Craft Spirits Segment Continues To Attract New Interest

Craft spirits comprise a small slice of the U.S. spirits market, but their influence is rising fast as new players continue to enter the category. According to the Distilled Spirits Council, there were just a few dozen American craft distilleries operating in 2000, compared to more than 200 today. Some craft distillers put the current number as high as 400.

“The craft spirits segment continues to enjoy growth well beyond that of the broader industry,” says Lance Winters, master distiller at St. George Spirits in Alameda, California. St. George makes 17 products under their own label and many more for other companies—including Hangar One vodka, marketed by Proximo Spirits. The St. George portfolio includes three gins (each $35 a 750-ml. bottle), a single malt whiskey ($70), a Bourbon-style whiskey ($36), an absinthe ($60), and several flavored liqueurs and eau de vie ($20 to $40 a 375-ml. bottle).

Craft distillers love the freedom that comes with small-scale spirits making. “We can decide what to make and what we want to be rather than aiming for the broadest appeal,” explains Sonja Kassebaum, co-founder of North Shore Distillery in Lake Bluff, Illinois. North Shore Distillery makes six core products and is developing several others. Kassebaum describes her portfolio as unique, arguing that her spirits couldn’t be made on a mass-production scale. North Shore’s main labels include Distiller’s No. 6 gin ($32.99), Distiller’s No. 11 gin ($32.99), North Shore vodka ($29.99), Sirène Absinthe Verte ($59.99), Aquavit Private Reserve ($29.99), and the chamomile and citrus-flavored vodka North Shore Sol ($29.99).

Even amid the current boom, many craft players believe that consumers don’t truly understand the difference between their spirits and those produced on a larger scale. The recent entry into the craft segment by the industry’s major players (Diageo has been especially active on this front) is likely to further complicate matters.

Boutique spirits companies often look to craft beer as a model for their own situation. “In the on-premise, most consumers still tend to order larger name brands,” notes Alan Dietrich, CEO of Oregon’s Bendistillery, whose Crater Lake product lineup includes gin and vodka, as well as a Reserve vodka, Pepper vodka and Hazelnut Espresso vodka (all priced at roughly $29.99). “The challenge now is to get people to drink craft spirits exclusively—as has happened with craft beer—and to get people to call for craft brands in bars. That’s happening, but slowly.” Restaurants and bars are a key growth channel for craft spirits because they provide a platform for consumer experimentation.

Given the growing array of craft spirits players and products, some anticipate an eventual shakeout. But consumer enthusiasm and strong upward momentum for the segment has others seeing much more growth ahead. “The craft spirits movement is growing in strength and numbers,” says Brett Joyce, president of Rogue Ales and Spirits in Newport, Oregon, which produces Spruce gin, Hazelnut Spice rum, Dark rum, Dead Guy whiskey and Oregon Single Malt whiskey (each priced between $35.99 and $44.99). “There will be much broader acceptance and understanding of craft spirits in the coming years. We will have between 500 and 1,000 craft distillers across the country.”

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