Staying Relevant in
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2026 How Craft Distilleries Can Adapt to a Changing Beverage Market
t the beginning of 2025, I shared my prediction that functional beverages, THC beverages, and various low-alcohol products would impact the alcohol beverage industry, and I encouraged industry members to embrace the changes that were coming. What was once a wide-open landscape now feels increasingly complex as we look toward 2026: Consumer behavior has shifted, distributor consolidation continues, non-alcohol and functional beverages are competing with alcohol for shelf space, and regulatory uncertainty remains a constant factor. The next year will be pivotal — not just for growth, but for survival. Craft distilleries can no longer rely on tasting rooms and a few local accounts to remain viable. The market has changed, and the distilleries that adapt strategically, rather than react slowly, will be the ones that stay relevant and profitable in 2026.
A Market in Transition Spirits growth in the U.S. has slowed from its post-pandemic surge and overall total spirits volume growth has been flat to slightly negative in recent quarters. Meanwhile, competition has expanded beyond traditional alcohol. Ready-to-drink cocktails, non-alcoholic spirits, THC beverages, and functional beverages now compete directly with craft spirits for consumer attention. The consumer’s mindset has shifted. Non-alcoholic spirits were once dismissed by distillers as a passing curiosity, but they now represent a meaningful revenue category. According to NielsonIQ Insight dated August 29, 2025, the U.S. no/ low-alcohol market is projected to exceed $1 billion by the end of 2025, and consumer usage patterns show it is being used with alcohol, not just instead of it. 24
Written by Alison Herman
Functional beverages — drinks enhanced with adaptogens, vitamins, electrolytes, or botanicals — have also captured consumer interest, especially among health-conscious drinkers. THC and hemp-derived beverages are another fast-growing market, drawing billions of dollars in investment but subject to shifting federal and state regulations. Regardless of whether distillers choose to enter adjacent categories, these alternative beverages have permanently raised consumer expectations for purpose-driven drinking experiences. Adapting strategically to a changing market means evaluating which emerging beverage categories best complement your core spirits portfolio. Determining whether to expand into RTD cocktails, non-alcoholic spirits, THC-infused beverages, or functional drinks requires a thorough assessment of how each aligns with your brand values and meets customer expectations. It’s equally important to understand the legal framework governing these categories and confirm that your business can secure the necessary licenses and approvals. Keep in mind that what’s permissible in one state may not be allowed in another. Before moving forward, invest time consulting with industry and legal experts to gain the insights needed to make an informed, compliant decision — one that positions your company to stay relevant and succeed in a rapidly evolving marketplace.
Distribution Challenges Gaining and maintaining wholesale representation is likely to be one of the most significant challenges facing small distilleries in 2026. Consolidation among major distributors has created increasingly limited portfolio space. Wholesalers of beer now sell wine, spirits, and non-alcoholic beverages (where permissible), and wholesalers of wine and spirits are also focused on becoming “total beverage distributors.” These moves narrow distribution channels and create concerns that smaller craft producers may have limited support and options in the market. Retailers are also reshaping expectations. Placement now demands proof of performance, and many expect suppliers to deliver local marketing support or in-store activation. This creates cost burdens for independent distillers trying to scale. Direct-to-consumer shipping could be a natural pressure release, but regulatory barriers remain. While wine has a robust DTC market, spirits DTC remains limited. Fewer than a dozen states allow interstate spirits W W W . ARTISANSPIRITMAG . C O M