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Craft distillers across the country are being hit by higher input costs caused by inflation and the upcoming tariffs on American whiskey, according to Distilled Spirits Council (DISCUS) CEO Chris Swonger.
“Consumers are still willing to spend more on that special bottle of spirits, but they’re feeling tighter in their wallets and more price conscious with their reduced discretionary dollars,” Swonger told FOX Business.
For the first time in more than a decade of operation, Jeff Quint, founder of Cedar Ridge Distillery in Swisher, Iowa, said he will not see double-digit sales growth. This year, he says sales from his distributors will be flat.
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“That’s new to us,” Quint said.
Meanwhile, Sonat Birnecker Hart, founder of Koval Distillery, told FOX Business that he has faced “a tough road of challenges since 2018.”
Koval Distillery in Chicago, Illinois. (Koval Distillery)
Birnecker Hart said his distillery, which has yet to reach pre-pandemic levels of growth and speed, has seen a “decline in business” over the past year – something he said has been seen across the industry.
“We are in the celebration industry… But right now, we see little to celebrate.”
But “as a craft product, we see it in a surprising way. Remember, we’re always competing with the biggest legacy brands that have a lot of sales,” he added. “The whole art industry has experienced a lot of problems related to that.”
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He’s worried not only about declining demand but also about possible tariffs on American whiskey exports to Europe and a possible liquor tax hike proposed by Chicago Mayor Brandon Johnson in his 2025 budget.
“We’re not celebrating right now… we’re in the realm of celebrations. We’re celebrating local farming and celebrating local art,” Birnecker Hart said. “But right now, we see little to celebrate.”
Sonat Birnecker Hart, founder of Koval Distillery in Chicago, Illinois. (Koval Distillery)
Swanger described the pandemic as an “extraordinary time” for the industry, as consumers are left with more money to see less luxury goods due to shutdown orders and other restrictions. Many of them chose to “medicate themselves by buying high-quality spirits, building their own livelihoods and exploring different categories of spirits,” Swonger said.
Now, Swonger noted that the industry is starting to adjust after “a period of phenomenal sales growth.”
“Consumers have strengthened their spending due to the increase in inflation and high interest rates and the sellers have reduced the speed of repurchases as they reduce the accumulation of items that occur when consumer demand increases,” he said.
According to data from DISCUS, the sales of spirits suppliers grew twice as much as before the pandemic in 2020 and 2021.
Currently, volume sales of tequila are up more than 5 percent, while many other categories, including American whiskey, cordials and vodka, are experiencing declines of less than 2 percent. Categories such as brandy, cognac, rum and gin fell by around 4%.
Sales of distilled spirits are expected to double the pre-pandemic rate in 2020 and 2021, according to the Distilled Spirits Council. (iStock / Stock)
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Despite the drop in sales, Swonger also warned that distillers may face more challenges in the near future, especially the possible return and doubling of the European Union’s retaliatory tax on American whiskey at the end of March 2025.
EU tariffs on American whiskey were suspended in 2022, paving the way for US whiskey exports to the European Union to rise by more than 60%.
If these costs come back, they will reverse this “much-needed rebound in US spirits exports,” Swonger said. He said a 50% tariff on US whiskey in the industry’s biggest export market would be “a very serious blow” at a time when US spirits sales are down.
A bright spot in the industry, however, has been the strong growth of ready-to-drink spirits-based products, which offer low-alcohol options to consumers, as well as growing interest in low- or no-alcohol products.
According to DISCUS data, volume sales of cocktail and ready-to-drink spirit-based products continue to grow strongly, with ready-to-drink spirit-based products growing by nearly 15%.
One of Ventura Spirits’ products, the Angeleno Spritz, is a ready-to-drink version of the classic Aperol Spritz. (Ventura Spirits)
Henry Tarmy, who founded California’s Ventura Spirits 10 years ago, uses innovative styles, which have helped the company avoid a dip in sales.
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“There are certain categories that stand out even in severe cases of alcoholism,” Tarmy told FOX Business.
The team at Ventura Spirits, based in Ventura, California. (Moira Tarmy)
Among its large portfolio, Tarmy has noted an increase in demand for the company’s bottled amaro. He said there is strong demand for the Angeleno Spritz, a ready-to-drink alternative to the classic Aperol Spritz.
Tarmy said the company’s strategy was about identifying where the bright spots are and “making sure we adjust accordingly.”
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