Photo: cyclonebill, Flickr
The U.S. could see a “bourbon Rennaissance” according to Citi analysts Vivien Azer and Geoffrey Small. The spirit posted strong growth last year, driven largely by increased consumption of alcohol in the U.S., an innovation in the flavour of Bourbon, and consumers tiring of vodka.Alcohol consumption has been on the rise, with 67% of adults in the U.S. consuming some kind of alcoholic beverage in 2010, compared with 56% in 1989. And spirits, especially brown spirits like bourbon, have gained market share. According to Azer and Small:
“Assuming that bourbon only maintains their current share of the distilled spirits category, that alone would represent nearly 300,000 incremental bourbon drinkers that could still enter the category. However, as it is often the case that higher total alcohol consumption drives an increase in total spirits consumption, we estimate there could be as many as 1 million incremental bourbon drinkers that have yet to enter the category.”
Meanwhile, flavour innovation is also key to this growth potential. This innovation is being driven by Jack Daniel’s Tennessee Honey accounted for 30.5% of sales growth among bourbons in the last 10 months.
The growth in the bourbon category is sustainable, according to Azer and Small, because of bourbon’s popularity among higher-income consumers, older consumers, and its potential for growth among Hispanic consumers — who represent a burgeoning consumer demographic.
This bourbon Rennaissance could make Brown-Froman, maker of Jack Daniels whiskey, a good investment bet and Citi analysts reiterated their buy rating on the stock.