Somber Spirits Head for an Unpredictable Year
Since September, the rate of spirits growth has declined steadily each month. In the four weeks to Oct. 7, dollar value of spirits increased 4.4%. In the four weeks to Nov. 4 and Dec. 2, dollar sales were up 3.4% and 2.8%, respectively, according to IRI scan data.
In the long-term, however, the rate of spirits growth has held relatively steady. In the 52 weeks to Oct. 7, dollar sales of spirits grew 2.1%. The same is true for the 52 weeks to Nov. 4 and the 52 weeks to December 2. But it also takes longer for trends to show up in 52 week data.
The most obvious answer seems to be that consumers are less willing or able to buy expensive spirits. Until recently, vodka was at the helm of the trading up activity. But in the 4 weeks to Dec. 2, dollar sales of ultra-premium vodka (priced $26 and above) declined -4.6%. The category lost 1% of dollar share from the same four week period last year. Volume of ultra-premium vodka was down -4.1% in November, losing -0.3% of share from the same period in 2006.
Let’s compare these numbers to months prior. In September, dollar sales grew 12.6% for ultra-premium vodka and October sales slowed considerably, growing only 3.8%.
The rate of growth for super-premium ($21-$26) vodka has also slowed in the past several months, while premium ($16-$21) vodka sales stalled slightly in November. November sales for premium vodka were up 5.2%, while October sales grew slightly higher at 6.4%. Were people cutting back to make room for holiday gift buying?
The rate of growth for mid-value vodka ($11-$16) has declined slightly since September. As you might expect, value vodka ($10 and below) is slightly on the rise. In September, dollar sales of value vodka rose 4.3%. In Oct. and Nov., value sales were up 5.8% and 6.3%. We infer that more people are drinking at home, and therefore buying the cheaper stuff. What good does it do to buy expensive vodka if you can’t impress your friends at the bar? Also, let’s not forget to take other factors into account. Sure, we’re starting to see some weakness, but comps and pricing can come into play here as well.
Let’s take a look at some of the big vodka brands in the U.S. In November, value of Smirnoff rose 9.4%, Absolut was up 10.6%, Skyy grew 5% and Stoli was up 1.8%. Grey Goose declined -4.1% and Ketel One was down -1.3%. We have to chalk up some of the decline for Grey Goose and Ketel One to comps and pricing, though, because October dollar sales saw Grey Goose rise 9% and Ketel One climb 1.5%.
Of course, it’s not just the upper rim of the vodka category that’s taken a hit. Ultra-premium whiskey, rum and tequila have all seen better days but their numbers aren’t near as incongruent as with the vodka category. In other words, ultra-premium whiskey (up 4.9%), ultra-premium rum (up 109.4%) and ultra-premium tequila (up 27.9%) were still growing in November, albeit the rate of growth declined slightly, while ultra-premium vodka was down -4.6%.
The one ultra-premium price category that might be posed for a comeback is gin. Industry insiders have predicted a resurgence for sometime and now we’re starting to see evidence. In October, ultra-premium gin was down a whopping -7.8%. In November, however, it jumped 4.5% from the same period last year. Again, comps and pricing probably have something to do with it, but perhaps consumers are returning to gin. In the four weeks to December 2, dollar sales of Tanqueray rose 11.5%. Seagrams was down -3.1% and Bombay was down -2.7%.
Is this the end of trading up as we know it? We think the answer is no. People that will hurt less from a recession will continue to trade up, and don’t forget the aficionados that would rather live without heat than settle for a less-then-perfect brand.
We heard that the mood at the NABCA board meeting last week was more somber than in previous years, mainly due to soft holiday sales for spirits and whispers of heavier discounting. Even Diageo is expected to miss its quarterly numbers.
We’d like to know what our readers are thinking. In your opinion, how will the economy affect wine and spirits sales in 2008? Have you already seen an impact in your business? Will imports or domestics suffer more in the U.S. this year? Will wine or distilled spirits suffer more in 2008?
TEXAS COURT DECISION RESULTS IN HOLLOW VICTORY
In what was neither a complete victory nor defeat for out-of-state retailers and Texas wholesalers, Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas ruled that Granholm offers protection from discrimination to both wineries and retailers. In other words, he ruled that Texas law barring out-of-state retailers from shipping directly to consumers is unconstitutional. The judge interprets that Granholm requires Texas to allow both in-state and out-of-state retailers to ship directly to Texans or none at all. This part of the ruling is a victory, but perhaps a hollow victory, for the Specialty Wine Retailers Association (SWRA) and here’s why. The judge wrote that the State of Texas has the option to force out-of-state retailers to purchase wine from Texas wholesalers, so he’s basically leaving the decision up to the state.
"The court concludes that Texas' ban on the sale and shipment of wine by out-of-state retailers to Texas residents is unconstitutional, but it also holds that the requirement that wine retailers--including out-of-state retailers--first purchase such wine from Texas-licensed wholesalers is constitutional."
However, it’s worth noting that the judge dismissed arguments by wholesalers that barring direct shipments from out-of-state retailers would help prevent minors from accessing alcohol and ensure proper tax collection.
In the unlikely even that out-of-state retailers start purchasing wine from Texas wholesalers, we’re pretty sure things would get chaotic fast. Plus, is it even legal? We smell more court dates and legal wrangling to figure this thing out.
In all, the language of the decision does not bode well for wholesalers nationally, but Texas wholesalers managed to dodge a bullet. The decision will likely affect similar retailer lawsuits in New York and Michigan. A New York court recently ruled that Graholm doesn’t apply to retailers, while a Michigan court decided Granholm does apply to retailers.
CONSTELLATION TO CUT JOBS AT FORMER BEAM WINE ESTATES
Many employees at Beam Wine Estates will lose their jobs as Constellation attempts to swallow the newly acquired division. Constellation is reportedly cutting 93 jobs at Beam Wine Estates and will close its Healdsburg headquarters in the next 6 months to a year. In all, Beam Wine Estates employs 520 workers. Most of the reductions are coming from finance, human resources, sales and marketing, according to The Press Democrat. Official details of the integration plan should be available by the end of January.
DRINKING AND EXERCISE GOOD FOR YOUR HEART
If drinking and exercise is good for the heart, then it looks like we’re set for a hearth healthy future. Danish researchers found that moderate drinking (1-14 drinks per week) coupled with exercise can lower your risk for coronary heart disease. This doesn’t mean, however, that you can trade exercise for drinking or vice versa. The two have a compound effect. The study found that people who don’t drink and don’t exercise had double the risk for heart disease as those who exercise and drink moderately.
WSD BRIEFS:
DOLLAR GENERAL has promoted Richard W. Dreiling, former head of Duane Reade, as ceo of the discount chain starting January 21.
ANGOVE WINERY of Australia announces the U.S. debut of its award-winning Nine Vines Wines. Although available in limited amounts last year, Nine Vines will launch nationwide this month for $11.99 a bottle. The line includes Nine Vines Grenache-Shiraz Rosé, Nine Vines Viognier and Nine Vines Shiraz-Viognier.
Until tomorrow, Megan
“Young is the one that plunges in the future and never looks back.”
Milan Kundera
--------- Sell Day Calendar ----------
Today's Sell Day: 10
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
In the long-term, however, the rate of spirits growth has held relatively steady. In the 52 weeks to Oct. 7, dollar sales of spirits grew 2.1%. The same is true for the 52 weeks to Nov. 4 and the 52 weeks to December 2. But it also takes longer for trends to show up in 52 week data.
The most obvious answer seems to be that consumers are less willing or able to buy expensive spirits. Until recently, vodka was at the helm of the trading up activity. But in the 4 weeks to Dec. 2, dollar sales of ultra-premium vodka (priced $26 and above) declined -4.6%. The category lost 1% of dollar share from the same four week period last year. Volume of ultra-premium vodka was down -4.1% in November, losing -0.3% of share from the same period in 2006.
Let’s compare these numbers to months prior. In September, dollar sales grew 12.6% for ultra-premium vodka and October sales slowed considerably, growing only 3.8%.
The rate of growth for super-premium ($21-$26) vodka has also slowed in the past several months, while premium ($16-$21) vodka sales stalled slightly in November. November sales for premium vodka were up 5.2%, while October sales grew slightly higher at 6.4%. Were people cutting back to make room for holiday gift buying?
The rate of growth for mid-value vodka ($11-$16) has declined slightly since September. As you might expect, value vodka ($10 and below) is slightly on the rise. In September, dollar sales of value vodka rose 4.3%. In Oct. and Nov., value sales were up 5.8% and 6.3%. We infer that more people are drinking at home, and therefore buying the cheaper stuff. What good does it do to buy expensive vodka if you can’t impress your friends at the bar? Also, let’s not forget to take other factors into account. Sure, we’re starting to see some weakness, but comps and pricing can come into play here as well.
Let’s take a look at some of the big vodka brands in the U.S. In November, value of Smirnoff rose 9.4%, Absolut was up 10.6%, Skyy grew 5% and Stoli was up 1.8%. Grey Goose declined -4.1% and Ketel One was down -1.3%. We have to chalk up some of the decline for Grey Goose and Ketel One to comps and pricing, though, because October dollar sales saw Grey Goose rise 9% and Ketel One climb 1.5%.
Of course, it’s not just the upper rim of the vodka category that’s taken a hit. Ultra-premium whiskey, rum and tequila have all seen better days but their numbers aren’t near as incongruent as with the vodka category. In other words, ultra-premium whiskey (up 4.9%), ultra-premium rum (up 109.4%) and ultra-premium tequila (up 27.9%) were still growing in November, albeit the rate of growth declined slightly, while ultra-premium vodka was down -4.6%.
The one ultra-premium price category that might be posed for a comeback is gin. Industry insiders have predicted a resurgence for sometime and now we’re starting to see evidence. In October, ultra-premium gin was down a whopping -7.8%. In November, however, it jumped 4.5% from the same period last year. Again, comps and pricing probably have something to do with it, but perhaps consumers are returning to gin. In the four weeks to December 2, dollar sales of Tanqueray rose 11.5%. Seagrams was down -3.1% and Bombay was down -2.7%.
Is this the end of trading up as we know it? We think the answer is no. People that will hurt less from a recession will continue to trade up, and don’t forget the aficionados that would rather live without heat than settle for a less-then-perfect brand.
We heard that the mood at the NABCA board meeting last week was more somber than in previous years, mainly due to soft holiday sales for spirits and whispers of heavier discounting. Even Diageo is expected to miss its quarterly numbers.
We’d like to know what our readers are thinking. In your opinion, how will the economy affect wine and spirits sales in 2008? Have you already seen an impact in your business? Will imports or domestics suffer more in the U.S. this year? Will wine or distilled spirits suffer more in 2008?
TEXAS COURT DECISION RESULTS IN HOLLOW VICTORY
In what was neither a complete victory nor defeat for out-of-state retailers and Texas wholesalers, Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas ruled that Granholm offers protection from discrimination to both wineries and retailers. In other words, he ruled that Texas law barring out-of-state retailers from shipping directly to consumers is unconstitutional. The judge interprets that Granholm requires Texas to allow both in-state and out-of-state retailers to ship directly to Texans or none at all. This part of the ruling is a victory, but perhaps a hollow victory, for the Specialty Wine Retailers Association (SWRA) and here’s why. The judge wrote that the State of Texas has the option to force out-of-state retailers to purchase wine from Texas wholesalers, so he’s basically leaving the decision up to the state.
"The court concludes that Texas' ban on the sale and shipment of wine by out-of-state retailers to Texas residents is unconstitutional, but it also holds that the requirement that wine retailers--including out-of-state retailers--first purchase such wine from Texas-licensed wholesalers is constitutional."
However, it’s worth noting that the judge dismissed arguments by wholesalers that barring direct shipments from out-of-state retailers would help prevent minors from accessing alcohol and ensure proper tax collection.
In the unlikely even that out-of-state retailers start purchasing wine from Texas wholesalers, we’re pretty sure things would get chaotic fast. Plus, is it even legal? We smell more court dates and legal wrangling to figure this thing out.
In all, the language of the decision does not bode well for wholesalers nationally, but Texas wholesalers managed to dodge a bullet. The decision will likely affect similar retailer lawsuits in New York and Michigan. A New York court recently ruled that Graholm doesn’t apply to retailers, while a Michigan court decided Granholm does apply to retailers.
CONSTELLATION TO CUT JOBS AT FORMER BEAM WINE ESTATES
Many employees at Beam Wine Estates will lose their jobs as Constellation attempts to swallow the newly acquired division. Constellation is reportedly cutting 93 jobs at Beam Wine Estates and will close its Healdsburg headquarters in the next 6 months to a year. In all, Beam Wine Estates employs 520 workers. Most of the reductions are coming from finance, human resources, sales and marketing, according to The Press Democrat. Official details of the integration plan should be available by the end of January.
DRINKING AND EXERCISE GOOD FOR YOUR HEART
If drinking and exercise is good for the heart, then it looks like we’re set for a hearth healthy future. Danish researchers found that moderate drinking (1-14 drinks per week) coupled with exercise can lower your risk for coronary heart disease. This doesn’t mean, however, that you can trade exercise for drinking or vice versa. The two have a compound effect. The study found that people who don’t drink and don’t exercise had double the risk for heart disease as those who exercise and drink moderately.
WSD BRIEFS:
DOLLAR GENERAL has promoted Richard W. Dreiling, former head of Duane Reade, as ceo of the discount chain starting January 21.
ANGOVE WINERY of Australia announces the U.S. debut of its award-winning Nine Vines Wines. Although available in limited amounts last year, Nine Vines will launch nationwide this month for $11.99 a bottle. The line includes Nine Vines Grenache-Shiraz Rosé, Nine Vines Viognier and Nine Vines Shiraz-Viognier.
Until tomorrow, Megan
“Young is the one that plunges in the future and never looks back.”
Milan Kundera
--------- Sell Day Calendar ----------
Today's Sell Day: 10
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
posted at 12:25 PM
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