Artisan Spirit: Summer 2022

Page 45

Written by KEVIN O’BRIEN

2021

S

pirits industry mergers and acquisition (M&A) activity in 2021 picked up right where it left off at the end of 2020. After the pandemic related disruptions in the broader M&A market in early 2020, the second half of the year experienced robust activity. Spirits M&A activity in 2021 was driven by similar factors as in prior years — premiumization, distributor consolidation, and low interest rates. The year saw fewer overall transactions than in previous years but reinforced certain trends that have been observed in the recent past. As a primer, it should be noted that the U.S. spirits industry once again outperformed its beverage alcohol counterparts during 2021. Spirits volume in the U.S. grew by 9.3 percent during the year, far eclipsing wine and beer which both saw negative growth rates. Continuous annual growth in the spirits industry has led the category to account for over 41 percent of U.S. beverage alcohol revenue. In fact, since 2011, the percentage of U.S. alcohol dollar sales has increased from 34.1 percent to 41.3 percent, FIGURE 1 Spirits % of U.S. Alcohol Dollar Sales an increase of more than 21 percent. These Source: Distilled Spirits Council growth trends continue to support investments by leading beverage alcohol suppliers +21.1% to capture additional market share in one of 41.3% 39.6% the few growing segments in the industry. 35.9% 34.1% Additionally, 2021 welcomed the return of the very important on-premise channel. This is of interest because nascent spirits brands are developed in the on-premise channel where consumer trial is most effective — this trial tends to lead to off-premise purchases. With the pandemic related disruptions of 2020, the on-premise channel cratered with a year-over-year decline 2011 2016 2020 2021 of almost 44 percent. Fast forward one year and the growth rate exceeded 50 percent. The shift from off-premise Off-Premise On-Premise Total to on-premise was dramatic and ultimately resulted in the overall cat53.0% egory growing year-over-year. The increase in on-premise business certainly benefited up and coming 18.0% spirits brands seeking to establish 7.7% 9.3% 1.0% a presence in an ever competitive marketplace.

SPIRITS INDUSTRY MERGERS & ACQUISITIONS Year in Review

FIGURE 2

On-Premise vs. Off-Premise Spirits Volume Growth (2020-2021) 2020 2021 Source: Distilled Spirits Council W W W . ARTISANSPIRITMAG . C O M

-44.0% 45