American Whiskey Sales Face Challenges Amid Tariff Threats and Economic Uncertainty

Domestic Sales of American Whiskey Decline as Inflation Bites

The year 2024 proved to be a challenging period for American whiskey sales in the domestic market, as inflation took its toll on consumer spending. According to a report released by the Distilled Spirits Council, an industry trade association, domestic sales for American whiskey categories such as bourbon, Tennessee whiskey, and rye whiskey saw a decline. The council did not provide a detailed breakdown of sales for each type of whiskey but highlighted that the overall revenue for American whiskey dropped by 1.8% to $5.2 billion in 2024. This decline reflects a broader trend of consumers cutting back on discretionary spending, including distilled spirits, as inflation continued to squeeze household budgets. Chris Swonger, the CEO of the Distilled Spirits Council, noted that the combination of high inflation and rising interest rates forced many consumers to reduce their spending on luxury items like premium spirits.

The domestic market for spirits as a whole also experienced a slight downturn, with overall revenues falling by 1.1% to $37.2 billion, despite a 1.1% increase in volumes to 312.2 million 9-liter cases. The sale of super-premium spirits, which command the highest prices, was particularly hard hit, with both revenue and volumes declining as inflation-weary consumers opted for more affordable options. On the other hand, tequila and mezcal sales saw a 2.9% increase, while premixed cocktails and ready-to-drink spirits products experienced a significant surge of 16.5%. These shifts in consumer preferences suggest that while some segments of the spirits market are thriving, American whiskey is facing a tougher landscape.

Tariffs Loom Large as a Major Threat to American Whiskey Exports

While domestic sales presented challenges, the biggest threat to the American whiskey industry in 2024 came from the looming specter of tariffs, particularly in key foreign markets. The Distilled Spirits Council warned that the reimposition of tariffs on American whiskey exports to the European Union (EU) could deal a devastating blow to the industry. Starting April 1, 2024, the EU plans to reinstate tariffs on American whiskey at a rate of 50%, double the previous rate of 25%. These tariffs are part of a broader trade dispute over steel and aluminum that has reignited tensions between the U.S. and its trading partners.

The council expressed concerns that the resumption of tariffs at such a high rate would undo the significant progress the industry had made in rebuilding American whiskey sales in Europe since the previous tariffs were suspended a few years ago. During that suspension, American whiskey exports to the EU surged by 60%, demonstrating the potential of the European market for U.S. spirits. However, the reintroduction of tariffs at 50% would make American whiskey significantly more expensive in Europe, pricing many products out of the market and causing irreparable harm to distillers of all sizes. As Swonger put it, the tariffs would "gut this growth and do irreparable harm to distillers large and small."

The situation is further complicated by trade conflicts with other key export markets, such as Canada and Mexico. Canada, for instance, had initially imposed tariffs on American imports, including spirits, before announcing a reprieve late last year. However, the uncertainty caused by these trade disputes has already had a chilling effect on the industry, with several Canadian provinces considering the removal of American liquor brands from government store shelves. These developments highlight the vulnerability of the American spirits industry to trade policy decisions and the broader geopolitical climate.

The American Whiskey Industry Pleads for a Resolution to Trade Disputes

The Distilled Spirits Council has been vocal in advocating for a resolution to these trade disputes, emphasizing that the spirits industry should not be caught in the crossfire of unrelated trade conflicts. "This industry should not be involved in unrelated trade disputes," Swonger stated during a recent briefing. The council is urging policymakers to negotiate trade deals that would protect American spirits from being entangled in retaliatory tariffs. The industry is particularly concerned about the long-term consequences of these tariffs, as they could permanently damage the reputation and market share of American whiskey in key foreign markets.

The council’s concerns are shared by many in the industry, including small craft distilleries that are increasingly dependent on international exports to expand their businesses. For example, Boundary Oak Distillery in central Kentucky is working to establish a presence in the EU to complement its domestic sales in 12 to 15 U.S. states. The distillery, which is family-owned, has already shipped bourbon and lavender whiskey to Lithuania and is exploring distribution opportunities in Poland and Hungary. However, the prospect of a 50% tariff on its products in the EU could derail these efforts. "That would wipe out the market," said Brent Goodin, the distillery’s owner. "That would pretty much kill it."

American Whiskey Exports: A High-Stakes Game for the Industry

The stakes are high for the American whiskey industry, which relies heavily on exports to drive growth. According to the Distilled Spirits Council, spirit exports come from 45 states, and American whiskeys account for 63% of all U.S. spirits exports. The EU is the single largest export market for American whiskey, making the resumption of tariffs particularly concerning. During the previous round of tariffs imposed by the EU, American whiskey exports to the region plunged by 20%. While the suspension of those tariffs led to a rebound, the industry is now bracing for the possibility of an even more severe impact.

The broader context of U.S. trade policy under the Trump administration adds another layer of complexity to the situation. President Donald Trump has used tariffs as a tool to negotiate trade concessions, particularly on issues such as immigration and steel imports. However, this approach has led to significant uncertainty for industries like American whiskey, which have become collateral damage in larger trade disputes. The council has pointed out that the industry should not be drawn into unrelated trade conflicts, as the consequences for small and large distillers alike could be catastrophic.

The Human Cost of Trade Disputes: Small Distilleries and Local Economies

The impact of these trade disputes is not limited to the balance sheets of large corporations. Small craft distilleries like Boundary Oak Distillery are also feeling the pinch, as they struggle to navigate the complexities of international trade amid tariff uncertainty. These distilleries, many of which are family-owned and operate on thin margins, are particularly vulnerable to sudden changes in trade policy. The imposition of high tariffs on their products in key export markets could make it impossible for them to compete, forcing them to scale back their operations or even exit the market entirely.

The consequences of these tariffs extend beyond the distilleries themselves, affecting local economies that rely on the spirits industry for jobs and revenue. In Kentucky alone, where 95% of the world’s bourbon supply is produced, the industry supports thousands of jobs, from distillery workers to farmers who supply the grains used in whiskey production. At the start of 2024, a record 14.3 million barrels of bourbon were aging in Kentucky, underscoring the state’s central role in the American whiskey industry. Any disruption to exports could have ripple effects throughout the state’s economy.

Conclusion: A Call for Cooler Heads and Bipartisan Solutions

As the American whiskey industry faces the dual challenges of declining domestic sales and escalating trade disputes, the Distilled Spirits Council is urging policymakers to take a more nuanced approach to trade negotiations. The council is calling for cooler heads to prevail, with the hope that trade deals can be reached that protect the interests of the spirits industry. The council’s message is clear: the American whiskey industry should not be forced to bear the brunt of unrelated trade conflicts, as the consequences for distillers, their employees, and local economies could be severe.

In addition to advocating for trade policy changes, the industry is also focusing on adapting to changing consumer preferences and economic realities. While inflation and higher interest rates have dampened demand for premium spirits, the rise of premixed cocktails and other convenience-focused products offers a potential bright spot for the industry. However, the long-term success of American whiskey will depend on the industry’s ability to navigate the complexities of global trade and emerging market trends.

Ultimately, the story of the American whiskey industry in 2024 is one of resilience in the face of adversity. From the craft distilleries working to establish a foothold in international markets to the larger distillers navigating the uncertainties of trade policy, the industry is determined to persevere and thrive. But as the tariff threats loom, the industry is hopeful for a resolution that will allow it to continue to grow and succeed, both at home and abroad.