The Retail Spirits Marketplace is More Than a Numbers Game
The off-premise spirits retail sector—namely, liquor stores—has faced a whirlwind of change over the past 10 years. From shifting consumer tastes to new competitive pressures, these transformations have redefined how liquor store owners operate. Below, we dive into 10 significant changes since 2015 that are reshaping the retail spirits business, backed by data and examples. We’ll also explore how producers and retailers can collaborate to adapt and how liquor stores can hold their ground against grocery store encroachment.
ALSO READ: SPIRITS TRENDS PAST AND PRESENT
1. Premiumization Takes Hold in Retail Spirits Marketplace
The trend of premiumization—consumers opting for higher-quality, higher-priced spirits—has redefined retail shelves. U.S. spirits wholesale revenue doubled from $29 billion in 2012 to $58 billion in 2022, growing at a 6% compound annual rate, with premium tequila and bourbon leading at 12% and 10% annual volume increases from 2015-2020 (IWSR). This shift reflects a cultural move toward “drinking less but better,” especially among Millennials and Gen X, who associate premium spirits with status and craftsmanship. Retailers like Binny’s Beverage Depot in Illinois have capitalized by dedicating 30-40% of shelf space to bottles priced $50+, such as Woodford Reserve Double Oaked ($60) or Don Julio 1942 ($150), boosting margins by 15-20% over mass-market brands. Smaller stores, however, struggle with the capital required to stock these pricier options, often missing out on the trend’s full profit potential unless supported by supplier financing or promotions.
Over the past five years my team and I at Felene vodka have conducted over 1,000 consumer tasting events in: New York, Florida, Texas, California and Colorado. From the sprawling super stores in Colorado to the “mom and pop-style” stores in New York, we have collected tens of thousands of data points. This is a practice that enables Felene to be a better partner to our retail clients and become an agent of change and a source of business information in the retail spirits marketplace.
2. Ready-to-Drink (RTD) Boom
Ready-to-drink cocktails have exploded from a niche novelty to a retail juggernaut, appealing to convenience-driven younger drinkers. U.S. spirits-based RTD sales surged 62.3% during the 2022 Halloween season alone (NielsenIQ), and the global market is projected to hit $40 billion by 2027. Brands like High Noon, a vodka-soda hybrid, doubled its market share from 2020 to 2023, while Cutwater Spirits grew 73% in 2022, fueled by portable packaging and bold flavors. Liquor stores benefit from RTDs’ high turnover—often selling at $10-15 per four-pack with margins rivaling premium spirits—and their appeal to impulse buyers near checkouts. However, competition from mass retailers like Walmart, which stock RTDs at lower prices, pressures independent stores to differentiate with exclusive or craft offerings, such as local distillery collaborations.
3. Spirits Overtake Beer
Spirits eclipsed beer in U.S. market share in 2022, claiming 42.1% versus beer’s 41.9%, a historic shift after decades of beer dominance (SponsorUnited). This pivot is driven by Millennials, who account for 32% of spirits consumption by value despite being 29% of the drinking-age population, favoring spirits’ perceived sophistication and lower-calorie profiles over traditional lagers. Retailers have responded by reallocating shelf space—some reducing beer sections by 25% to spotlight flavored vodkas (e.g., Felene Flavors) or small-batch whiskeys. Independent stores in urban areas, like Astor Wines in NYC, report spirits sales outpacing beer 3:1 since 2020, though rural stores note slower shifts due to entrenched beer loyalty. This trend challenges retailers to educate traditional customers while capitalizing on younger, spirits-curious buyers.
4. E-Commerce Surge
The leap to online alcohol sales has been seismic, accelerating during the pandemic and sticking post-2020. U.S. e-commerce alcohol sales jumped from $2.6 billion in 2019 to $5.6 billion in 2020—a 115.4% increase—per Drizly data, with 64% of liquor store owners now offering digital platforms (L.E.K. Consulting, 2023). Chains like Total Wine & More have invested millions in apps and delivery, reporting 20% of 2023 revenue from online channels, while independents partner with platforms like Saucey to compete. Regulatory hurdles—varying state laws on shipping—complicate adoption, but successful stores use e-commerce for curated subscriptions (e.g., Flaviar’s $300/year whiskey club) or last-minute delivery, capturing urban Millennials who value convenience. The challenge? Balancing online costs with thin margins, often requiring supplier support for digital marketing or fulfillment.
5. Health-Conscious Choices
A growing health-conscious wave, particularly among Gen Z (drinking 20% less per capita than Millennials), has spurred demand for low-ABV and non-alcoholic spirits. Non-alcoholic spirits sales reached $395 million in the U.S. from 2021-2022, up 20.6%. Brands like Seedlip and Ritual Zero Proof leading the way. Retailers report 15-25% annual growth in this category, often placing these $30-40 bottles near premium spirits to signal quality. Smaller stores, however, face shelf-space dilemmas—stocking non-alcoholic options risks displacing proven sellers. Rural retailers note slower uptake due to traditional drinking cultures. Success stories include chains like BevMo!. BevMo! pairs these products with “mocktail mixers” to drive basket size, appealing to sober-curious and wellness-focused shoppers.
6. Craft Spirits Growth
The craft spirits boom has transformed retail offerings, with U.S. distilleries growing 35% annually since 2011 and craft volumes rising 19% yearly since 2015. Tito’s Handmade Vodka exemplifies this, scaling from 1 million cases in 2013 to 11 million by 2021, while smaller labels like St. George Spirits gain traction in urban markets. Liquor stores benefit from craft’s higher margins—often 25-30% versus 15% for mass brands—and local appeal; a Denver store might stock Stranahan’s Whiskey or Felene Vodka to draw Colorado pride. Yet, the flood of new brands (over 2,000 U.S. distilleries by 2023) overwhelms shelf space, and inconsistent quality risks alienating customers. Retailers must curate carefully, often relying on producer tastings or data to pick winners.
7. Sustainability Push
Sustainability has moved from buzzword to buying factor, with 46% of Gen Z expecting eco-friendly practices from brands (NIQ, 2023). Spirits like Ketel One tout carbon-neutral production, and Bruichladdich uses recycled glass, influencing retailer decisions. Stores like Liquor Barn promote these brands with “green” signage, reporting 10-15% sales lifts among younger buyers. Smaller retailers, however, face higher costs for sustainable stock—sometimes 5-10% above standard—and limited supplier options. Urban independents thrive by pairing sustainability with local sourcing, while rural stores lag, citing lower demand. This trend pressures retailers to align with consumer values without sacrificing profitability.
8. Demographic Diversification
The spirits buyer profile has diversified dramatically. Women now account for 36% of U.S. whiskey drinkers, up from 15% a decade ago, and 41% of wine drinkers are men (Snipp, 2024). Multicultural buyers—e.g., Hispanic consumers driving tequila’s 40% U.S. volume share—further reshape demand. Retailers adapt with targeted marketing: Specs Liquor promotes flavored vodkas to women with pastel displays, while Total Wine offers mezcal tastings for diverse urban crowds. Smaller stores struggle with outdated assumptions, missing sales to evolving demographics. Success hinges on understanding local customer bases—e.g., a Chicago store boosting rum sales 20% by targeting Caribbean communities—and adjusting inventory accordingly.
9. Supply Chain Strain
Supply chain disruptions and inflation have squeezed retailers since 2020. Spirits sales dropped 3.9% in 2024 as consumers balked at $40+ bottles amid rising costs (WSWA). Allocated spirits like Blanton’s or Weller became scarce—some stores report 50% fewer bottles in 2023 versus 2019—pushing prices up (e.g., Blanton’s from $60 to $150 resale). Retailers pivot to lesser-known brands like Clyde May’s Whiskey, but loyalists grumble, and margins shrink on substitutes. Urban stores hoard allocated stock for regulars, while rural ones lose out entirely, highlighting uneven access. This strain tests customer trust and profitability, demanding supplier transparency on availability.
10. Experience-Driven Retail
Physical stores fight e-commerce and grocery competition with experiences—tastings, classes, and subscriptions grew 30% since 2018 (GlobalData). Flaviar’s $300/year whiskey club ships curated bottles, while independents like K&L Wine Merchants host $20 tasting events, lifting foot traffic 15-20%. Urban retailers excel here, drawing Millennials with “Instagrammable” setups—think neon signs and tasting bars—while rural stores lag, lacking space or demand. Chains like Total Wine report 18% monthly traffic boosts from events, but smaller shops need supplier funding or samples to compete, turning retail into a destination rather than a transaction.
Grocery Store Competition: Coping Strategies
Spirits and wine in grocery stores have surged where permitted—17 U.S. states allow it, up from 11 in 2015 (NCSLA), with grocery alcohol sales hitting $12.8 billion in 2023, up 15% annually since 2019 (IRI). This has hit liquor stores hard—28% report sales declines due to grocery competition (L.E.K., 2023). Chains like Kroger offer $20 vodkas and $10 wines, undercutting independents by 10-15%. Coping strategies include:
- Specialization: Stock rare or craft spirits (e.g., Pappy Van Winkle) unavailable in groceries, drawing enthusiasts.
- Personalization: Use loyalty programs or staff expertise—62% of shoppers value tailored advice (NIQ).
- Events: Host tastings or mixology demos, boosting traffic 18% (e.g., Total Wine’s model).
- Niche Focus: Target premium or health-conscious buyers with exclusive non-alcoholic or high-end options like $100 tequilas.
Collaboration: Producers and Retailers Teaming Up
Producers like Felene and liquor stores can align to thrive:
- Data Sharing: Producers offer trend reports (e.g., RTD surges), retailers provide sales insights (e.g., top vodkas). Diageo’s Specs partnership lifted sales 25% in 2023.
- Joint Promotions: Co-branded seasonal kits—Felene vodka with ginger beer—spur impulse buys.
- Allocation Clarity: Predictable limited-release schedules help retailers plan and profit.
- Competitive Edge: Exclusive products or tasting kits differentiate stores from grocery giants.
Collaboration turns challenges into opportunities, ensuring liquor stores remain vital in a shifting market.
