FEBRUARY 10, 2017 | MODERN DISTILLERY AGE VOLUME 8 | NUMBER 6

Distilled Spirits Council Annual Economic Briefing

Distilled Spirits Sector Growth Accelerates in 2016 — Gains Market Share for Seventh Consecutive Year

The distilled spirits sector achieved accelerated growth in 2016 with supplier sales up 4.5% to $25.2 billion, volumes up 2.4% to 220 million cases and a seventh straight year of market share gains relative to beer, the Distilled Spirits Council announced on Tuesday at its annual economic briefing for media and Wall Street analysts, sponsored by Spirited Funds.

“The continued growth of the spirits sector clearly demonstrates that adult consumers’ taste for and interest in premium distilled spirits across all categories is trending upward,” said Distilled Spirits Council President and CEO Kraig R. Naasz. “Spirits makers continue to develop new innovations to appeal to a growing audience of adult Millennials, and they are responding by purchasing and enjoying our products.”

Naasz cited recent public opinion research, which showed 78% of the public view the spirits sector favorably and a significant majority support sales of spirits in grocery stores as well as equal taxes and the same regulations for spirits, beer and wine.

“Our sector is viewed favorably by the majority of the public, which also thinks we should be treated equally with respect to regulation and taxation,” said Naasz. “From a public policy standpoint, our goal is to continue to modernize the marketplace and provide consumers with the choices and convenience they seek when it comes to spirits.”

American Whiskey Boom ContinuesAmerican whiskey — bourbon, Tennessee and rye — continued to captivate

U.S. consumers with volumes up 6.8% to 21.8 million cases and revenues up 7.7 to $3.1 billion. Several other spirits categories performed exceptionally well in the U.S. market including:

• Cognacvolumesup12.9%to5.1millioncases;revenuesup15.3%to$1.5 billion

• Irish whiskey volumes up 18.7% to 3.8million cases; revenues up19.8%to$795million

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A survey conducted by The Harris Poll finds that beer is the most favorite beverage of choice, and wine is the favorite alcohol among women, adults aged 65 and more and those in high income households.

For nearly four in ten regular drinkers (U.S. adults aged 21+ who drink alcohol several times a year or more), beer is that beverage of choice (38%) followed by wine (31%) and spirits (28%).

Most regular drinkers who say beer is their beverage of choice today also say it was their go-to alcohol beverage two years ago (83% of those 23+) and ten years ago (73% of those 31+).

A majority of today’s spirit choosers say the same as well, with 78% stating they preferred spirits two years ago (of those 23+) and 63% ten years ago (of those 31+).

Wine drinkers, on the other hand, tell a slightly different story. While nearly three quarters of today’s wine drinkers say they also preferred wine two years ago (73% of those 23+), just four in ten say the same of ten years ago (44% of those 31+).

Beer Tops List of Beverage of Choice

Actûrus – Winners of the Most Often Recommended Spirit Brand Awards

Fireball is not only the most often recommended shot/shooter among U.S. bartenders, but it’s also the most often recommended brand within all spirits categories for the first time. The Actûrus MSS U.S. BartenderInfluencerStudy,nowinits11th year, asked over 10,000 bartenders their opinion of brands and to rank all the major spirits brands in terms of the frequency they recommend them to consumers.

“Bartenders are the gatekeepers between brands and their consumers, and the bartender recommendation is a huge factor in which brand ultimately succeeds,” said Kevin Moran, co-CEO of Actûrus. “These bartenders are making recommendations to roughly 40% of their consumers. Theseinfluencersrepresentasignificantopportunityfor a brand to increase its on-premise market share within the adult beverage category.”

The award program recognizes spirit brands with the highest share of recommendations among

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5 FEBRUARY 10, 2017 | MODERN DISTILLERY AGE

Following its release in the Bahamas in 2015 and in Florida and Tennessee, Afrohead Rum from Trinidad has expanded distribution to Virginia. Afrohead Briland 07 (40% ABV) is a blended seven-year-old rum. A 750-ml bottle sells for about $33.

The company also makes Afrohead XO 15-Year-Old Rum. Afrohead rums are also available in New York, Illinois, Maryland,Pennsylvania, Washington, D.C., Arizona, Colorado and South Carolina, with additional markets to come in 2017.

Afrohead Rum

InMarch,Michter’sDistilleryinLouisvillewill release Michter’s 10 Year Single Barrel Kentucky Straight Rye (46% ABV).

This is the first whiskey released by Michter’s from Master Distiller Pamela Heilmann, who in 2016 became the first woman since Prohibition to serve as Master Distiller at a Kentucky Distillers’ Association distillery. A 750-ml bottle sells for about $150.

Michter’s 10 Year Rye

Twisted Shotz Moscow Mule Kick

After a social media campaign, IndependentDistillershasreleasedanewflavor in its Twisted Shotz line: MoscowMule Kick (20% ABV). The campaign, “You Call the Shot,” asked existing and potential new Twisted Shotz fans, including 500,000 Millennials, to develop and submit two new Twisted Shotz flavors for release in 2017.

Moscow Mule Kick, one of two winning entries, was submitted by Ryan Golderer, an electrical engineer in Philadelphia. The shot combines lime and ginger liqueurs with a dash of oak extract. Like all Twisted Shotz flavors,MoscowMuleKick ispackaged ina double-chambered, reusable shot glass. Theflavorsmixtogetherwhentheshotistipped into your mouth. A four-pack (each 12.5-ml) sells for about $6, and Moscow Mule Kick is available nationally and will soon be available in the Twisted Shotz Party Pack.

Woodford Reserve Double Double Oaked

Woodford Reserve has re-released Double Double Oaked (45.2% ABV) in its DistillerySeries.Itwasfirstreleasedasoneof the Distillery Series’ initial expressions in 2015.

Double Double Oaked is the result of finishing fully aged Woodford Reserve Double Oaked for an additional year in a second, heavily toasted, lightly charred, new oak barrel. A 375-ml bottle sells for about $50, and Double Double Oaked is available in limited quantities at the Woodford Reserve Distillery and select retailers in Kentucky.