SIC 2085 Distilled and Blended Liquors

Encyclopedia of American Industries | 2005 | Copyright

SIC 2085
DISTILLED AND BLENDED LIQUORS

This category includes establishments primarily engaged in manufacturing alcoholic liquors by distillation and in manufacturing cordials and alcoholic cocktails by blending, processing, or mixing liquors and other ingredients. Establishments primarily engaged in manufacturing industrial alcohol are classified in SIC 2869: Industrial Organic Chemicals, Not Elsewhere Classified, and those bottling purchased liquors are classified in SIC 5182: Wine and Distilled Alcoholic Beverages.

NAICS Code(s)

312140 (Distilleries)

Industry Snapshot

In 2002, American consumption of distilled spirits totaled 153.0 million cases, an increase of 1.8 percent from 2001, the fifth consecutive year of gains for the distilled spirit industry. Despite a weak economic climate, adult beverages were driven by desirable high-end premium products and consumers growing thirst for fruit-infused vodkas, rums, and other flavored alcoholic beverages. These newly introduced flavored beverages combined with mixability were key factors in the spirit industry's growth.

Although product introductions such as "hard" lemonades and iced teas became popular spirits in 2001, flavored-malt beverages dubbed "malternatives" were the favored adult beverages of 2002. Spirit-branded products, especially vodka and tequila, were the leaders in this fast-growing segment. Malternatives grew 25 percent in the United States in 2001 and 7 percent worldwide. Vodka-infused drinks were the most successful, owning 24 percent of the market, followed by tequila-infused drinks with 5 percent.

All the major liquor companies watched the international arena, especially the Asian market. Japan was already at the top of the U.S. export list and had been a favorite home for American whiskey. Latin America was also noted for its tremendous growth opportunity, especially for premium-priced products.

Organization and Structure

A few large companies that offer a variety of alcoholic beverages dominated the distilled spirits industry. Most started with a flagship brand, such as Jim Beam Bourbon, and diversified into a family of products that included whiskey and non-whiskey items, such as gin, vodka, rum, tequila, cordials, mixed cocktails, and even fruit juices and other nonalcoholic or low-alcohol beverages. Many, such as Seagram's, Diageo, and Allied Domecq were subsidiaries of large multinational conglomerates with diverse portfolios.

This category includes only those companies that produce distilled spirits. All distillers have to sell their products through wholesalers and retailers in order to accommodate various federal, state, and local regulations regarding the sale of alcoholic beverages. The Federal Alcohol Administration Act (FAA) was established at the end of the 13-year Prohibition Era in 1933. The FAA, which is enforced by the Bureau of Alcohol, Tobacco, and Firearms (ATF), qualifies distillers, collects producer and wholesaler occupational taxes, and regulates trade practices, advertising, and labeling. Beyond the uniformity of the FAA, regulations vary greatly among the 50 states.

States can sell distilled spirits either with an "open," licensed method or in a controlled environment. Open states have licensed retailers and wholesalers that handle the distribution and sale of alcoholic beverages. Thirty-two states and the District of Columbia use the open method. The other 18 states operate under the control method, in which each state government buys and sells alcoholic beverages at the wholesale and retail levels.

In addition to federal regulations, some states have set up their own independent agencies that are responsible for the administration, licensing, and enforcement of state laws and the collection of state revenues. Some state legislatures have created their own Alcoholic Beverage Control (ABC) agencies with rule-making power, and 32 states allow their citizens to vote for or against the sale of liquor on a city or county-wide basis.

Background and Development

All forms of alcoholic beverages—beer, wine, and liquor—are based on fermentation, the natural process of decomposition of organic materials containing carbohydrates. Liquor production involves the extra step of distillation, which reduces the original water content and greatly increases the alcoholic strength. Whereas beer averages 2 to 8 percent alcohol content, and wine averages from 8 to 14 percent, distilled spirits range from 35 to 50 percent alcohol. Two types of raw materials are used to make a distilled spirit: sugar and carbohydrates. Sugary materials include grapes, sugarcane, agave, molasses, and sugar. Those materials with high levels of carbohydrates are corn, rye, rice, barley, wheat, and potatoes.

Civilizations in almost every part of the world developed some type of alcoholic beverage. The Chinese distilled a beer from rice before 800 B.C. The Arabs developed a method used to produce a distilled beverage. A reference to distillation appears in the writings of the Greek philosopher Aristotle, and the Romans produced distilled beverages, although no written...

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