RISING FUEL COSTS REAR ITS UGLY HEAD
The Wall Street Journal has the industry a’ buzzing over an article published yesterday that suggests today’s consumers are starting to trade down.
According to the article, "Consumers Curb Upscale Buying As Gasoline Prices, Housing Bite," higher fuel costs are reversing the decade long trend of trading up in the eye of the consumer, and instead encouraging Americans to cutback. And while WSJ never touched on the alcohol beverage category specifically, restaurants like P.F. Changs are taking cuts. So what could this mean for the industry?
We predict that consumers won’t necessarily stop purchasing higher end products; they’ll merely look for better bargains between channels. Lucky for us, big-box retailers are going increasingly high-class as already seen with Costco and Wal-Mart.
The middle and low income segments are the hardest hit as of late. The wealthy shoppers continue to spend on luxury items while the lower-income segment had already started pulling back – as seen with slowing sales at Wal-Mart. WSD expects middle-income shoppers to continue trading up but making more deliberate choices about what exactly they want. If that’s the case, and we think it is, merchandising is more important than ever.
Households consisting of one individual or a couple (think millennials) are not likely going anywhere. They have the money to spend, and for most, image is everything. Buying premium alcohol is a cheaper way to gain an impressive image then, say, buying the latest SUV or $600 handbag.
TAKE A LOOK AT THE NUMBERS. Wine and spirits are one of life’s affordable little luxuries. Wine bottles priced $10 and up are the fastest growing segment in the category, while wines priced below $6 are currently in decline – according to ACNielsen.
Premium and super-premium spirits volume is also on the rise, where the average consumer spends $16 and over on each brand. Along with trading up, flavored spirits is another profit driver in the category.
According to the article, "Consumers Curb Upscale Buying As Gasoline Prices, Housing Bite," higher fuel costs are reversing the decade long trend of trading up in the eye of the consumer, and instead encouraging Americans to cutback. And while WSJ never touched on the alcohol beverage category specifically, restaurants like P.F. Changs are taking cuts. So what could this mean for the industry?
We predict that consumers won’t necessarily stop purchasing higher end products; they’ll merely look for better bargains between channels. Lucky for us, big-box retailers are going increasingly high-class as already seen with Costco and Wal-Mart.
The middle and low income segments are the hardest hit as of late. The wealthy shoppers continue to spend on luxury items while the lower-income segment had already started pulling back – as seen with slowing sales at Wal-Mart. WSD expects middle-income shoppers to continue trading up but making more deliberate choices about what exactly they want. If that’s the case, and we think it is, merchandising is more important than ever.
Households consisting of one individual or a couple (think millennials) are not likely going anywhere. They have the money to spend, and for most, image is everything. Buying premium alcohol is a cheaper way to gain an impressive image then, say, buying the latest SUV or $600 handbag.
TAKE A LOOK AT THE NUMBERS. Wine and spirits are one of life’s affordable little luxuries. Wine bottles priced $10 and up are the fastest growing segment in the category, while wines priced below $6 are currently in decline – according to ACNielsen.
Premium and super-premium spirits volume is also on the rise, where the average consumer spends $16 and over on each brand. Along with trading up, flavored spirits is another profit driver in the category.
posted at 1:22 PM
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