When Covid-19 slammed the brakes on normal life last March, consumers in control states shifted gears and began stocking home bars with their favorite spirits in the face of lockdown restrictions. “Off-premise licensees were pumping out spirits like it was Christmas every week,” says Pat Gagliardi, executive commissioner of the Michigan Liquor Control Commission. “They really stepped up and moved a lot of product, with the help of our suppliers and distributors.”
Some control states, including Virginia, Alabama, and Mississippi, are looking to expand and/or continue temporary provisions adopted last year to facilitate retail shopping, such as online ordering, curbside pickup, and home delivery. Mississippi lawmakers are considering privatizing the state’s wholesale tier and lowering the legal drinking age to 18. The Alabama Alcoholic Beverage Control (ABC) Board launched a consumer mobile app in March for consumers to search for products and store locations and implemented same-day pickup of online beverage alcohol orders via Instacart. Spirits sales were up double-digit rates in Mississippi and Alabama, jumping 18.7% and 11.1%, respectively, while Virginia showed strong growth, increasing by 9.1%.
Cooking, Shaking, Moving
In the face of a global pandemic, Americans traded up big time. “In Michigan, we couldn’t keep Champagne on the shelf,” Gagliardi says. “Vodka is still king in Michigan, but the straw stirring the drinks are Tequilas, Bourbons, and Cognacs.” Dollar sales in control states climbed 13.1% to $11.8 billion in 2020, up from $10.4 billion in 2019, according to NABCA. In Michigan, the largest control state by spirits volume, the category surged 11.6% in 2020 to 9.42 million cases. And dollar sales far outpaced volume. For the fiscal year October 1, 2019-September 30, 2020, Michigan spirits sales jumped 17% to $1.8 billion, according to Gagliardi. “We’re hoping to cross the $2 billion mark next year,” he says.
Across all control states, Hennessy ($41 a 750-ml.) posted the highest growth rate among the top ten spirits brands at 30.4% to surpass 1 million cases. Tito’s ($20), Fireball ($15), New Amsterdam vodka ($13), and Jose Cuervo ($21) had double-digit growth and contributed to total spirits growth rate in control states nearly doubling to 8% last year, from 4.1% in 2019, according to NABCA/Impact Databank.
Bourbon, RTD cocktails, Tequila, and Cognac/brandy drove growth. “American whiskey remains the category that’s most sought-after in Ohio,” says Jim Canepa, superintendent of the Ohio Division for Liquor Control (OHLQ). “In 2020, it was second only to vodka in sales, and just barely at that. The category grew nearly 26% in dollars from 2019. Our barrel program, as well as our work to bring more selections of Bourbon to the state, have helped lead the way for this growth.”
In all, nine of the 17 control states posted double-digit spirits growth last year. Pennsylvania, which closed its beverage alcohol retail tier from mid-March through May, was the only control state to decrease in spirits sales in 2020. “Excluding those months from a year-to-year comparison of 2020 to 2019, spirits dollar sales increased 5.9% and 9-liter cases increased 1.9%,” says Tim Holden, chairman of the Pennsylvania Liquor Control Board (PLCB).
Covid-19 restrictions and precautions have magnified the importance of online technology. Some internal technological changes, however, were also a long time coming. Michigan installed a new Online Liquor Ordering system (OLO) in February for the state’s 14,000 liquor licensees to place spirits orders. “It’s leading our business into the 21st century. Our previous system was 42 years old,” Gagliardi says. “It’s going to allow us to watch and study our inventory. We will be able to keep track of products to see what is selling where.”
Social media is revealing key intelligence and marketing opportunities. “Facebook and Instagram continue to be the biggest drivers of wine and spirits sales for Fine Wine & Good Spirits Stores,” says Holden. The PLCB’s social media channels became customer service platforms last year as consumer outreach increased during the pandemic. “Social media continues to be a very efficient and effective way to reach a lot of people and drive sales,” Holden says. “During the pandemic customers became more engaged on social media platforms, and we were able to harness and direct some of that energy to generate sales.”
Spirits sales in No.-2 control state Pennsylvania decreased 8.5% last year because the governor shut its 585 state liquor stores for more than two months. Many Pennsylvanians procured spirits in neighboring states, including Delaware, New York, New Jersey, Ohio, and West Virginia. “Spirits sales in calendar year 2020 were down, mostly due to the shutdown of Fine Wine & Good Spirits stores in mid-March through May,” Holden says, noting that leading categories in Pennsylvania last year included RTDs, whisk(e)y, Tequila, and Cognac. “RTDs experienced the most significant dollar sales growth at 36.6% in 2020, excluding the shutdown months.”
Engaging Barrel Selections
In Ohio, barrel selections generate the most engagement on the OHLQ’s Facebook and Twitter pages. “These posts, in turn, translate to the greatest sales impact from social media,” Canepa says. “We include information on the barrel age, proof, tasting notes, price, and unique distillery information to inform consumers about our special selections. If applicable, we also share information about virtual tastings held to garner more interest.” OHLQ stores’ “Last Call” sections highlight discontinued and discounted products. “Our bargain hunter consumers often flock to this section to find the latest deals,” Canepa says. “We also have five Last Call destination stores that house a large inventory of these products as well as each store’s display area.”
Spirits sales in Ohio were robust last year with a 9.7% gain in volume to 7.03 million cases and an 18% increase in sales to $978.4 million. “The percentage increase of dollars rose significantly more than the increase of gallons, indicating consumers were choosing high-priced products,” Canepa says. “We are always looking for ways to improve the brand experience for our customers and contract liquor agencies.”
Super-premium spirits accounted for the highest category sales by volume in Ohio in 2020. High-end brands posting strong growth rates included Hennessy XO ($100 a 375-ml.), Jim Beam Black ($23 a 1-liter), and Código 1530 Rosa Tequila ($60 a 750-ml.). “We see a post-Covid-19 shift in disposable income spending continuing toward at-home entertainment, including a well-curated, high-proof spirits selection,” Canepa says. “Building on that selection, we anticipate ongoing exploration and expansion into high-end products.”
The OHLQ started installing brand kits at its agencies, including category wayfinding signs, stanchion signs, counter mats, liquor store hour signs, and an OHLQ logo identifying spirits retailers. “We’re enhancing the consumer experience on OHLQ.com,” Canepa says. “Our site revamp will bring new features including robust category education, recipes for different occasions and experience levels, a ‘My List’ function to save your favorite products, and more. We’re working with website development experts to create an easy-to-use and informative site that will launch in late spring.” Adding to the rampant growth, Ohio lawmakers recently approved home delivery of spirits. “We anticipate maturation and expansion of in-state, e-commerce point-of-sale channels,” Canepa says.
Five of the top ten control states by spirits volume recorded double-digit growth last year. Among them, North Carolina posted the highest growth rate at 12.6% to 7.05 million cases. This growth catapulted North Carolina past Ohio to become the third-largest control state by spirits volume. Consumers in the Tar Heel State increasingly bought spirits in the 1.75-liter format. RTD cocktails, Tito’s, Hennessy VS, and Tequila led growth trends. Craft distilling in the state also contributed to spirits growth. More than 600,000 bottles of spirits distilled in North Carolina were sold through ABC stores in calendar year 2020. That was a 15.7% increase over 2019. Top craft distillery brands in North Carolina include Midnight Moon Apple Pie moonshine ($23 a 750-ml.), Social House vodka ($20), Sutler’s gin ($30), and Bedlam vodka ($20).
Category growth is anticipated to maintain momentum in North Carolina. “The trend line is up and the expectation is for continued healthy growth,” says Jeff Strickland, public affairs director of the North Carolina ABC Commission. “As the state’s population continues to grow, the North Carolina ABC Commission remains committed to innovation, efficiency, and customer service.”
Virginia, the No.-5 control state by spirits volume, experienced a 9.1% increase to 5.7 million cases in 2020. Spirits dollar sales last year grew 15.9% as Virginia consumers traded up. Many customers shifted to purchasing online and picking up curbside. “Consumers increased purchases of larger package sizes, especially 1.75-liter bottles,” says Travis Hill, CEO of the Virginia Alcoholic Beverage Control Authority. “Consumers focused on brands they knew, such as Tito’s ($22 a 750-ml.), Jack Daniel’s ($25), and Hennessy ($42).”
While the pandemic has changed the way people shop and how and where they consume spirits, the PLCB’s Holden is optimistic about long-term category growth in the Keystone State. “While less frequent shopping trips may continue for some time, we believe longer-term spirits trends for the future include premiumization, convenience, and experience,” he says. “Customers will continue to trade up to higher-priced products and seek convenience through easy-to-use and single-serve packages from our retail stores. And once restaurant and bar dining returns, patrons will be looking for unique and creative cocktail experiences in on-premise consumption.”
Although spirits sales are off to a slow start in Michigan this year, Gagliardi expects strong category sales in the second half of the year. “I expect the second half of this year to be a barn burner,” he says. “People are so pent up to get out and have some sort of normal life. Entertainment is such is a big part of our life and beverage alcohol is an amenity to entertainment. We’re going to continue rolling the hospitality industry and the economy is going to be better.”
Gagliardi says he wouldn’t be surprised if Michigan had another double-digit or high single-digit growth year. “Right now we’re down for the year, but we’ve had all of our on-premise closed since the beginning of the year,” he notes. “We’re a little behind but we can catch up and we’ll grow. I’m pretty certain of that.”