Oregon Spirits Sales Soar

Trading-up trends and bull runs on Tequila and RTDs propel spirits sales past $800 million in the Beaver State.

Oregon spirits sales (Pearl Specialty in Portland pictured) continued growing in 2021, jumping 6.2% to more than $800 million. Off-premise sales are expected to cross the $1 billion mark in the Beaver State by 2025.
Oregon spirits sales (Pearl Specialty in Portland pictured) continued growing in 2021, jumping 6.2% to more than $800 million. Off-premise sales are expected to cross the $1 billion mark in the Beaver State by 2025.

Spirits in Oregon flexed their muscles last year, with dollar sales growing another 6.5% on the heels of the historic 11.4% gain in 2020. “After a significant increase in sales during 2020, sales returned to growth rates more in-line with recent history,” says Paul Rosenbaum, chairman of the Oregon Liquor and Cannabis Commission (OLCC). He adds that a growth rate over 6% was a surprise following such high gains the year prior. 

Dollar sales gains easily outpaced volume growth, which inched forward 0.6% to 3.83 million cases, according to the National Alcohol Beverage Control Association (NABCA) and Impact Databank. Sales gains in Oregon have now been 6% or higher for four consecutive years, having grown 6% in 2018 and 6.3% in 2019. If the Beaver State maintains this brisk growth pace, spirits sales are on track to eclipse the $1 billion milestone in 2025.

Times Are A-Changin’

Previously known as the Oregon Liquor Control Commission, the OLCC became the Oregon Liquor and Cannabis Commission on August 2, 2021. The word “Control” that had defined the agency’s original post-Prohibition mission was eliminated. The name change comes seven years after voters passed Measure 91, which directed the agency to establish a framework for regulating Oregon’s recreational marijuana marketplace.

Oregon lawmakers also approved a series of bills in 2021 that will continue the transformation of the OLCC’s regulatory responsibilities from an agency focused on oversight of the alcohol industry to a regulator engaged in consumer protection of alcohol and cannabis products. The legislature green-lighted the OLCC to modernize its licensing system and alcohol distribution and tracking infrastructure, approving funding for information technology upgrades and a new consolidated warehouse. “This agency is the second or third largest revenue producer for the state of Oregon,” says Rosenbaum. “In the next three to five years, we are probably going to surpass $2-$3 billion in revenue combined. I applaud the legislature for understanding we couldn’t do that without them supporting us 100% in everything they did in this past legislative session.”

In other action, the OLCC recently approved a floor pricing proposal for distilled spirits that would increase the price of the lowest priced spirits sold in Oregon liquor stores. In response to public health concerns, the OLCC proposed implementing a minimum for the lowest-priced spirits sold by the OLCC. The Commission framed the issue as balancing business interests with public health concerns.

The OLCC’s dual mission elevates the agency to a unique position and sheds light on consumer spending habits. Concerns have existed among some in the alcohol industry about losing business to recreational marijuana. Industry developments in Oregon are a big eye-opener, as sales of recreational marijuana quickly zoomed past those of beverage alcohol and the $1 billion milestone in 2020. During year one of the pandemic, sales of recreational marijuana jumped 41% to $1.1 billion from $785 million in 2019.

Last year, Oregon’s recreational marijuana sales increased 6.6% to $1.184 billion, according to the OLCC. Considering the historic growth of beverage alcohol during the same two years, it’s hard to believe recreational marijuana is taking customer share from the spirits industry. The dynamics are much more complicated. Border-crossing consumers from Idaho have also fueled Oregon’s recreational marijuana sales.

Tequila, Tequila, Tequila!

The top three established spirits brands—defined as sales rank within the top 50 brands sold in Oregon—with the highest growth rates were all Tequilas. Casamigos Blanco ($48 a 750-ml.) rocketed 103.63%; Espolòn Blanco ($27) increased 25%, and 1800 ($30) grew 20%. Tequila saw the largest increase in share of the overall spirits category in Oregon, increasing from 12.77% of sales in 2020 to 14.61%, a $21.4 million increase, last year.

Bourbon, Canadian, and Irish whiskies are also popular among Oregonians. While Tito’s vodka is the top-selling spirits brand by value in Oregon, the next five brands comprising the top-ten are whiskies: Pendleton ($26 a 750-ml.), Jameson ($21), Jack Daniel’s Black ($21), Fireball ($17) and Crown Royal ($25). Rounding out the top-ten spirits brands by value in Oregon are: No. 7 Smirnoff vodka ($12), No. 8 Monopolowa vodka ($12), No. 9 Maker’s Mark Bourbon ($40), and Patrón Tequila ($50) at No. 10.

While the Commission does not directly engage in marketing and merchandizing plans for the state’s independently operated liquor stores, the Commission launched its 10th “Chance-to-Purchase” campaign last October, featuring rare and limited-edition Bourbons and whiskies. The campaign featured 29 “collectors” bottles from seven rare spirits brands. Supply chain issues, however, continue to be a factor. “The Commission intends to open another Chance-to-Purchase campaign once the small batch sought after products become available again,” Rosenbaum says.

The OLCC also has a semi-quarterly “Chance to Purchase” drawing for rare spirits. Ten brands and 70 bottles were allocated for last December’s drawing. Among the ten brands, five were Pappy Van Winkle Bourbon variants: 18 entries of Old Rip Van Winkle 10 Year ($80 a 750-ml.); six entries of Pappy Van Winkle Family Reserve 15 Year ($120); three entries of Pappy Van Winkle Family Reserve 20 Year ($230); three entries of Pappy Van Winkle Family Reserve 23 Year ($330); and 12 entries of Van Winkle Special Reserve 12 Year ($90). “This program enables the OLCC to give customers a chance to obtain extremely rare bottles,” Rosebaum says.

Expansion Initiative

The OLCC is taking steps to maintain growth with strong support for the industry’s wholesale and retail tiers. The Commission distributes spirits from a central warehouse and an auxiliary warehouse in the Portland area to more than 280 independent retailers statewide and regulates manufacturers, wholesalers, bars, restaurants, and grocery and convenience stores. Even before the pandemic, distilled spirits sales have grown steadily year-over-year, straining the existing capacity at OLCC’s two warehouses. Currently, the OLCC stocks more than 3,100 products, including more than 800 made by Oregon distillers.

The Commission has plans to open a new $145.8 million warehouse in Canby, about 25 miles south of Portland, to increase the number of products sold and distributed and to meet consumer demand. Last year the commission delisted 260 items, including Russian spirits, but added 100 new items. Groundbreaking for the new warehouse is set for mid-2023 with the opening forecasted for early 2025. The new warehouse will allow the OLCC to continue to offer a wide selection of products, as well as the flexibility to add new items as they become available.

Oregon launched a retail liquor store expansion effort in 2015. During the six years of the expansion, from 2015-2021, 36 stores have opened across the state. The average sales per liquor store during the period increased from $2.3 million to $2.9 million, though retailers in metropolitan areas are significantly higher. The average annual revenue for the 68 liquor stores in the Portland metropolitan area was $4.8 million in 2021. Liquor stores in Oregon sell spirits to bars, restaurants, and hotels, which typically accounts for about 25% of a store’s overall sales. In 2015, there was one liquor store for every 16,000 residents, but now there is one for every 15,000 residents. “The OLCC recruited eight new independently owned liquor store operators in 2021,” Rosenbaum says. “The Commission plans to continue looking for underserved markets to expand stores with a metric of one store per 15,000 residents.”

During the first six years of the expansion project, Oregon’s population increased from slightly more than 4 million residents to 4.2 million residents. In keeping with this growth, 21 stores have been added to the metropolitan areas in Bend, Eugene, Medford, Portland, and Salem since the inception of the retail expansion program. First-time liquor stores also opened in the Parkdale, Selma, and Terrebonne communities. In February of this year, the Commission announced expansion plans for phase six of the project, with six new locations planned for Multnomah County and one store each for Clackama and Washington Counties. The Commission requires that liquor stores must be open at least between noon and 6 p.m., but stores may open as early as 7 a.m. and stay open until 10 p.m. Store owners also have the option tbe open on Sundays and legal holidays, with hours varying from store to store. “Oregon continues to see growth statewide,” Rosenbaum says. “In response to this fact, the OLCC has continued to offer small business opportunities statewide under the retail expansion program.”

On-Premise Rebounds

The OLCC has pledged to help the state’s hospitality industry as it emerges from the pandemic and to take steps to ensure that more than half a billion dollars in state revenue doesn’t slip away. Bar and restaurant licensee sales have returned to pre-pandemic levels. This has offset the related decline in consumer retail sales over this same period. Licensee sales averaged $13.3 million a month in 2019 but fell to $6.6 million a month in 2020 because of the Covid-19 national emergency. Last year, on-premise sales rose to $11.3 million a month. The Commission also saw its largest month, at the time, of licensee sales in July 2021 when sales were $14.7 million. That amount was surpassed in March of this year when licensee sales reached $15.9 million. On the consumer side, sales averaged $43.9 million a month in 2019, increased to $57.3 million in 2020 and were down slightly in 2021 to $56.5 million. 

One of the state’s major legislative changes (Senate Bill 317) permanently allows bars and restaurants with full and limited on-premises licenses to sell packaged beer, wine, and cider to go. Previously, on-premise licensees were required to obtain an off-premises license to sell bottles or 6-packs to go. Full on-premise licensees are also allowed to sell single servings of wine to-go.

Other significant changes included refreshing the definition of malt beverage in Oregon to align it with the federal definition, permanently allowing restaurants and bars with full on-premise licenses to sell cocktails to-go, eliminating the keg tag requirement for consumer keg sales, and increasing flexibility for Oregon nonprofit organizations that want to conduct special events involving alcohol.

The Commission continues to work with both distillers and independently operated liquor store owners to ensure market health and public safety. Oregon craft distillers saw sales through OLCC contracted liquor stores increase 6.3% in 2021. The top three craft distilleries in 2021, based on sales dollars, were Hood River Distillers, Wild Roots, and Bendistillery.