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VIDEOSex, Drugs, and the Rocky Economy: Alcohol
When the economy hits bottom, do people hit the sauce?
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Not really. Contrary to what many believe, alcohol sales and consumption have barely changed as a result of the recession. If anything, both liquor sales and at-home consumption have declined. In June, the research firm Gallup reported: “Despite some anecdotal reports of a surge in drinking accompanying the economic recession, Gallup’s annual update on alcohol consumption finds little change in Americans’ drinking habits. The percentage of US adults who consume alcohol is fairly steady at 64%, and there's been little change in self-reported drinking volume." (See chart here.)
Other polls show that consumption in its entirety is not just steady, but down. As reported by Five Thirty Eight, a blog about consumer and political sentiment, US Department of Commerce figures revealed that in the fourth quarter of 2008, sales of alcohol for off-premises consumption had dropped by 9.3% from the previous quarter.
In the end, when you don’t have money...you don’t have money.
Interestingly, what's changed is the type of alcohol people are buying. An AP report explains that "Whiskey, of all the spirits, is making a bit of a comeback and showed good performance in a slow market. Premium rum, super premium tequila, and premium vodka also grew."
But the sultans of suds in the beer industry have not been so lucky. Earlier this month SABMiller PLC said its beer shipments fell unexpectedly in the most recent quarter amid a worldwide slump in consumer spending.
Miller isn’t the only brew to stumble into the gutter. According to Real Time Economics, Heineken, Budweiser (BUD), Corona, and Coors (TAP) sales all stood victim to the recession, though some sales percentages decreased more than others.
Last spring, Danny Brager, Vice President of Beverage Alcohol at The Neilsen Company, brewed on the subject:
While alcohol beverages are sometimes thought to be "recession proof," we’re seeing significant evidence of changes in consumers’ dining and buying habits. Consumers are clearly focused on value and in many cases, altering their shopping behavior in order to get the most for their money. It remains to be seen if these changes are temporary or exactly how long the "economic hangover" will last once we come out of recession.
In other words, drinking enthusiasts would rather be frugal than broke, and are willing to change their taste in the product to serve the better buck.
The Neilsen report also found that:
When out at a restaurant, bar or nightclub, a considerable number of consumers are changing their behavior. Trading down is more prevalent among wine consumers, with 24% of wine consumers choosing less expensive drinks while a fairly equal number (about one-third) of beer, wine, and spirits consumers order fewer drinks.
Maybe Bruce Springsteen's fans didn't get the memo. At a recent concert, his final show at Giants Stadium in East Rutherford, New Jersey, line-ups for the beer vendors wrapped along the walls endlessly. It looked as if music fans had no idea that the economy had taken a downturn. And at the concession stands, the general consensus among beer vendors was that they'd seen little, if any, change in consumers drinking patterns at sports games and concerts.
At Old Bay bar, a watering hole in nearby New Brunswick, New Jersey, the staff worked their usual pace doing the happy-hour rush. “It’s the same as it ever was,” said the bartender. “We don’t feel the hit of the recession, but we aren’t seeing an increase either. It just hasn’t changed.”
Hoofy and Boo have covered some of the baddest vice stocks before. See their report below.
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