Craft Liquor Nudges Craft Beer Out Of The Spotlight With Consumers

In a report released Wednesday, UBS Securities said that the trend to craft beers seems to have leveled off but the craft theme is picking up in spirits. The securities firm's Evidence Lab surveyed 1,200 regular alcohol consumers.

"The percentage of consumers that enjoy (spirits) brand experimentation and that view craft brands as cool has grown by 8 to 13 percentage points in the past two years," UBS said.

Despite this trend, there are some big brands gaining share, such as Diageo's largest brand, Crown Royal (about 15% of its U.S. sales) and trends appear to have stabilized for its Smirnoff (13%) and Captain Morgan (10%) brands, following their recent price repositioning.

Diageo shares have climbed 34% from a Nov. 28, 2016 low to a 131.41 close on Thursday, up 1.1% for the day.

Colin Blake is director of spirits education for Moonshine University, which teaches people how to found and operate a distillery. "We have seen an explosion of craft distilleries. From over 500 people who have taken our week-long course, some 140 distilleries have opened after the founder took our class," Blake said in an interview.

Big Kentucky distillers such as Jim Beam and Maker's Mark, both owned by Suntory Beam, a unit of Japanese beverage giant Suntory, are on board. So is Louisville-based Brown-Forman , which makes Jack Daniel's, Early Times and other brands, Blake said. Brown-Forman has been trading in a narrow range this year and closed at 55.62, up fractionally.

"When we told them what we were doing, they were supportive. If someone tries a craft bourbon and it tastes bad, that's bad for the whole industry. Craft distillers are just good for the industry at large," he said.

Several large distilleries have been acquiring craft distillers. New York-based Constellation Brands , which makes Black Velvet Canadian Whiskey and Svedka Vodka among others, bought craft whiskey maker High West last October for $160 million. Constellation shares have shot up 36% so far this year to a new high close at 200.10 Thursday.

Allen Katz is director of mixology & spirits education for Southern Glazer's Wine and Spirits. Privately held Southern Glazer's is North America's largest wine and liquor distributor, with operations in 44 states, the District of Columbia and the Caribbean.

Katz says the trend to craft liquor has been a long time coming. "If you take the long view, it is a 45-year arc that starts with a food movement. It began with Alice Waters' Chez Panisse restaurant in Berkeley, California. They looked for local food and more importantly looked at where the food originated."

From food the trend spread to beer and now to spirits, Katz said. "Why craft spirits? This was the last horizon in many ways in gastronomy."

According to Katz, there are more than 1,000 domestic craft distillers today, up from fewer than 100 seven or eight years ago. "Many of the current crop got their start during the Great Recession. People from many walks of life began taking it up. Many in the financial arena or other professions said: I got laid off. Why not give it a shot now?"

Correction: Southern Glazer’s Wine & Spirits Director of Mixology Allen Katz’s name was misspelled in an earlier version of this story.