2022 was another very busy year for mergers and acquisitions in the beverage alcohol space with over 50 deals made between suppliers. Deals were primarily driven by established beverage alcohol companies, but there was a noteworthy number of non-traditional companies entering the space and trying their luck with high-growth categories. Alcohol-adjacent firms such as Monster Beverage and Coca-Cola have formed beverage alcohol partnerships alongside a growing number of private equity firms, and even tech companies like Uber are betting on the alcohol category.
In order to track M&A trends in the industry, Park Street University has created its first annual white paper summarizing the major supplier deals in the beverage alcohol industry in both 2021 and 2022.
The deals came in several different forms, including full acquisitions, minority stakes, equal partnerships, and distribution or licensing agreements. Price tags on the deals ranged as high as $1.2 billion.
The spirits sector saw the most investment, with 46 deals in this timeframe, followed by wine with 26. Beer deals made up the remaining moves with four.
The period was also marked by a rise in activity in the e-commerce sector, where the industry saw seven major deals.
The global alcohol category has been very invested in premiumization. Consumers are buying more products at higher prices and drinks companies are following these trends.
Fast-growing categories like ready-to-drink (RTD), agave-based spirits, and American whiskey drove M&A activity. These categories were prime candidates for investment from strategic investors. Buyers consistently emphasized category growth when discussing motivation for investments.
Diageo was the most active investor during the period. The drinks company directly made seven acquisitions, and five investments through subsidiaries over the last two years.
The agave sector was part of many major deals, including Diageo’s acquisition of flavored tequila 21Seeds and Constellation Brands’ investment in Dos Hombres Mezcal.
2022 marked another year of growth for the beverage alcohol industry. Several new regulation updates from the TTB and the Treasury Department, along with some notable acquisitions, highlighted the year. As we begin the new year, we are taking a look back at some of the top news stories of 2022, along with the top-performing blogs, podcasts, and videos.
On February 9, the U.S. Department of the Treasury released a 63-page report on the status of the U.S. alcohol market along with recommendations for removing competitive barriers, reducing consolidation, and protecting consumers.
In a letter dated November 17th, the TTB said that it would issue proposed rules on mandatory nutrient allergen and alcohol content labeling, and start the process for regulations on mandatory ingredient labeling.
Brown-Forman made some key acquisitions this fall, including a deal with Vantguard and MG Destilerías to acquire Gin Mare brands and a separate deal to purchase the Diplomático Rum brand and related assets from Destillers United Group S.L.
In May, the TTB asked for comment about eliminating all standards of fill for wine and spirits, except for a 50mL minimum for both and a 3.785-liter maximum for spirits.
Effective January 1, 2023, oversight of CBMA will transition from Customs Border Protection (CBP) to the Alcohol and Tobacco Tax and Trade Bureau (TTB). With this shift the beverage alcohol industry will see changes in the way the tax reduction program is applied as well as the steps that brands need to take to comply.
When it comes to alcohol regulation in the U.S. every state has its own unique rules and regulations. This entry in the Park Street University blog covers what brands need to know to enter and gain traction in Control States.
Mergers & acquisitions in the beverage alcohol space continued apace in 2022 as strategic buyers adjusted their portfolios to meet the demand for new consumer trends like canned cocktails, hard seltzer, and e-commerce. This blog features a report on the most prominent M&A deals from 2022.
Park Street Companies teamed up with the American Craft Spirits Association (ACSA) to develop and release the sixth annual Craft Spirits Data Project to track the long-term growth of the U.S. craft spirits category.
ecoSPIRITS, the world’s first low carbon, low waste spirits distribution technology, announced a partnership with Park Street to bring its closed-loop distribution system to the U.S. market in 2022.
With many up-and-coming brands emphasizing sustainable practices, Park Street University’s Sustainability Spotlight series featured founders from some of the beverage alcohol brands paving the way to a better future.
Founders of Samson & Surrey sit down to discuss their backgrounds in the industry, the formation of Samson & Surrey, and their recent sale to Heaven Hill. They explain the strategy for developing the brands in their portfolio and how Samson & Surrey’s core principles translate to a compatible partnership with the Heaven Hill team.
The Co-Founder of 21 Seeds Tequila discusses the brand’s meteoric rise and sale to Diageo. She dives into how she was able to use her personal experience to craft a brand that appealed to a previously overlooked consumer base.
Mark Anderson discusses how the sustainable ethos of his brand filters into all aspects of the Drake’s Organic model. He gets into the methods his business uses to operate sustainably from production to packaging and the history that led to his brand becoming one of the leaders in sustainable spirits production.
The two industry veterans discuss their brand’s principles and growth over recent years. Joly & Lindner touch on how their on-premise background and marketing initiatives translated to developing some of the most popular premium RTDs on the market.
The founder of DisPact Ventures and Chinola Passion Fruit Liqueur, sat down with Park Street to discuss the intersection of impact investing and brand development. He takes listeners through his investment strategy and helps them understand the decision-making process behind how he allocates funds.
In this video, Donna Hartman, General Council for The Connacht Whiskey Company, explains the key facets of maintaining an efficient corporate culture in a highly regulated industry. She discusses how aspects like reviewing management structure and diligent record-keeping go a long way when navigating the legal landscape.
Jeff Menashe, CEO of Demeter Advisory Group, takes us through the mindset of a prospective buyer when sizing up a beverage-alcohol acquisition. Menashe outlines the best models for brands to attract buyers and scale their growth long-term.
Robin Robinson, Founder of Robin Robinson LLC, provides a clear definition of sales and explains how it translates to pitching a brand to retailers. Robinson discusses the importance of systematizing your approach to sales and why creating a system that can be replicated and leads to predictable outcomes leads to continued success for your brand.
Kristen Bareuther, Managing Director at First Bev, outlines how private equity investors size up a potential beverage-alcohol deal. She walks us through the key tenets that brands must refine to position themselves as attractive investment candidates.
Sarah Nagel Sisisky, Park Streets Director of Client Development, walks us through some strategies for growing a sphere of influence. Sisisky discusses ways to generate awareness with a distributor by promoting high gross margins, establishing authentic connections, and more.
This past year saw the beverage-alcohol industry continue to stabilize as it edges closer to its pre-pandemic standards. In a year that was marked by rising inflation and persisting supply chain issues, there are compelling reasons for optimism with category expansions and on-premise activity demonstrating strong performances.
In a recent presentation, CGA by Nielsen IQ issued a report outlining the key takeaways from this year and what knowledge can be gained from these trends going into the new year. From regulatory changes to the emergence of industry-sweeping trends, Park Street has evaluated the lessons of 2022 and what brand owners can expect in 2023.
2022 Year in Review
Key Trends
Several key trends drove consumer activity across 2022, and are poised to continue into next year.
Consumer decision-making–especially on-premise–has been widely influenced by attaining authentic experiences. This was coupled with a motivation to discover new products, with 50% of US consumers agreeing that they’re more likely to try different drinks in bars and restaurants compared to when they’re at home. As a result, brands across all categories have responded to the consumer thirst for new flavor profiles.
Convenience is now critical to consumers as well. Whether by providing e-commerce solutions to make products readily available, or introducing convenient packaging like boxed wine and ready-to-drink formats, brands were thoroughly invested in providing convenience factors through 2022.
Interest in aligning with health and wellness trends continues to proliferate across all consumer groups. Imbibers now want to know what goes into their products and further how this contributes to their overall lifestyle. We’re beginning to see alcoholic drinkers adopt non-alcoholic beverages into their weekly routines.
Sustainable credentials are now a crucial component of a brand’s ethos, with over 50% of consumers considering this when making a purchase.
Premium products continue to drive the growth of the spirits category, with higher price tiers performing well across 2022.
Beverage Alcohol By Numbers
Taking a holistic look at all beverage alcohol categories, the total value of on-and-off-premise dollar sales rose 14% year on year to reach $198 billion sold, in the 52 weeks ending on November 8.
Off-premise outlets in the U.S. grew 1.4% year on year to reach 240,463 in total. Of these, liquor stores saw the biggest jump with a 2.9% increase.
Similarly, the on-premise grew by 2.4% year on year to reach 291,501 outlets, shy of pre-pandemic levels by about 10,000 outlets. With the premiumization trend in full swing, premium bars (3.2%) and polished casual dining (4.9%) saw the largest increases in the number of outlets. It’s also still the most lucrative channel, with 55% of total beverage alcohol dollars spent on-premise this year.
Spirits Performance
Over the past year, total on-and-off-premise spirits growth rose 18% to reach the $74 billion mark in total sales. Overwhelmingly, these sales came from the on-premise, which created 71% of spirits sales.
What’s more is that according to Andrew Hummel, Client Solutions Director of North America at CGA Strategy, in the last year, spirits “have gained over two percentage points of total beverage alcohol value share from beer and wine respectively.”
On-Premise
In the on-premise, tequila had the most strikingly positive performance of all spirits categories. Agave spirits saw a massive 1.1% rise in value share compared to other categories in 2022, reaching a 22.6% share of total on-premise value. The second highest growth in on-premise value share was gin at 0.3%, followed by whiskey at 0.1%.
Whiskey maintained its position as the top category in terms of value share, commanding 25.6% of the total on-premise value. Vodka came in as the second largest value category despite dropping 0.7% year on year with a 22.8% share, followed by the red hot tequila category at 22.6%.
Interestingly, despite a 0.3% drop in value share for rum on-premise (now just 9.9%), Hummel notes that CGA data suggests “as a spirit base for cocktails, rum has actually been the biggest share gainer. Even in a declining category, there are definitely opportunities for well-positioned brands to align with cocktail menus.”
Off-Premise
In 2022, total spirits dollars spent in the off-premise were up 0.6% for the 52 weeks ending on November 8 compared to the previous year. The segments driving this growth for retailers were spirits RTDs ($435 million), tequila ($218 million), and American whiskey ($52 million). The rapidly expanding non-alcoholic spirits segment also contributed positively to on-premise sales growth at $2.8 million.
On the other end of the spectrum, cognac ($-145 million), vodka ($-131), and scotch ($-75) were the segments that struggled the most this past year.
When looking at CGA’s breakdown of spirits share by price tier, the dominance of premium spirits shines through. The combined share of the premium, super-premium, and ultra-premium spirits accounts for 69.1% of total spirits value, up 1.2% year on year.
“Interestingly enough, if you go backwards, the value of these premium and above tiers is very rarely below 68%. In other words, this premiumization is really baked in for spirits,” noted Jon Berg Vice President of Alcohol Industry Thought Leadership for NielsenIQ. “Come December, this jumps to about 72-73% of total spirits due to gifting and holiday entertaining. We haven’t seen any evidence that premiumization is going away.”
Expectations for 2023
On-Premise to Weather Economic Concerns
Despite the persisting cost of living concerns like inflationary pressures, rising interest rates, and unemployment that consumers are dealing with across the board, CGA projects that dollars put towards beverage alcohol will remain fairly secure as we enter 2023.
A recent survey conducted by CGA found that over the next three months 76% of consumers expect to spend more or the same as they have been in on-premise environments. “We’re really optimistic that core on-premise consumers will continue to visit and spend as they have been,” said Andrew Hummel. The same study noted that the on-premise is regarded by many consumers as an “affordable luxury” that they’re willing to prioritize over comparable experiential expenses like entertainment and sporting events.
Premiumization Providing Value
Premiumization is expected to forage ahead in 2023, with the celebratory and “treat yourself” nature of on-premise visits encouraging people to trade up. This is reflected by 2022 CGA data that cites ultra-premium spirits as the largest price tier gainer among spirit categories, mostly taking away from mid-tier products.
Investment From Outside Bev-Alc to Continue
This year saw large soda companies like PepsiCo and Keurig Dr. Pepper stake their claim on the beverage alcohol sector, injecting new diverse mashup products like Hard Mtn Dew and Lipton Hard Iced Tea. This is expected to continue in 2023, with Jon Berg noting that “there’s much more to come in terms of innovation [from these companies].”
Other Key Expectations From the Nielsen Report
Sub-premium beer flourishing in the first half of 2023
Non-alcoholic products gaining more influence among alcohol drinkers
The maturation of the ready-to-drink market coupled with SKU rationalization
Functional attributes to replace flavor as the innovation driver in beverages
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