Shrinking US bar tabs signal little festive cheer for liquor makers
23/12/2024 07:00
*
US drinkers spending less on expensive cocktails amid high
inflation, bar owners say
*
Wholesaler sales of spirits expected to decline nearly 6%
this
year, trade group says
*
Trend poses challenge to liquor companies such as Pernod,
Diageo
By Emma Rumney, Jessica DiNapoli
LONDON/NEW YORK, Dec 23 (Reuters) - Meaghan Dorman's
five New York bars look just as full as they always do in
December - packed with couples on dates, holiday get-togethers
and business meet ups. But when takings are counted, it's clear
that customers are spending less.
Dorman, bar director and partner of Raines Law Room and Dear
Irving bars, each with multiple locations, said customers were
buying fewer expensive craft cocktails, priced between $26 and
$40, before switching to a cheaper tipple like wine.
"You feel like you are busy all night, and we will be full
all night," but revenues are down versus previous years, she
added.
Difficult economic conditions, such as high inflation, have
left some U.S. drinkers, especially middle-income earners who
used to splurge during the holidays, looking for ways to rein in
their booze spending, three of the largest U.S. spirits
distributors told Reuters.
The trend poses a challenge for major spirits producers like
Diageo DGE.L and Pernod Ricard PERP.PA , for whom October,
November and December are critical to help drive annual sales.
Pernod, for example, made 30% of its annual sales during that
period last year.
Diageo and Pernod declined to comment on current trading.
As well as buying less, some drinkers are switching to
cheaper liquor brands and venues or reducing the amount of
out-of-home celebrations they attend, Southern Glazers Wine &
Spirits, Republic National Distributing Company and Breakthru
Beverage Group, which count Diageo and Pernod among their
suppliers, said.
Annually, wholesaler sales of spirits are expected to
decline by 5.65%, with year-over-year trends pointing to
potentially severe volume decreases over the festive period,
trade group the Wine and Spirits Wholesalers of America told
Reuters.
"Everything is slower," said Francis Creighton, the CEO of
the wholesalers' group. "Consumers have to pay for rent, cars.
There's a lot more competition out there for the last dollar in
someone's wallet than there used to be."
In bars and nightclubs, a shift away from more expensive
bottles to those in a price tier below was underway across
categories of spirits, data from the wholesalers' group showed -
challenging major producers' central strategy aimed at getting
consumers to shell out for more expensive liquors.
The companies are already struggling with a sharp downturn
in U.S. sales following a post-pandemic boom; a relatively weak
holiday season may compound their problems.
SOME CHRISTMAS CHEER
Not all markets are seeing the same trends. In Britain, for
example, large pub group Marstons MARS.L reported Christmas
Day bookings up 11% on last year, adding it has seen consumer
spending recover.
In the United States, the biggest market for most major
Western liquor producers, Southern Glazers is expecting "one of
the more cautious, or challenging" holiday seasons in a while,
though all three distributors said they did not expect sales to
decline dramatically.
Sales of spirits for at-home consumption, while lower
margin, are up compared to last year. Higher earning consumers
also remain resilient, and cheaper restaurants are benefiting as
consumers seek value, Poelma said.
Casual dining chains Chili's and Applebee's, for example,
offer holiday cocktails for between $5 and $7, with pricier
options of up to $13.
Those are unlikely to rival cocktails like the $28 Weaving
Weber - the take on an old fashioned at Dorman's Dear Irving in
Gramercy Park, New York, which contains artisanal tequila,
xila-spiced agave syrup and angostura bitters.
People tend to treat themselves to one such craft cocktail
nowadays, whereas they previously could have up to four, Dorman
said.
These trends were combining with longer-term shifts towards
drinking less or experimenting with alternatives like
THC-infused beverages, RNDC's senior vice president Emily Xu
said. Tetrahydrocannabinol (THC) is the psychoactive compound in
cannabis.
Joseph Gabelli, a portfolio manager at spirits investor
Gabelli Funds, said the U.S. trading raises questions over
whether spirits makers' bid to shift drinkers to pricier brands
could deliver sales at the same rate as it had in the past.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Wholesaler case sales of key spirits at different price tiers to
bars and nightclubs in the year to October https://reut.rs/3ZBA29W
Retail spirits dollar sales in the 12 weeks to November https://reut.rs/41EbWhh
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Emma Rumney in London and Jessica DiNapoli in New
York; Additional reporting by Waylon Cunningham in New York;
Editing by Emelia Sithole-Matarise)
((mailto:Emma.Rumney@thomsonreuters.com; +447391409253;))