It's not just U.S. drinkers who've acquired a thirst for Tennessee whiskey and Kentucky bourbon. The Distilled Spirits Council says international sales topped $1 billion for the first time ever last year, up 5% from 2012 as Japan, Germany, and France tippled more of these distinctly American alcoholic beverages, but it remained domestic drinkers who carried the "browns" business forward, leading sales 10% higher to $2.4 billion as volumes rose 7% to 18 million cases.
Part of the reason for the global uptake in whiskey and bourbon was the signing of new trade agreements that reduced or eliminated tariffs. Brown-Forman (NYSE:BF-B), the maker of the iconic Jack Daniel's, said the Tennessee whiskey grew 10% over the first six months of its fiscal 2014 year with a global rollout of its Tennessee Honey -- the first flavored Jack Daniel's product -- helping to push net sales higher by 30%. Overall, the Jack Daniel's brand enjoyed double-digit growth for the first half of the year.
Similarly, distiller Beam (NYSE:BEAM) said full-year sales hit a record on above-market growth in North America and Europe, with its flagship bourbon Jim Beam rising 4% and premium power brand Maker's Mark running 17% higher.
While bourbon and whiskey are similar, Tennessee whiskey is differentiated because it's made through the so-called Lincoln County process, which filters straight bourbon whiskey through charcoal prior to barreling. That aging ends up mellowing the otherwise harsher taste of bourbon. Kentucky not only produces 95% of the world's bourbon supply, but along with Tennessee accounts for 90% of the whiskey that's consumed in the U.S.
The popularity of the browns spirits segment got a charge from the popularity of the TV show Mad Men, which admittedly can make you thirsty whenever you watch the show. Yet today it's just as much a global uptake of whiskey and bourbon that's keeping sales afloat. Sales in Japan were highest at $120.8 million, a $22.7 million or 23% increase, followed by Germany, up 16% or $19 million to $140.1 million. France came in third with a 12.5% increase.
Also responsible for the increase in sales was the introduction of new flavors into the mix, like Tennessee Honey, that the distillers group said accounted for 45% of the increase in volume that whiskey enjoyed. It probably accounts for the strength witnessed elsewhere, too, as Irish whiskey saw a 17.5% jump to 2.5 million cases in 2013 while single-malt Scotch whisky volumes rose 11.6% to 1.8 million cases. Diageo (NYSE:DEO), one of North America's premier whiskey distillers with a 23% share of the market, also dominates Scotch whisky, owning more than a one-third share.
Importantly for the distillers, spirits continued to take share away from beer, marking the fourth straight year they've recorded such gains, and now account for 34.7% of the alcoholic beverage market. Beer has a 48.3% share as of the end of the year, and wine is a distant third at 17%.
Although that's an outcome Don Draper would want to raise a glass to toast, investors might be better served looking more closely at the individual distillers themselves. Beam was just acquired by Japan's Suntory in a $16 billion deal, but I've suggested Diageo might be one investors would be foolhardy to discount despite its sharp pullback.
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Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Beam and Diageo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.