Bottom's Up: Alcohol sales not nipped by tough economy

Wednesday, August 13, 2008 3:00 AM EDT
In tough economic times, American consumers tend to cut spending on such things as travel, dining out and impulse shopping.

But not booze.

According to state liquor officials and local bars and stores, Vermonters continue to spend money on booze.

It has long been said that the alcohol industry is somewhat recession-proof. Hrworld.com lists the alcoholic beverage industry as one of 25 that are immune to economic downturns.

“Stocks markets go up and down, but no matter what the economy is doing, people worldwide continue to drink,” wrote Dan Ahrens in his book “Investing in Vice: The Recession-Proof Portfolio of Booze, Bets, Bombs and Butts.”

Local pubs and store owners report people are as thirsty as ever, despite troubling statistics about unemployment, prices, wages and energy costs.

A recent survey by the Nielsen Co. found that the “declining economy has little impact on consumers’ alcoholic purchases.” Half the consumers who were polled said the declining economy has “no impact” on their purchases of alcohol.

Flat or better

Local beer and wine retailers say sales have either stayed the same or bumped higher this year.

“We haven’t seen a decline at all. If anything, sales have increased slightly,” said Lisa Grassette, manager of Tomlinson’s Beverage in Morrisville. “People are going to drink what they want to drink, and we have not noticed a difference at all.”

“It has not affected us at all economy-wise. People continue to buy what they like,” said Jerry Lopez, a clerk at Stowe Beverage.

“We have stayed pretty much the same here,” reported Cannis Johnson, manager of Waterbury’s Crossroads Beverage Center. “There are more people paying attention to sales, but there has been no drastic changes in what people buy.”

According to the Vermont Department of Liquor Control, liquor-license purchases are actually up 4 percent from a year ago — which Commissioner Michael Hogan said “is pretty favorable.”

The Distilled Spirits Council of the U.S. expects liquor makers to post $19 billion in revenue in 2008, up 4.6 percent from last year. Revenue rose 5.6 percent, to $18.2 billion, in 2007.

“Nobody is recession-proof,” said David Ozgo, chief economist of the Distilled Spirits Council in an interview with Associated Press. “However, there are a number of mitigating factors for us. We’ll react to a recession, but it’s not like we’re the real estate industry or the auto industry … where you would expect sales to go into the tank.”

Still going out

Ozgo says that, in tough times, people will often drink at home rather than at bars, because it’s cheaper than a night on the town. He says that’s a boon to liquor-sellers.

But, according to the Vermont Department of Taxes, Vermonters are actually buying more alcohol at hotels, restaurants and bars than they did last year, based on collections from the state meals and rooms tax.

Jeffrey Lang, executive chef at the Alchemist in Waterbury, said business has continued to increase at his brewpub.

“We are busier than we have ever been. … We have seen business rising all summer long, from Memorial Day up until today,” Lang said.

In the first quarter of 2008, taxable receipts for alcohol sales in Waterbury totaled $474,873 — up 29.8 percent from last year’s $365,896. In all of Washington Country, alcohol sales were about $3.5 million, up 11.1 percent from last year.

In Stowe, the $2.66 million spent on alcohol in the first quarter was 8.2 percent ahead of a year ago. In Lamoille County, alcohol sales for the quarter were $3.3 million, up 10.9 percent from a year earlier.

Statewide, Vermont alcohol sales totaled $36.7 million in the first quarter of 2008, up 4 percent from a year earlier. That’s in line with fourth-quarter results from 2007.

Microbreweries grow

The success of the Alchemist reflects a larger national trend: The biggest winner in the beer market as of late has been microbrewers — smaller brewers who tend to focus on quality and taste, rather than cost and advertising.

According to a study by the Brewers Association, a trade association that represents a majority of U.S. brewing companies, sales by U.S microbrewers have risen more than 11 percent in the last year.

That growth is due mostly to a “grass-roots movement toward fuller-flavored, small-batch beers made by independent craft brewers,” the study found.

That success comes despite the fact that microbrewers have had to raise prices by about $1 a sixpack, due to rising costs of commodities such as wheat, hops and barley.

Julia Herz, director of marketing for the Brewers Association, thinks people are more interested than they once were in supporting local businesses, rather than larger companies.

“A brewery in every town is not so crazy to think about in the future,” she said. “A lot of these breweries are deeply involved with the community, and consumers are looking to buy products from local businesses.”

“I think the success is a combination of many factors — the craft brewing explosion and the rise of the ‘buy local’ movement, especially here Vermont, have all been a factor in keeping business at microbreweries going,” said Lang at the Alchemist.

Rock Art Brewery in Morrisville has been doing so well that it recently expanded to include a tasting room.

“It seems (beer) is definitely recession-proof,” said Rock Art owner Matt Nadeau, whose brewery has grown in each of its 11 years in Morrisville.

Larger beer manufacturers are growing, too, though more slowly. In late July, Anheuser-Busch, which holds about 48 percent of the U.S. beer market, reported its second-quarter net sales increased 4.6 percent from last year.

Wine sales are also growing, although not as fast as they used to.

The “economic downturn has impacted our category to a lesser extent than others,” reported Wine Business Monthly in June. “The continued growth shows people are not walking away.”

So why do people keep buying alcohol, despite having less disposable income?

Nadeau, at Rock Art, said he thinks people are cutting back, just not on alcohol.

“It is an affordable luxury,” he said. “If they are feeling a pinch, they may not go on their vacation or do a major renovation, but they will treat themselves to a few drinks. Even when money is tight, people are not going to give up everything.”