2008 spirits sales up, slowing as recession sets in
Jobs are being lost, sales are down, building is slowing, Americans have increased their rate of saving and reduced spending...
Despite the frightening economic news—or perhaps because of it—Montanans are still enjoying the occasional libation, though price sensitivity is becoming more pronounced as consumers guard spending more carefully.
 |
Steve Swanson
|
The Montana Liquor Division of the Department of Revenue reports case sales and revenue from sales, taxes and mark-up on spirits were up slightly in calendar year 2008 compared to 2007.
But national authorities and evidence from around the state indicate the hospitality industry revenue was tailing downward toward the end of 2008. And many are warning that misguided liquor tax hawks could "upset the marginal stability" of an already distressed industry.
The Division's Steve Swanson, Distilled Spirits and Program Manager, told the Montana Tavern Times Feb. 4 that case sales in 2008 were up 13,313 or 2.1 percent over 2009—646,848 versus 633,535.
He said calendar year 2008 liquor revenues were $100,890,398
compared to $96,150,496 in 2009, up about 4.7 percent and $4.74 million. Of that amount, tax revenue for the respective calendar years amounted to $20.8 million in 2008 compared to $19.8 million in 2009.
Swanson said the department’s fiscal year 2008 sales figures indicate the vodka category is up most—10.26 percent—from 146,579 cases to 161,617 cases. The whiskey category was also thriving, up 9.93 percent from 200,429 cases to 220,327 cases. Rums were doing well, too, up 8.02 percent from 70,282 cases to 75,921 cases.
Leading the categories decline was "cordials and cocktails," down 8.02 percent from 100,517 cases to 92,458 cases.
Swanson said some stellar performers showing strong growth since their introduction in Montana were: New Amsterdam Gin—135 cases sold since April 2008; Dr. McGillicuddy Lemon Drop—114 cases sold since March 2008 and Captain Morgan Spiced Rum 100-proof—106 cases sold since August 2008.
Swanson said he did not have the data to determine what portion of the state's volume was sold retail to consumers through state agency stores, and what portion was sold wholesale to on-premise accounts who in turn sell retail by-the-drink.
The Distilled Spirits Council of the U.S. (DISCUS) said Jan. 30 that the "industry is recession resistant but not recession proof, and that the premiumization trend continues."
DISCUS CEO Peter Cressy released national industry data showing slowing 2008 revenue growth of 2.8 percent totaling $18.7 billion, and volume growth of 1.6 percent to 184 million cases. He noted market share was holding steady but softened in the fourth quarter.
For 2009, he warned policy makers at all levels that "distilled spirits, and indeed all beverage alcohol, are a key component in hospitality industry profitability and particularly for the hard-hit on-premise segment of restaurants, bars and hotels. New hospitality taxes could have a devastating impact on employment and actual tax receipts."
Cressy emphasized that it is essential that policy makers and legislators understand three things in 2009:
—the on-premise segment of the hospitality industry is reeling;
—spirits represents a key component of the profitability of restaurants, bars, hotels and tourism;
—new hospitality taxes at any level would have a devastating impact on employment in a sector that has already lost over 150,000 jobs.
"Our message is simple: we are not seeking a bailout; just do no harm," Cressy stated.
Key factors Cressy cited in the industry’s recession resiliency included: holding the line on new hospitality taxes; expanding market access; continuing fascination with the cocktail culture and consumer premiumization; and spirits remain a good value compared with other beverages.
“Premiumization continues,” Cressy said, noting that many consumers appear to be “trading around, not trading down. Consumers are being more discerning about their buying decisions when it comes to alcohol.”
He cited growth in premium rums and high-end premium and super premium American, Canadian and Irish whiskeys. Super premium tequila also continued its growth, and vodka, the largest category representing approximately 24 percent of sales, also showed growth. But, he said, it remains to be seen how the recession will affect the categories going forward.
A bright spot in Cressy's remarks included 8 percent growth in exports of U.S. distilled spirits, primarily American whiskeys, totaling $1.1 billion for 2008. This represented a sixth straight year of record exports.
Strong growth occurred in Australia ( 24.3 percent); Canada (21.2 percent); France (15.9 percent); and Germany (8.9 percent). Emerging markets, including China and Brazil where the industry had run market promotions, showed strong growth albeit from a smaller base.
"Bourbon and Tennessee whiskey are unique and historic products of the United States that are capturing worldwide attention and acclaim," Cressy said. "Importantly, export growth helps to protect jobs in the U.S., not only in the spirits sector, but in the farm, forest products, packaging and trucking sectors as well."
Source: The Montana Tavern Times, March 2009, published monthly by Continental Communications, 125 W Granite, Suite 102, Butte MT. 59701