US tariffs ‘positive opportunity’ for Canadian whisky

As the tariff threat-slinging battle between Canada and the US wages on, could Canadian whisky producers be a beneficiary in their country’s on-trade?

Considering the situation, Mitch Stefani, CGA by NIQ’s client solutions director – Americas, believes that there is “definitely an opportunity for Canadian whisky,” should US president Donald Trump’s proposed 25% tariffs on Canada go ahead tomorrow (4 March).

Canadian whisky and American whiskey make up two thirds of all whisky volume sold in bars and restaurants in Canada, according to CGA by NIQ data. And while CGA’s OPM (On Premise Measurement) data shows a 2.7% year-on-year decline in all whisky volumes in the country’s on-trade, it still is the second biggest spirit by volume.

On this note, however, Canadian whisky sales have fallen twice as much as American Bourbon in the past year – at 3.5%, compared to 1.4%. Canadian whisky might be the most-ordered whisky at Canada’s bars and restaurants, but American whiskey has been gaining rapid share.

If the tariffs do come into play, Canadian provinces have warned that they would pull American-made alcohol from their stores.

Assuming this is the case, Stefani feels that “we would expect to see Canadian whisky, at a minimum, maintain levels of what it’s doing in the on-premise, but certainly with potential to to expand its sales from a volume perspective”.

“That’s where that gap will then definitely shrink if no bars and restaurants are able to get American whiskey products, they’ll use what they have until it runs out,” he adds.

Typically, Canadian whisky is priced lower than its American counterparts, which have a “notoriety” that Canadian products have not quite achieved yet.

Explaining the dynamic, Stefani says that for volume “Canadian whisky is slightly higher than American whiskey, but when we look at dollar share – so total dollars sold – American whiskey is actually higher. Canadian whisky has 34% of volume and American whiskey 33%, of total whisky volume, but the dollar share flips to where American whiskey is number one at 32% and Canadian whisky is number two at 29%”.

This is because Canadian whisky is more affordable, usually, and also that there is a greater affinity of Bourbons and American whiskeys that are higher priced and are more premium products that consumers align with.

“That higher price point is why we will see the dollar number come up for American whiskey, whereas for Canadian whiskies, there aren’t as many premium products. For the number that are, they are just not as big in size. You will see Canadian whisky often more in the well than where you’ll see Bourbons or American whiskey on the back bar. So, the premium versus value dynamic is what separates the share volumes that are displayed between the two categories.”

Patriotic consumers

Adding to this, there’s also a ‘support local’ movement in Canada that has picked up steam.

CGA’s Canada On Premise Consumer Pulse report revealed that for a third of consumers, it’s ‘increasingly important’ that their drink is made by a Canadian brand compared to a year ago.

Stefani says: “There’s a lot of advertising being put out there, and a lot of messaging that are trying to get Canadians to support local, too. That has an impact on smaller craft Canadian whisky brands that make their own whisky, and will prop up availability in retail stores and in bars and restaurants – and possibly from maybe the premium price point as well, that could replace the American whiskeys.

“From a consumer standpoint, it will be interesting to see if they just cut consumption of those US products all together, or if they will still look for them when they come back, if there will be some sort of missing out on having the product or not. I do think the local movement will allow people to try new types of drinks within Canadian whisky, which I think is positive and hopefully at retail, but also in the on-trade.

“Also with classic cocktails like your Old Fashioned and Manhattans, will people swap American whiskey with Canadian whisky? I would anticipate that a lot of operators are gonna have to get creative with what they do with their cocktails, like with the with more popular serves. Traditional on-trade channels (bars, restaurants, pubs and nightclubs) are where a lot of people try drinks, and that link to off-premise purchases is evident. So there’s that positive opportunity for Canadian whisky.”

Opportunity elsewhere

Looking far from home, Stefani adds that there could be an opportunity for Scotch, as the category presents similar premium appeal from value and quality standpoints to Bourbon.

He theorises the people drinking premium and ultra-priced Bourbons could switch to that premium type of offering, but also: “Scotch is still very small. It’s only about 8% of the volume of whisky in Canada. “Assuming most provinces are removing them [US products] all together, then it will be interesting to how the dynamics change. When you look at whiskey, do the older American whiskey drinkers who may drink more premium types of whiskeys, like Bourbons for example, will they maybe try and dabble into Scotch, which have a similar setup in terms of a lot of premium products, a lot of aged products, products that have a lot of notoriety and are well known.

“When you look at it, the dollars that [Scotch] generates, it’s actually up to 14% of whisky. So it does have that same dynamic as Bourbons in the on-trade, where price, the share of dollar sales is greater than what its share of volume sales are respective for the category. That could be an opportunity, but it’s so small that, again, Canadian whisky is a third of all sales and you can still see that really being a potential beneficiary of American products being pulled in Canada.”

Outside of whisky, of course there is the idea that people could remove themselves from the category all together. Vodka still leads as the biggest spirit in Canada’s on-trade, and Tequila is the only spirit that grew last year.

He says that while vodka is the “clear front-runner in terms of volume in the on-trade”, in terms of dollar share “Tequila is creeping up” due to its higher price and premium positioning.

“Younger consumers that drink whisky may just pivot outside of the category. Tequila is doing extremely well right now. Do they just change that type of complexion to a different category, to a Tequila or a vodka, instead of trying a different type of whisky? All that’s going to be on the table if American whiskeys aren’t available to them.

“And that’s another thing with premiumisation as a whole right now – consumers choosing quality over quantity or trading up to get a better quality drink instead of maybe going for two drinks. The offerings within Tequila do play quite well with that behaviour, where we could see some of that crossover, if consumers are closely aligned to that behaviour within whisky as well.”