Positive Whiskey Numbers Fuel Spirit Industry Growth

If there was one clear winner in the spirits industry his past year, it's whiskey. American, Irish, Scotch, Japanese whiskey—you name it, it boomed. Bourbon ceased to be associated solely with your grandpa, as even women admitted that they love drinking bourbon and all sorts of whiskey. Indeed, whiskey had a lot of cause to thank women for fueling this so-called whiskey renaissance.

Whiskey's popularity grew so much in 2014 that rumors of a great whiskey shortage started milling about. Sure, getting a bottle of ultra-premium American whiskey like 23-year-old Pappy van Winkle became harder and harder, but that was true for any spirit that takes decades to age. Scotch whiskey makers were too aware of the shrinking stocks of their older whiskies, leading to certain adjustments in their brands. For instance, king of Scotch Johnnie Walker had to drop its 18-year-old age statement due to a shortage of 18-year-old malts.

However, scarcity is not yet in the cards for whiskey, despite reports that many whiskey aficionados have been hoarding supplies. Many whiskey distillers had the foresight to stock up for rainy days in the past few years. In fact, experts say that excess supply is much more likely to happen than a deficit.

Something positive emerged from the rumors, though—it ushered the era of flavored whiskeys. Many distillers tried to create one, but only a few survived. One of the most successful is Fireball Cinnamon Whiskey, likened to a "fire-breathing dragon who just ate a whiskey barrel full of spicy cinnamon." Other huge flavored whiskey hits include Jim Beam's Kentucky Fire and Jack Daniel's Fire.

Even small distillers took advantage of the flavored whiskey boom. For instance, Eastside Distilling, Inc. (OTCQB: ESDI) from Portland's Distillery Row boasts of its Cherry Bomb Whiskey, made with a blast of real Oregon cherries and aged whiskey. All its flavor and deep red color comes from the fruit itself, without any flavor extracts or artificial coloring. Not only has its sales skyrocketed, but it also won gold medals from the prestigious MicroLiquor Spirits Awards and the American Wine Society. Cherry, incidentally, was also a top choice in cocktails last year.

2014 also saw the release of Pumpkin Spice Whiskey by New England craft distiller Sons of Liberty. Made from locally grown pumpkins and traditional autumn spices, Pumpkin Spice Whiskey was named as the world's best flavored whiskey by Whiskey Magazine's 2014 World Whiskies Award in London

Speaking of craft distillers, 2014 was the best year yet for these local craftsmen. The number of micro-distillers in the United States ballooned from a mere 50 in 2005 to more than 600 in 2013, according to the American Distilling Institute. That was almost a 30 percent increase every year. And the growth was not just concentrated in Kentucky, where bourbon is soaring in popularity. Craft distillers cropped up from different parts of the country, from Oregon to Alabama.

From Rum to Moonshine

Whiskey was not the only spirit that soared to the top of the charts this year. Rum also made its presence felt this year, despite mixed sales. Terry Baker, marketer of Pusser's Rum in the United Kingdom, said, "Some supermarkets are reporting sales increases of between 20 percent and 30 percent. Bars are showing increased rum sales of 10 percent and more."

The emergence of premium rums should be credited for the renewed interest in the category. In 2014, rum tried to shed off its party image by making way for premium expressions designed to be sipped, like Bacardi Gran Reserva Maestro de Ron. Flavored rums also came into the picture, like Eastside Distilling's double-distilled premium flavored rums under the Below Deck line. One of the most successful is the triple gold award-winning Below Deck Spiced Rum, flavored with spices like nutmeg and vanilla with a hint of citrus zest.

Big companies also made some major moves to show their support for tequila, even though the spirit was not as explosive in 2014 as expected. Still, Pernod Ricard bought majority shares of brand Tequila Avion. Diageo also bought the small but reputable Peligroso Tequila and taking full ownership of Don Julio from Jose Cuervo. High-end tequila also thrived last year, with sales of Don Julio's 1942, Tequila Avion Reserva 44, and Patron's Roca line shooting up because of the high demand. P. Diddy even announced the release of his high-end DeLeon Tequila.

Another category that surged last year was moonshine, which basically covers everything from corn whiskey to neutral grain spirits. But since moonshine has no strict definition, a wide variety of products hit the market, many of them simply disguised in mason jars. Though the creation process was often not disclosed, the taste of moonshine was close enough to whiskey, and by association, they sold.

Millennials Taking Over

More millennials came of drinking age in 2014, and since this group makes up to $1.3 trillion in consumer spending, brands spent a lot of time and money to attract them. Big brands used social media to lure consumers, like Diageo that created a Smirnoff mini-movie on YouTube starring Adam Scott and Alison Brie. Beam Suntory's Laphroaig also encouraged their millennial consumers to interact with them on social media using #OpinionsWelcome. Bacardi even set up an island concert extravaganza for 2,000 social media influencers in the hope of reaching millennials in their natural habitat—the online space.

Smaller brands tried a different, more practical approach—the creation of a lineup of whole new products spanning across different spirits. Koval Distillery from Chicago not only has six different versions of whiskey mostly made from grains like rye and oat, but also has various flavored liqueurs, brandies, and even a brand each of dry gin and vodka. Eastside Distilling also has its own line of award-winning spirits—whiskey, bourbon, rum, liqueurs, and Portland Potato Vodka, which received a gold medal and Best Buy rating from the Beverage Tasting Institute. Craft distillers' production of a variety of brands takes advantage of the robust cocktail culture, driven in part by the efforts of excellent bartenders and bars that have significantly upped their game in 2014.

Amid all these healthy developments in the spirits industry, one thing is for sure: more and more people are expanding their horizons and learning about spirits than ever before. It's expected that spirit producers will seize the opportunities that 2014 opened up for them and bring the bustling sector to much bigger success in 2015.