Consumers Trade to “Bottom-Shelf” Spirits
Responsible for propelling the spirits industry to where it is today, the premiumization train may have reached its final stop or at least slowed for awhile. Most people in the spirits industry agree “trading up” is slowing down in the face of a recession – a phenomenon that is also supported by retail data, Jeremy Mullman of Ad Age featured an article on the topic, carrying the tagline: “Once Scorching-Hot Brands Are Experiencing Pronounced Slowdowns as Consumers Shift to Bottom-Shelf Booze.”
In the article, Citi Investment Research analyst Philip Morrisey acknowledged that the “weaker U.S. economy has impacted spirits” and predicted it will “get worse before it gets better.”
Citing Nielsen data, Jeremy points out that super-premium brands such as Grey Goose, Johnnie Walker, Hennessy and Patron are slowing, while value brands are picking up.
One of the biggest impacts on “trading up” is the consumer shift from the on-premise to the off-premise. Consumers are less likely to trade up to a trendy label when drinking at home, and are also less influenced by marketing efforts at bars and restaurants. As it turns out, spirits companies are advertising more in bars, restaurants and nightclubs instead of implementing traditional ads.
Recall that Paul Varga, ceo of Brown-Forman, said at its fiscal year conference call last week that the company is starting to post more advertisements and flashy displays on the off-premise for that very reason.
"When people are going out, they'll still buy these aspirational luxury brands," said John O'Connell, chief operating officer of Patrón Spirits Co., in the article. "But in a store, it's a bit different, and you do see the lower end growing."
Richard Hurt, Nielsen’s senior VP-beverage alcohol, said spirits are “more recession-resistant than recession-proof.”
Most interestingly, Hurt also indicated that the full impact of the recession may not yet be felt by wine and spirits drinkers.
“Spirits and wine drinkers tend to have higher incomes," he said. "And higher-income groups tend to get hit last."
To read the full article, click here.
SUPER-PREMIUM WINES AND BELOW WILL “CARRY THE DAY.”
Similar to spirits, Americans are still buying wine but just cutting back on how much they spend. Decanter reports that dollar sales growth is expected to slow, but many segments of the wine business remain strong.
Bill Leigon, president of Hahn Family Wines, told the publication that sales are weak, but the weakness is hidden as consumers trade down in price. He said Costco retail sales were up 32% and Wal-Mart sales were up as well.
Leigon told Decanter that the under $15 retail sales will “carry the day.”
The luxury segment ($15-20) showed the biggest increase in dollar sales, followed by super luxury ($20 and up) and super-premium ($8-11).
Of all wine categories, the fastest-growing is the cask, or 'premium box' segment, with sales up 33.9% over the past year. Perceived value and eco-friendly packaging are reportedly driving the category.
As we’ve said before, the weak dollar continues to hurt imports. According to the article, the big three importers (Italy, Australia and France) are declining, while Chilean, Spanish, New Zealand, Argentinean and South African imports have seen increased sales.
ITALIAN OFFICIALS CONFISCATE VINO NOBILE DI MONTEPULCIANO
Italian officials have reportedly confiscated 12,000 liters of Vino Nobile di Montepulciano on suspicion of illegal blending. Vino Nobile di Montelpulciano by law must be minimum 70% Sangiovese, with the possible addition of up to 10% of native grape Canaiolo, while the remaining 20% can be any number of varieties cultivated within the Montepulciano growing area, according to Decanter.
Investigators have reportedly confiscated Vino Nobile from the Vecchia Cantina co-operative cellar, and they are also investigating the Gattavecchi firm, whose proprietor Luca Gattavecchi is also the president of the Vino Nobile Consorzio.
According to the Italian newspaper Corriere Fiorentino investigators suspect the wines in question have been blended with grapes from other Italian regions since 2004.
Recall that the Italian government seized thousands of bottles of Brunello months ago because they suspected winemakers were using grapes other than Sangiovese. The TTB has issued a warning it will ban Brunello beginning June 23 if the Italian government cannot issue a list of mislabeled wines by then.
FIRE DAMAGES GALLO GLASS PLANT
A fire erupted in an area where ingredients are mixed to make bottles at the Gallo Glass Company in Modesto yesterday (June 8) afternoon. According to local reports, four workers were injured. Three were treated and released at two local hospitals, while the condition of the fourth worker was not announced. Another 11 workers were treated at the scene. The cause of the fire was under investigation Sunday evening.
The plant is one of the largest bottle making facilities in the U.S. It employs over 800 workers and makes about one billion bottles a year.
BEER SHOWS IMMUNITY TO RECESSION
Faced with a slowing economy, U.S. consumers are reassessing their spending and determining what consumer goods they are willing to spend money on. Some of the results may surprise you. The Nielsen Company found that products such as seafood, dry pasta and candy are most immune to a recession. Beer and pasta sauces also show some level of immunity.
The most vulnerable products include carbonated beverages, eggs, cups/plates, food prep/storage items and tobacco.
The report was presented last week at Nielsen's Consumer 360 Conference.
WSD BRIEFS:
NEW JERSEY LAWMAKERS ARE CONSIDERING plans to allow beer and wine sales in grocery stores. NJ currently limits supermarket chains to two total liquor licenses and mandates that alcoholic beverages be sold separately from groceries. A senate committee will vote on the bill today.
GOV. ARNOLD SCHWARZENEGGER SIGNED A LAW last week legalizing competitions for home wine makers.
Until tomorrow, Megan
“Any man who afflicts the human race with ideas must be prepared to see them misunderstood.”
H. L. Mencken
--------- Sell Day Calendar ----------
Today's Sell Day: 6
Sell days this month: 21
Sell days this month last year: 21
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: 0
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
In the article, Citi Investment Research analyst Philip Morrisey acknowledged that the “weaker U.S. economy has impacted spirits” and predicted it will “get worse before it gets better.”
Citing Nielsen data, Jeremy points out that super-premium brands such as Grey Goose, Johnnie Walker, Hennessy and Patron are slowing, while value brands are picking up.
One of the biggest impacts on “trading up” is the consumer shift from the on-premise to the off-premise. Consumers are less likely to trade up to a trendy label when drinking at home, and are also less influenced by marketing efforts at bars and restaurants. As it turns out, spirits companies are advertising more in bars, restaurants and nightclubs instead of implementing traditional ads.
Recall that Paul Varga, ceo of Brown-Forman, said at its fiscal year conference call last week that the company is starting to post more advertisements and flashy displays on the off-premise for that very reason.
"When people are going out, they'll still buy these aspirational luxury brands," said John O'Connell, chief operating officer of Patrón Spirits Co., in the article. "But in a store, it's a bit different, and you do see the lower end growing."
Richard Hurt, Nielsen’s senior VP-beverage alcohol, said spirits are “more recession-resistant than recession-proof.”
Most interestingly, Hurt also indicated that the full impact of the recession may not yet be felt by wine and spirits drinkers.
“Spirits and wine drinkers tend to have higher incomes," he said. "And higher-income groups tend to get hit last."
To read the full article, click here.
SUPER-PREMIUM WINES AND BELOW WILL “CARRY THE DAY.”
Similar to spirits, Americans are still buying wine but just cutting back on how much they spend. Decanter reports that dollar sales growth is expected to slow, but many segments of the wine business remain strong.
Bill Leigon, president of Hahn Family Wines, told the publication that sales are weak, but the weakness is hidden as consumers trade down in price. He said Costco retail sales were up 32% and Wal-Mart sales were up as well.
Leigon told Decanter that the under $15 retail sales will “carry the day.”
The luxury segment ($15-20) showed the biggest increase in dollar sales, followed by super luxury ($20 and up) and super-premium ($8-11).
Of all wine categories, the fastest-growing is the cask, or 'premium box' segment, with sales up 33.9% over the past year. Perceived value and eco-friendly packaging are reportedly driving the category.
As we’ve said before, the weak dollar continues to hurt imports. According to the article, the big three importers (Italy, Australia and France) are declining, while Chilean, Spanish, New Zealand, Argentinean and South African imports have seen increased sales.
ITALIAN OFFICIALS CONFISCATE VINO NOBILE DI MONTEPULCIANO
Italian officials have reportedly confiscated 12,000 liters of Vino Nobile di Montepulciano on suspicion of illegal blending. Vino Nobile di Montelpulciano by law must be minimum 70% Sangiovese, with the possible addition of up to 10% of native grape Canaiolo, while the remaining 20% can be any number of varieties cultivated within the Montepulciano growing area, according to Decanter.
Investigators have reportedly confiscated Vino Nobile from the Vecchia Cantina co-operative cellar, and they are also investigating the Gattavecchi firm, whose proprietor Luca Gattavecchi is also the president of the Vino Nobile Consorzio.
According to the Italian newspaper Corriere Fiorentino investigators suspect the wines in question have been blended with grapes from other Italian regions since 2004.
Recall that the Italian government seized thousands of bottles of Brunello months ago because they suspected winemakers were using grapes other than Sangiovese. The TTB has issued a warning it will ban Brunello beginning June 23 if the Italian government cannot issue a list of mislabeled wines by then.
FIRE DAMAGES GALLO GLASS PLANT
A fire erupted in an area where ingredients are mixed to make bottles at the Gallo Glass Company in Modesto yesterday (June 8) afternoon. According to local reports, four workers were injured. Three were treated and released at two local hospitals, while the condition of the fourth worker was not announced. Another 11 workers were treated at the scene. The cause of the fire was under investigation Sunday evening.
The plant is one of the largest bottle making facilities in the U.S. It employs over 800 workers and makes about one billion bottles a year.
BEER SHOWS IMMUNITY TO RECESSION
Faced with a slowing economy, U.S. consumers are reassessing their spending and determining what consumer goods they are willing to spend money on. Some of the results may surprise you. The Nielsen Company found that products such as seafood, dry pasta and candy are most immune to a recession. Beer and pasta sauces also show some level of immunity.
The most vulnerable products include carbonated beverages, eggs, cups/plates, food prep/storage items and tobacco.
The report was presented last week at Nielsen's Consumer 360 Conference.
WSD BRIEFS:
NEW JERSEY LAWMAKERS ARE CONSIDERING plans to allow beer and wine sales in grocery stores. NJ currently limits supermarket chains to two total liquor licenses and mandates that alcoholic beverages be sold separately from groceries. A senate committee will vote on the bill today.
GOV. ARNOLD SCHWARZENEGGER SIGNED A LAW last week legalizing competitions for home wine makers.
Until tomorrow, Megan
“Any man who afflicts the human race with ideas must be prepared to see them misunderstood.”
H. L. Mencken
--------- Sell Day Calendar ----------
Today's Sell Day: 6
Sell days this month: 21
Sell days this month last year: 21
This month ends on a: Mon.
This month last year ended on a: Fri.
YTD sell days Over/Under: 0
WINE & SPIRITS DAILY
Subscribe or check back issues at: www.winespiritsdaily.com
Send news and comments in confidence to: megan@winespiritsdaily.com
© 2008 Wine & Spirits Daily, all rights reserved. May quote with attribution.
posted at 12:53 PM
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