Proud of its dominant position as the largest brewer in the world, Anheuser-Busch In-Bev (A-B InBev) is boasting another accomplishment these days—its new footing as a spirits influencer. “As a result of the strong and steady incremental growth of Cutwater and Nütrl, which source significantly from existing spirits companies, A-B InBev has become the No. 3 share gainer among all spirits companies,” a company representative says, citing June Circana data. “As consumers further educate themselves on the spirits-based RTD category, we can only expect it to grow. Consumers are looking for options in their beverage choice and Anheuser-Busch looks to deliver for them.”
Times have certainly changed for A-B InBev and other leading brewers, who now identify themselves as spirits marketers too. Gone are the days when the country’s largest beer marketers focused solely on malt beverages. Rather, the marketers are putting a growing emphasis on spirits—and RTDs in particular—as volume growth in a post-pandemic world continues to elude the beer category. Regional and craft brewers are following a similar path and responding to the increasing diversification among their consumers in beverage options.
While definitive data on the number of brewers that produce spirits is hard to come by, there’s no question beer makers see opportunity. According to the Brewers Association, some 600 U.S. breweries hold permits to distill (although it’s unlikely all of them actively make spirits). Indeed, brewer-produced spirits brands are among some of the hottest labels on the market. Sales of Cutwater, the No.-2 spirits-based RTD, jumped 15% last year to 3 million 9-liter cases from 2.7 million in 2022, according to Impact Databank. Nütrl, meanwhile, the fifth-largest RTD, surged to more than 2 million cases from 900,000 in 2022, its first year on the market.
Skating To The Puck
The recent swell in brewer-produced spirits brands comes in response to overall market conditions and the brewers’ desires for continued growth. “Beer has been having some struggles,” notes Fred Matt, president and CEO of F.X. Matt Brewing Co., in Utica, New York, which teamed up with Saranac, Maryland’s Flying Dog, and Massachusetts’ Harpoon breweries, to form canned cocktail marketer Right Coast Spirits two years ago. “There’s a very different consumer today, and they’re drinking a variety of things. As alcoholic beverage producers, we’re all competing for share.” Pointing to the overall trend toward spirits for many consumers and the opportunity the movement provides brewers, Matt quotes hockey great Wayne Gretzky. “You have to skate to where the puck is going to be, not where it has been,” he says.
Bart Watson, vice president of strategy and chief economist at the Brewers Association, told Market Watch last year that most of the craft brewers in the spirits space are producing large-format full-strength products. “While there are small producers of RTD cocktails, the vast majority of that market is produced by large companies,” Watson said. That’s certainly the case at A-B InBev, where Cutwater canned cocktails have a much larger presence than the brand’s bottled spirits.
Similarly, at Dogfish Head Craft Brewery, RTD cocktails are emphasized over full-strength products. “Our RTD cocktails remain the priority among our spirits portfolio,” notes co-founder Sam Calagione, as the products are distributed from coast to coast, while the company’s bottled spirits are
only available in Delaware, Maryland, New Jersey, New York, Hawaii, and Washington, D.C. “Some super limited releases are only available at our coastal Delaware hospitality locations,” he adds. “The canned cocktail space is among the fastest-growing categories in alcoholic beverages, and Dogfish is one of the few brands in that space that has been making cocktails incorporating our own spirits for over two decades.”
Parent company Boston Beer Co., meanwhile, has also been leaning into spirits-based RTDs in recent years, with products like the multi-flavored Truly vodka soda and Truly Tequila soda, which rolled out earlier this year in four flavors. And Sun Cruiser, a vodka-based tea innovation designed to compete with the likes of Surfside, was recently launched in East Coast markets. “We see potential for Sun Cruiser, which expands our tea portfolio to bring new consumers to the category who prefer a spirits-based beverage,” Boston Beer president and CEO Michael Spillane told analysts this summer. “The initial feedback on the brand from wholesalers, retailers, and drinkers has been very positive.”
Big Brewer Brands
A-B InBev’s Beyond Beer business unit acquired Cutwater Spirits five years ago, and product assortment and availability have subsequently grown dramatically. “Cutwater has steadily grown dollar sales by double digits for five consecutive years,” the company spokesman says, with a 23% rate of growth through June of this year. Founded in San Diego in 2016 by former Ballast Point Brewing executives, Cutwater operates from a 50,000-square-foot distillery and production facility. According to A-B InBev, Cutwater spirits and many of the company’s canned cocktails are produced at the facility. In addition to bottled vodka, rum, gin, whiskey, and Tequila, Cutwater markets more than 20 canned cocktail varieties ($16 a 4-pack of 12-ounce cans). The Lemon Drop Martini expression launched this summer, while Tequila Paloma, White Russian, and Espresso Martini flavors were recently expanded.
Vodka-based Nütrl, meanwhile, was introduced by the beer marketer in 2022, and has grown steadily since its launch, including year-to-date dollar growth of 68% through May, according to Circana, the A-B InBev spokesman says. Comprising vodka, seltzer, and fruit juice, Nütrl is available nationally in a range of single-flavor 4-packs ($10), including pineapple, watermelon, and black cherry, as well as three variety packs.
A-B InBev rival Molson Coors Beverage Co. has also expanded into spirits in recent years but has focused more on straight spirits than RTDs. In 2021, Five Trail Blended American whiskey ($30 a 750-ml.) was released under the Coors Whiskey Co. banner, and produced in partnership with Bardstown Bourbon Co. At the time of the launch, Molson Coors said the decision to expand into whisk(e)y was premised on three factors: “the spirit’s unbridled growth over the past two decades, a built-in affinity of beer drinkers for a whiskey produced by a brewery, and a desire to build more premium offerings within the company’s portfolio.”
In 2023, the company introduced Barmen 1873 Bourbon ($37 a 750-ml.) to its portfolio and established Coors Spirits Co., which, it said at the time, will “house Molson Coors’ growing spirits division, as part of the company’s shift from a beer company to a total beverage company.” Molson Coors also acquired luxury Bourbon and rye producer Blue Run Spirits of Georgetown, Kentucky last year, and further innovation is planned for the coming years.
Boston Beer’s Dogfish Head, meanwhile, has been distilling for more than 20 years, and in addition to its RTDs, its spirits portfolio today consists of whiskeys, gins, vodkas, rums, cordials, and brandy. “Recently, we’ve seen a lot of folks gravitating toward our whiskeys,” Calagione notes. “They’ve been very well reviewed and rated in respected publications such as Whisky Advocate.” The company’s Compelling gin ($32 a 750-ml.) is another top seller. “It’s super approachable, with bold citrus-forward flavors. Even non-gin drinkers love it,” Calagione says. Among new developments for Dogfish Head canned cocktails is the introduction of a line of 12% abv canned cocktails, including Strawberry Lime Tequila Margarita packaged in 4-packs of 12-ounce cans for $15. The canned cocktails were also recently launched in parts of Canada.
Fantastic Margins
It’s not just large brewers who have set their sights on spirits; regional breweries have also expanded into the space, via both full-strength and RTD offerings. Spoetzl Brewery Inc., in Shiner, Texas, opened the K. Spoetzl Distillery last year, a move which required modifications to its existing campus and the installation of a still from Scotland. According to Tom Fiorenzi, director of brewery and distillery operations, sales of its vodka, gin, and moonshine largely take place at the brewery/distillery, which attracts some 75,000 visitors a year. But in the spring, Spoetzl launched the products, priced at $20-$25 a 750-ml., at retail in the Dallas-Fort Worth area. A Bourbon and rye could be released as early as 2025 and 2026, respectively, Fiorenzi says.
Right Coast, meanwhile, produces only canned cocktails, with spirits purchased from New York’s ClearSource. The unique partnership utilizes the sales force from each of the breweries to provide for distribution along the east coast (last year, F.X. Matt acquired Flying Dog). At press time, expansion into the Midwest and Texas were planned. Right Coast’s portfolio comprises Vodka Whips and Margarita Whips in cans ($20 an 8-pack of 355-ml. cans) and bottled Italian Ice RTDs ($14 a 4-pack of 375-ml. bottles). “Before Covid-19, 85% of our business was in craft beer,” Matt notes. “Today, we have a stronger non-alcoholic and spirits division.”
Fiorenzi agrees that entry into spirits has rounded out Spoetzl’s portfolio. “In the past, they were taboo for brewers,” he says, “but we saw that beer distributors were getting into spirits. It’s brought a lot of enthusiasm to the company. And the margins are fantastic.” But there have been challenges too, Fiorenzi adds, pointing to tasks like staff and distributor training. Matt says the challenges for his company have included learning the category. “It requires different distribution, different channels than beer,” he says. “We’re not dropping 50 cases at a grocery store, but a smaller amount to a liquor store.”
Still, there’s widespread agreement that brewer expansion into spirits will continue. “I expect more brewers to try their hands at distilling or creating products using distilled spirits,” says Calagione. “It will be very interesting to watch the industry evolve over the next two, five, even ten years, as drinkers’ preferences continue to shift, and category lines continue to fragment and blur.”