US distilleries entering American single malt whiskey category at increasing rate

As the market for whiskey in the U.S. continues to make significant gains (+4.8%, FY18), U.S.-based craft distilleries are differentiating themselves from larger size producers by releasing a new ‘niche’ version of whiskey outside the traditional Bourbon, rye and blended variants. American single malt whiskies (+22.2%, FY18) are coming to market at increasing rates in an effort to stand out in an ever-crowded whiskey field.

The time necessary for craft distillers to age and perfect Bourbon batches makes it extremely challenging to profit in the $30-$40 range, which is already dominated by larger producers. Of the brands the IWSR tracks for American single malts, the average sale price is $55.49, providing substantially more profit potential without minimum ageing requirements in new oak barrels – a considerable cost to craft Bourbon producers. The higher cost also provides a trade-up alternative for consumers, fitting into the general premiumization trend underway in the U.S.

Consumer interest in American single malts has been on a steady increase as education and acceptance in the category grows at home and internationally

Overall in the U.S. market, total malt whiskey consumption from across the world – American, Irish, Japanese, Scottish – is up (+7.6%, FY18). While Scotch has historically dominated single malt whiskies, foreign producers outside of Scotland have also taken notice to the growing interest in single malts in the U.S. – Australian single malts have steadily increased their offerings in the U.S., with Melbourne-based Starward (+16.7% FY18, Australia only) entering the U.S. market in May of this year.

From a production standpoint, the use of smoke during the distillation process often characterizes the peat flavor that defines Scotch whiskies. While some U.S. producers also use this technique, many entrants are coming to market with a differentiation strategy attempting to create a distinctive and authentically American spirit by focusing on terroir and a clean, non-smoked taste of American barley.

Considering the American Single Malt Whiskey Commission (ASMWC) now has over 130 member producers and has lobbied the TTB to define the American single malt category the runway for this innovative style is limitless. Looking forward, the expectation is for the category to reach 39,900 cases by 2022 on the strength of additional consumer acceptance, further innovation and continued premiumization.

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