Wine and Spirits Braces for Economic Slowdown
As you’ll recall, WSD conducted a survey to get a taste of what our readers are thinking and what weighs most heavily on their minds. We had an enormous turnout among subscribers, so thanks to those who took time out of their day to answer our questions. Let’s take a look at what you had to say.
HOW WILL THE ECONOMY EFFECT WINE AND SPIRITS? Many of you feel that wine and spirits will see a big change in 2008 at the hands of the economic slowdown, while others think there would be little or no transformation. A common theme among responders is that consumers may trade down slightly to more “medium priced” brands, but sales will continue to grow. Some think premium brands could take a hit but super-premium and higher will feel little effect at all. Others believe all luxury brands will suffer and premiums and below will persevere. Several respondents even think that they’ll have a better year in 2008 than they did in 2007. General consensus? No one seems too worried. Here is some of the commentary:
“Retailers are scaling back inventory. November and December were the only months last year that came in under our projections.”
“This month Retail business is very slow. Retailers purchased heavily in November/December against anticipated 2008 price increases. Restaurants seem less affected. However, if we are to enter a recession Restaurant and Hotel business will decrease and home consumption will increase. Traditional Grocery will benefit most.”
“Retail sales will remain strong, especially at prices under $20/bottle. Restaurant bottle sales will slow, particularly over $50/bottle on wine lists. Producers will finally be increasing prices due to increased cost of packaging, wine and transportation. Overall, wine sales will continue to be strong.”
“I believe that within the luxury spirits category, you will not see too much effect. But other super premium brands that are driven by volume of middle to upper class consumers will definitely take a slight downturn. People that were trading up for status last year will most likely start trading down.”
“Retail: a customer will purchase one bottle instead of two. Volume has decreased but customers will not stop buying wines and spirits.”
“The ultra-high end is suffering. The mid-tier is strong. Consumers are looking for deals on brands they know and trust. Personal recommendations from retail staff & serving staff are key to drive sell-through.”
“By some it may seem ironic, but it my opinion based on historic trends that in the event of a downtrend in the economy that "Premium" and "Super-Premium" spirits will continue to do well and grow. Wines in those categories will also continue to do well although their growth will rise albeit at a slower rate than spirits in a rough U.S. economy.”
“I feel the weakening economy will change the places where people drink. Instead of going to the nicer ultra lounge, they will head to the local bar, or buy a bottle themselves and stay home.”
WHO HAS A BETTER CHANCE: IMPORTS OR DOMESTICS? When asked if wine imports or domestics will suffer more in the U.S. in 2008, 62% of readers answered “imports,” while only 4% said “domestics.” Those who believe neither imports nor domestics will suffer made up 7.3%, while 21% said “both” will feel some pain. The remaining 6.5% answered “I don’t know.”
“I believe import wine sales will remain the same or be down slightly. Domestic sales should continue to be strong with most growth being in the value wines and some premium priced wines.”
“The prospects for 2008 remain shrouded in uncertainty for the fine wine business. Inflationary pressures on the European Central Bank, combined with the Fed's rate-cutting response to the weakening domestic economy, will continue to drive the value of the dollar down and the price of imported wine up, particularly Italian and French wine. Every-increasing transport costs are no help at all. Wine enthusiasts, in possession of less discretionary income, may curtail spending in both on- and off-premise fine wine consumption. Look to under-valued wine regions like Spain, Argentina, and Austria to ride to the rescue of the wine enthusiast that has no palate for homogenous New World offerings in the $10-$15 range.”
SAFEWAY CLOSER TO A BUYOUT
At least one analyst thinks Safeway’s Chicago-based grocery chain, Dominick’s, could be a part of a private equity group planning to buyout the entire Safeway chain, reports the Sun Times. Sean Egan, managing director at Egan-Jones Ratings Co., said a private-equity firm such as Kohlberg Kravis Roberts & Co., Thomas H. Lee Partners or Chicago's own Madison Dearborn Partners would be the likely buyers of Safeway.
"With the federal government pumping liquidity into the market, there will be a time when conditions will be right for a buyout. Safeway is close to the top of the list," Egan said.
FLORIDA REVISITS DIRECT SHIPPING ISSUE
Florida legislators will consider three winery shipping bills once the regular session convenes March 4. As you’ll recall, Floridians failed to pass a new shipping bill in 2007. HB 693 has a production cap of 250,000 gallons and limits consumers to 18 cases of wine per household per year. SB 1736 is similar, but limits households to 15 cases a year. Lastly, SB 1096 would limit consumers to ordering only 4 cases of wine per household each year.
To read more about the three bills, visit Ship Compliant Blog.
Until tomorrow, Megan
“Horse sense is the thing a horse has which keeps it from betting on people.”
W. C. Fields
--------- Sell Day Calendar ----------
Today’s Sell Day: 17
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
HOW WILL THE ECONOMY EFFECT WINE AND SPIRITS? Many of you feel that wine and spirits will see a big change in 2008 at the hands of the economic slowdown, while others think there would be little or no transformation. A common theme among responders is that consumers may trade down slightly to more “medium priced” brands, but sales will continue to grow. Some think premium brands could take a hit but super-premium and higher will feel little effect at all. Others believe all luxury brands will suffer and premiums and below will persevere. Several respondents even think that they’ll have a better year in 2008 than they did in 2007. General consensus? No one seems too worried. Here is some of the commentary:
“Retailers are scaling back inventory. November and December were the only months last year that came in under our projections.”
“This month Retail business is very slow. Retailers purchased heavily in November/December against anticipated 2008 price increases. Restaurants seem less affected. However, if we are to enter a recession Restaurant and Hotel business will decrease and home consumption will increase. Traditional Grocery will benefit most.”
“Retail sales will remain strong, especially at prices under $20/bottle. Restaurant bottle sales will slow, particularly over $50/bottle on wine lists. Producers will finally be increasing prices due to increased cost of packaging, wine and transportation. Overall, wine sales will continue to be strong.”
“I believe that within the luxury spirits category, you will not see too much effect. But other super premium brands that are driven by volume of middle to upper class consumers will definitely take a slight downturn. People that were trading up for status last year will most likely start trading down.”
“Retail: a customer will purchase one bottle instead of two. Volume has decreased but customers will not stop buying wines and spirits.”
“The ultra-high end is suffering. The mid-tier is strong. Consumers are looking for deals on brands they know and trust. Personal recommendations from retail staff & serving staff are key to drive sell-through.”
“By some it may seem ironic, but it my opinion based on historic trends that in the event of a downtrend in the economy that "Premium" and "Super-Premium" spirits will continue to do well and grow. Wines in those categories will also continue to do well although their growth will rise albeit at a slower rate than spirits in a rough U.S. economy.”
“I feel the weakening economy will change the places where people drink. Instead of going to the nicer ultra lounge, they will head to the local bar, or buy a bottle themselves and stay home.”
WHO HAS A BETTER CHANCE: IMPORTS OR DOMESTICS? When asked if wine imports or domestics will suffer more in the U.S. in 2008, 62% of readers answered “imports,” while only 4% said “domestics.” Those who believe neither imports nor domestics will suffer made up 7.3%, while 21% said “both” will feel some pain. The remaining 6.5% answered “I don’t know.”
“I believe import wine sales will remain the same or be down slightly. Domestic sales should continue to be strong with most growth being in the value wines and some premium priced wines.”
“The prospects for 2008 remain shrouded in uncertainty for the fine wine business. Inflationary pressures on the European Central Bank, combined with the Fed's rate-cutting response to the weakening domestic economy, will continue to drive the value of the dollar down and the price of imported wine up, particularly Italian and French wine. Every-increasing transport costs are no help at all. Wine enthusiasts, in possession of less discretionary income, may curtail spending in both on- and off-premise fine wine consumption. Look to under-valued wine regions like Spain, Argentina, and Austria to ride to the rescue of the wine enthusiast that has no palate for homogenous New World offerings in the $10-$15 range.”
SAFEWAY CLOSER TO A BUYOUT
At least one analyst thinks Safeway’s Chicago-based grocery chain, Dominick’s, could be a part of a private equity group planning to buyout the entire Safeway chain, reports the Sun Times. Sean Egan, managing director at Egan-Jones Ratings Co., said a private-equity firm such as Kohlberg Kravis Roberts & Co., Thomas H. Lee Partners or Chicago's own Madison Dearborn Partners would be the likely buyers of Safeway.
"With the federal government pumping liquidity into the market, there will be a time when conditions will be right for a buyout. Safeway is close to the top of the list," Egan said.
FLORIDA REVISITS DIRECT SHIPPING ISSUE
Florida legislators will consider three winery shipping bills once the regular session convenes March 4. As you’ll recall, Floridians failed to pass a new shipping bill in 2007. HB 693 has a production cap of 250,000 gallons and limits consumers to 18 cases of wine per household per year. SB 1736 is similar, but limits households to 15 cases a year. Lastly, SB 1096 would limit consumers to ordering only 4 cases of wine per household each year.
To read more about the three bills, visit Ship Compliant Blog.
Until tomorrow, Megan
“Horse sense is the thing a horse has which keeps it from betting on people.”
W. C. Fields
--------- Sell Day Calendar ----------
Today’s Sell Day: 17
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
posted at 2:10 PM
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