US: Spirits stand up to recession

03 February, 2010

US: The spirits industry has proved recession resilient, according to the Distilled Sprits Council (DISCUS).

DISCUS CEO Peter Cressy has released supplier data at an annual briefing for media and analysts showing 2009 volume growth of 1.4% but revenue holding steady at $18.7 billion for the year. He said market share versus beer and wine grew one-half a point by volume but declined slightly by two tenths of a point by revenue.

Cressy attributed the slower growth compared to 2008 to some trading down among consumers.  However, he cited a long-term analysis of prior recessions which showed a strong trend back to premiumisation as the economy improves.  “Our data shows that there is light at the end of the tunnel,” Cressy said. “The question remains, how long is the tunnel?   Following the historic pattern, once consumer confidence returns, premiumsation will also return. Consumers will again gravitate to affordable luxuries.”

The data also showed 2.2 percent volume growth in the off-premise sector—75 percent of the industry—as more people entertained at home.  That was offset by the on-premise sector—restaurants, bars, hotels and nightclubs—which continued to suffer with a three percent volume decline. 

Cressy strongly urged policy makers at all levels of government to refrain from the impulse of raising alcohol taxes, which he called devastating to the hospitality industry, particularly the already hard hit on-premise sector where 300,000 jobs have been lost. 

“Restaurants and bars have closed in every city and town in the nation during this recession,” he said. “Policy makers should not compound the damage and threaten the recovery by raising hospitality taxes at this time.” Cressy went on to talk about the decade in spirits.

“For distilled spirits, this has been an extraordinary decade of progress,” Cressy stated.  He cited as examples the resurgence of cocktail culture across America; the powerful growth of premiumisation; strong momentum in marketplace modernisations such as Sunday sales and tastings laws; more equitable treatment for spirits in advertising, taxation and market access; record export growth; and a wider appreciation of moderate consumption.

Cressy also noted the industry’s strong commitment to social responsibility and highlighted the decade of progress on underage drinking.  “While the nation had made much progress, much more needs to be done,” he said.
In closing, Cressy said the key factors for revived growth in 2010 and beyond include: the return of consumer confidence; revitalisation of on-premise business; expanded market modernisation and regulatory reform; holding the line on job-killing hospitality taxes; and more equal treatment for spirits versus beer and wine.

“This is an industry that is well-positioned to benefit from a recovery and well-positioned to continue growing into the next decade,” Cressy concluded.

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