be fair and say its dynamic,” says Dave Schmier, founder of Redemption Rye and Proof & Wood Spirits. “There’s a lot of undertow right now. You could slice this up a lot of ways. As bad as anything is, there’s still an enormous amount more of knowledge and passion in the consumers in the marketplace now. That’s not all of a sudden going away.”
“Will those people buy at the same rate as two years ago? No,” he adds. “The numbers tell us that sales are down. Is it equal across all price ranges? No. But still, as a whole, the category is down. $80 to $100 has been hit the hardest. But there are still bottles out there that people will knife each other for. That’s the positive.”
What’s Going on Out There?
Like many other industries, American whiskey enjoyed a sales boom during the Covid era. Consumers sheltering at home built out backbars and became bourbon experts by joining whiskey social media groups in droves. Single barrel store picks took off. Everyone bought 100 bottles (figuratively speaking).
Today, there’s little room left in back bars and basement bunkers for new purchases. Store picks saturated the market, lowering the excitement for this formerly hot trend. And with the U.S. economy in an odd place itself, consumers no longer spend as liberally on whiskey.
But they do spend. How so is interesting, and points to a peculiar future for the industry.
During a panel of industry experts hosted by Distill Ventures (a drinks accelerator backed by Diageo) in NYC this past spring, the subject of whiskey’s future was discussed. On the panel was veteran whiskey writer Noah Rothbaum, author of Art of American Whiskey. He saw similarities with craft beer back in the day.
“I remember asking the brewers, ‘Why are you making so many beers that nobody wants?’” Rothbaum says, recalling that industry’s over-innovation issue. “They were brewing beers not for consumers, but to show off.”
Is whiskey in a similar situation now? “I think we’re still scratching the surface in terms of whiskey drinkers in America and the world,” Rothbaum says. “People are buying whiskey with peanut butter or cinnamon spice mixed in. That’s a good sign to me, because those people are going to graduate to better whiskeys as they get older.”
Which raises the question: Will Gen Z drinkers eventually put down their canned cocktails and nonalcoholic beers for a premium whiskey? The problem may be their parents.
“There’s politics in what you drink,” says panelist Clay Risen, who covers spirits (and obituaries) for The New York Times. “People rage against the assumption of what their elders drank. People will reject entire brands completely if their parents drank them. Gen Xers and Millennials drink bourbon. Gen Zers want something different. There’s opportunity for other whiskey brands to come in.”
Panelist Holly Seidewand, founder of the boutique bottle shop First Fill Spirits in Saratoga Springs, NY, observes younger consumers approaching whiskey in a similar way that Millennials previously tore through craft beer.
“They come in saying, ‘What’s the newest bottle? What’s the newest finish?” she says. “It’s drinking chaos.”
This is the same attitude that gave rise to ruinous over-innovation in craft brewing: I never want to drink the same beer twice. Is this an alarming echo for whiskey today?
“I think innovation can slow down,” Seidewand says. “There doesn’t need to be something new coming out from a distillery every six months. You don’t need eight new expressions every year.”
As for current buying patterns at retail, Seidewand sees a slowdown. “Instead of leaving with two bottles, now people leave with one,” she observes.
At the same time, however, innovation remains an important part of a whiskey’s selling point. Brands must grab consumer attention from the crowded retail shelf, and then build out a shelf on that consumer’s backbar with multiple different bottles to choose from. On-premise accounts have also leaned into this sales strategy.
Hotel ZaZa Dallas maintains a sizable whiskey selection. Guests can enjoy private tastings from a selection of more than 1,000 whiskey labels from around the world. What do guests prefer these days?
“At [our] restaurants — Group Therapy, Dragonfly and Monarch — we focus on offering whiskeys that undergo a second maturation and feature unique finishing barrels,” says Dakota Marchio, director of food and beverage at Hotel ZaZa. “Many of these distinctive finishes are limited edition and difficult to find in retail, making our selection something they truly can’t experience elsewhere.”
“For private tastings, my friends enjoy collecting limited annual releases and creating a vertical tasting to compare how different years have developed,” Marchio adds. “For on-premise tastings, consumers are often eager to explore a brand’s portfolio and taste a wide range of flavors that can come out of a single producer.”
That said, on-premise operators have also noticed a shift in consumer behavior.
Alex Guerra is COO of Breakwater Hospitality Group, which is behind John Martin’s in Coral Gables, FL. John Martin’s has more than 400 whiskeys on the menu. “You know, the market’s still strong, but people are definitely being more thoughtful about what they’re buying,” says Guerra. “It’s like when a regular comes in and knows exactly what they want — there’s less impulse and more intention. They might not be buying as much, but when they do, they’re going for the good stuff. They want something that’s worth their time and money, which I totally respect.”
“Of course, with the economy being what it is, everyone’s keeping an eye on prices, but I wouldn’t say folks are cutting back in a big way,” he adds. “However, I’ve noticed that people aren’t experimenting with high-end whiskeys as much as they used to. Instead, they’re looking for small-batch, lesser-known whiskeys that offer the same taste profiles as select high-end options but at a more approachable price.”
Even as consumers have become more selective, many distilleries have increased production. Buffalo Trace and Woodford Reserve both recently doubled their distilling capacities, just to name two leading facilities. What does this mean at retail?
Speaking on this topic recently during an episode of our beverage magazine group’s podcast, On & Off, was Marty Holland, store manager of The Party Source, a 110,000-square-foot independent beverage alcohol retailer in Bellevue, KY “Demand is steady, products are starting to become a little bit more abundant,” Holland says. “For instance, the Buffalo Trace straight bourbon, that was a product we used to see on allocation once a quarter. And now we’re recently we’re starting to see it once a month, maybe even twice a month . . . We’re certainly seeing a trend where these products are little more widely available.”
“Obviously every distillery has found ways to increase capacity in the last decade or so,” he continues, “whether that may be adding vats, building rickhouses . . . We’re beginning to see certainly not an end in demand but maybe an increase in supply, which certainly is welcome.”
While supply has risen, many retail stores are still burdened with an overstocked sales floor, owing to Covid-era challenges.
“It was the perfect storm,” says Schmier of Proof & Wood. “Sales were up, demand was high, and supply chains were disrupted. That led to retailers overbuying whatever they could. Now there’s that overhang left over that we have to deal with. Overstocking in 2022 and 2023 is definitely a part of what we’re facing today.”
Stores simply have too much product now. When can we expect that to correct?
“I think that will sort itself out in about six to eight months,” says Mandell of Whiskey House.
“I think a number of those products have to go by the wayside,” he adds, also alluding to the industry’s over-innovation. “There will be a natural contraction of products and brands created during Covid.
Educated Consumers
While we’re not all stuck inside on our computers all day anymore like during the pandemic lockdowns, that period has left a lasting impact. Coupled with the bourbon boom, it’s led to consumers today being as educated as ever.
“Let me tell you, people today know their stuff,” says Guerra, of Breakwater Hospitality Group. “I’ve been behind the bar for four decades, and I’ve never seen customers this clued-in. They’re not just ordering a drink; they’re asking about the mash bill, the aging process, where the barrels come from — all of it. And honestly, I love it. It keeps me on my toes, and it makes for some great conversations.”
“Some folks really know their stuff, while others are willing to experiment with taste profiles they wouldn’t have touched 20 years ago,” he adds. “Take the Old Fashioned, for example. People are now willing to try versions with chocolate, orange, cherry and more. Just look at how many bitter flavors are on the market today. Back in the day, the basic Angostura bitter was all anyone knew. They’ve got the knowledge, and they’re eager to learn more, which is why it’s so important for us to stay sharp and keep offering them something new.”
Agreeing with Guerra is Marchio of Hotel ZaZa Dallas.
“Today’s consumers are more discerning than ever, thanks to the cocktail renaissance of the past decade,” he says. “Bar staff and patrons are also more knowledgeable with a wealth of information available online and in printed media, this has elevated the appreciation of the spirit.”
The Future of American Whiskey
Consumers that with that level of education likely won’t just walk away from the whiskey category. It’s another reason why hardly anyone has called the current state of the whiskey the beginning of the end. Rather than thinking a bubble is about to burst, most industry folks see our present issues as a natural, rocky time of transition.
“I think we are in for a turbulent couple of years,” says Schmier of Proof & Wood. “But as long as the neo-abolitionists don’t win, the category will be stronger in the long-term.”
Schmier’s joke makes a good point. Prohibition 2.0 is probably not in the offing. People will still drink whiskey, preferably of the premium variety. This suggests a sunnier future.
“Is this a cyclical downturn or just a blip?” asks Risen of The New York Times, during the Distill Ventures panel. “I think it’s more the latter. I think people are confused in this economy. There are headwinds. Inflation is putting pressure on consumers. But the basic interest in whiskey will stick around. I think whiskey is here to stay, and individual players will win or lose based on where they’re positioned.”
Growth has come fast for Whiskey House, which offers sourced brands a state-of-the-art facility complete with the ability to control just about every facet of a spirit’s production.
“We are still very bullish on the industry and its long-term prospects,” says Mandell of Whiskey House. “Short-term we have road bumps coming off of Covid with excess inventory in stores. Long term, the industry will remain strong.”
“We see growth rates slowing and settling down into growth patterns more consistent with what we had before Covid,” he adds. “The fundamentals of the American whiskey market are still strong.”
Feature photo by Stephen Ventura on Unsplash.
Kyle Swartz is editor of Beverage Dynamics. Reach him at kswartz@epgmediallc.com. Read his recent piece, Wine Cellar Celebrates 50 Years of Success.
