What A Difference A Year Makes

Last year at this time this column was titled ‘€œA Topsy-Turvy World,’€ and it detailed how a super-healthy beverage alcohol industry had been weakened by the vicious Recession of 2008-2009. In the years before the housing crisis and near-meltdown of the financial system, ‘€œtrading up’€ had been the operative phrase for the industry, which had enjoyed significant annual increases in sales of superpremium spirits and wines. That changed dramatically as the economy convulsed. Consumers began reaching for lower-priced items across the product spectrum. Large-size, value-priced spirits gained market share for the first time in years (up 5.5% in sales in 2009), while sales of superpremium spirits, for example, declined precipitously (down 5.1% in 2009). Meanwhile, sales of above-premium and superpremium wines suffered the same fate.

Now, however, ‘€œthe times they are a-changing.’€ Indeed, the latest 2010 statistics reflect that the sales dynamic has begun to shift back again. Though value-priced products are still doing relatively well overall, consumers are beginning to trade up to above-premium and superpremium brands again. The latest DISCUS report underlines this fact: it states that sales of high-end spirits in the U.S. rose 10.9% in 2010, a vast improvement over the previous two years, though high-end sales have still not recovered to pre-Recessionary levels..

And, as we point out in our Growth Brands cover story, overall wine and spirits sales volume increased in 2010, according to the latest statistics just released in the Handbook Advance 2011, published by the Beverage Information Group. U.S. distilled spirits sales volume rose to approximately 192.7 million 9-liter cases, representing a 2.1% gain versus 2009, while spirits revenue growth (the combined dollar total of off- and on-premise sales) actually outpaced volume gains in 2010, increasing 2.7% to $65.8 billion. The same holds true in the wine segment. Total U.S. wine consumption increased by 1.7% in 2010, to just under 302 million 9-liter cases, more than doubling 2009’€™s 0.8% volume gains. However, the real momentum in the wine segment in 2010 can be seen in the overall revenue figures, which show a 2.4% increase to $26.8 billion. These results contrast sharply with 2009 overall wine revenue, which declined by 3.2%.

But don’€™t just take my word for it. Our Retail Profile this issue focuses on Argonaut Liquors, the 40,000-square-foot beverage alcohol emporium that excels in the Denver, CO, market. In discussing the state of his business, co-owner Ron Vaughn tells us that the store just completed its best year ever. Things may not look this good in every beverage alcohol outlet across the country, but it does indicate that things are probably a lot better now than they were a year or two ago.

It still amazes me to see how resilient the beverage alcohol industry is. In the face of economic uncertainty, optimism has continued to reign, partially evidenced by the wide range of new products introduced over the past couple of years. While some of them have undoubtedly fallen by the wayside, many of them have shown promise in the marketplace and some have succeeded beyond expectations (see our Rising Stars sections in Growth Brands). In addition, all three tiers of the industry have continued to promote and merchandise in order to draw consumers to their brands and stores. From this vantage point, business appears to be improving and will likely continue in a positive direction.

Richard Brandes, Editor-in-Chief

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