US Craft Spirits Market Faces Third Year of Decline, Distilleries Close

Short description: US craft distillers fell 6.6% in 2025, with sales volume and value down for a third straight year.

The latest data from the American Craft Spirits Association (ACSA) reveal a deepening downturn. Active U.S. craft distilleries fell to 2,131 as of August 2026 – a 6.6% drop from 2,282 a year earlier. This is the first time on record that closures have outnumbered new openings. Retail sales volumes slid from 12.7 million nine-litre cases in 2024 to 11.7 million in 2025 (–8%), and sales value dipped from $7.6 billion to $7.3 billion (–3.7%). Craft’s share of the total U.S. spirits market has shrunk (to ~4.2% by volume, down from 4.5%). These losses continued trends noted in prior years; for example, active distillers had already plunged 25% in 2024.

Active distillers: 2,131 (–6.6% vs. 2024).
Sales volume: 11.7 million 9L cases (–8% YOY).
Sales value: $7.3 billion (–3.7% YOY).
Market share: ~4.2% of U.S. spirits (down from 4.5%).
Exports: 123,000 9L cases (–13.4%).
Investment: $526 M total by craft producers in 2025 (down 35% from $811 M in 2024).
Employment: 21,285 full-time workers (–25.6% vs. 2024).

These figures indicate a broad retraction. Producers slashed investment, with average spend per distillery falling from $288,900 in 2024 to $239,800 in 2025. Job counts are down sharply. (Over the past decade, the industry had grown rapidly – e.g. 2,853 active distillers in 2023 – so this reversal reflects a significant market pivot.)

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State-Level Shifts: Concentration and Contraction

Geographically, the craft base is becoming more concentrated. California remains home to the most craft distillers, but its count plunged from 207 (Aug 2025) to 159 (Aug 2026). California, New York, Pennsylvania, Texas and Washington together now account for roughly 31% of all craft distillers. Kentucky has surged into 6th place (up from 10th), and Tennessee and North Carolina entered the top ten, bumping Wisconsin and Colorado out of that group. In short, traditional strongholds (Coast and Northeast) still dominate, but the decline has hit every region.

Key Point: Four states (CA, NY, PA, TX) each host well over 100 craft distilleries. The next five states (including KY, NC, OR, TN, FL) add another ~18% of total distillers.

Smaller states and those with regulatory hurdles (shipping bans, high taxes) are seeing slower growth or outright declines. Brand owners should note that roughly half of all craft sales now occur in a distiller’s home state. (Craft sales are about 49% local vs. 51% out-of-state in 2025.) Given this, producers may need to double down on local and regional marketing, since nationwide distribution is tightening.

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Changing Sales Channels: Tasting Rooms and Distribution

Amid wholesale headwinds, tasting-room sales have become a lifeline. On-premise (distillery) sales grew from 14% of total craft sales in 2015 to 26% in 2025. In other words, more than one-in-four craft bottles is sold directly at the distillery. This shift suggests producers are leaning into tourism, events and direct-to-consumer (DTC) programs as traditional retail channels narrow. By contrast, out-of-state sales have shrunk: other-state (wholesale) sales fell to ~51% of the total in 2025, down from 54% in 2020. Key factors include distributors “narrowing portfolios” to work through inventories, persistent trade tariffs on U.S. spirits abroad, and most states’ prohibitions on DTC shipping.

Exports - once seen as a growth runway - are cooling. U.S. craft exports dropped 13.4% in 2025 to just 123,000 cases, as global competition and tariffs bite. Brand owners targeting overseas markets may need to reassess growth plans or seek new markets with better access. Overall, the mix is tilting toward home-focused sales channels (tasting rooms, in-state retail) and away from far-flung wholesale networks.

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Implications for Brands and Marketing Strategy

For craft brand owners and marketing leaders, the data signal a need to adapt. The market is still sizeable, but growth has stalled, so competition for the same (or shrinking) consumer budgets is fiercer. Key takeaways for strategy include:

Boost DTC and On-Premise Engagement: With on-site sales at a record share, distilleries should invest in tasting-room experiences, club memberships and e-commerce. Loyalty programs, virtual tastings and local events can capture walk-in traffic that no longer flows as freely through stores.
Lean into Local Markets: Since 49% of craft sales occur in producers’ home states, focus marketing and distribution efforts locally or regionally. Build relationships with state ABCs and local retailers, and consider “hyper-local” storytelling and tourism partnerships.
Streamline Distribution Portfolios: Work closely with distributors to move aging stock and adjust to narrower portfolios. Co-promotions and limited-edition releases can refresh retailer interest. Consider selective outsourcing to established DTC platforms if direct shipping is legally restricted.
Innovate and Premiumize: In a mature segment, differentiation is vital. Brands should emphasize unique attributes (e.g. grain-to-glass transparency, local sourcing, artisanal methods) and premium variants that justify higher price points. Ready-to-drink (RTD) or flavored craft spirits are also growing niches that could offset declines in core lines.
Manage Costs and Capital Carefully: With total industry investment down 35%, producers should prioritize ROI. Delay or scale back expansion capex, and seek efficiencies (contract services, shared warehousing, etc.). Explore grants or joint ventures for new product development.
Monitor Regulatory and Trade Changes: Stay alert to changes in shipping laws (e.g. new state DTC allowances) or tariff negotiations (recent US-EU trade deals may lower whiskey tariffs). Advocacy through trade associations can also help loosen access barriers.

The craft spirits slowdown is industry-wide and structural, reflecting broader shifts in consumer spending and the on-premise market. However, the sector’s focus on direct consumer engagement (tasting rooms, storytelling) and agility in product development are strengths to leverage. C-suite executives should use this period to sharpen brand positioning, reinforce core markets and maintain lean operations. Those who lean into local demand and unique brand narratives may weather the downturn best and emerge more robust as conditions improve.