Numbers don't lie. While the conventional wisdom among those in the liquor industry has long been that the spirits market is recession proof, data recently released by the Distilled Spirits Council of the United States, reveals that the liquor industry has begun to feel the impact of the recession.
During a recent briefing in Manhattan, Peter Cressy, the trade group's CEO, greeted everyone with a musing on semantics. "The industry is recession-resilient or resistant, choose whichever word you'd like, but it's absolutely not recession proof," he said, indicating that the fourth quarter, which is especially important because of holiday purchasing, showed softening.
Revenue for the industry was up 2.8 per cent to $18.7 billion while volume rose 1.6 per cent to 184 million 9-litre cases. As stand-alone figures, those numbers may be heartening in light of the global economy's skid, but it's a significantly slower pace than the six per cent annual growth rate seen each year since 2001.
The breakdown of the data by category tells a far more detailed story, one in which whisky plays a starring role. Premiumisation continued, albeit a bit more sluggishly than in years past. Whiskies, however, outpaced other categories, with gross revenues of super premium bourbons and Tennessee whiskey up 18.8 per cent (compared to the value brands, which were only up 2.7 per cent) and super-premium Irish whisky up an impressive 38.5 per cent. Super-premium single malts, though, only grew by 1.2 per cent. Overall, whisky sales rose 4.3 per cent by dollar value and 1.3 per cent by volume in 2008. (The figures are based on shipments from supplier to wholesaler, not consumer retail.)
On the striking growth of the Irish segment, Jameson brand manager Wayne Hartunian said: "Jameson continues to be the key driver of the fastest growing spirits category in the U.S. (Irish Whiskey) and one of the fastest growing brands in the total U.S. spirits industry due to evolving consumer dynamics, and growth in retailer support as they look to leverage the brand's growth and significant additional potential. Jameson also has several unique marketing programs that it leverages throughout the year to help drive the consumer demand."
Whisky drinkers appear to be trading up more than tipplers in other categories, who are reaching for less expensive brands. Rum, for instance, showed a gross revenue decline of 9.5 per cent in the super-premium segment while revenues on premium brands increased 8.4 per cent.
The news is a bit sunnier when it comes to exports of American spirits, whiskies in particular. "U.S. exports continue to do very nicely. Not all the numbers are in, but it looks like we're up about eight per cent," said Cressy. He noted that American whiskies in particular are a driving force. The international market has embraced bourbon and Tennessee whiskey as uniquely historical products and they're "capturing worldwide attention and acclaim."
This all bodes well for the entire whisky industry, as evidenced by the emergence of rye. "It's a small category, obviously, but it showed pretty good performance in a slow market," noted David Ozgo, chief economist for DISCUS. The healthy showing of newer American whiskey products, especially on the micro-distilling level, is another positive indicator.
"It's a sign of strength in the whiskey market," Ozgo said. "If people see development in that super-premium segment of the market, they want a piece of the pie. Brands develop with whiskey development. It's part of why rye grew. And there are all the micro-distillers. A lot of them invest their own capital. They're making a huge bet that people will be interested in the category for a while. And they're experimenting. Any time you see a lot of experimentation going on that's a good thing."
While nobody wanted to make predictions about the toll the recession will take on alcohol sales this year, DISCUS chiefs did acknowledge the chance that liquor companies would modify production plans, especially when it comes to a spirit that sits aging in a warehouse for years.
"Companies make careful decisions designed to optimize revenues," said Cressy.
"It's not like we've seen several years of strong whiskey growth," Ozgo explained. "The recent market signals good strength. I suspect people are looking at the state of the economy now and scaling back investment plans, but I would not see that as a big problem. The resurgent interest came at the same time as we saw the slowing of the economy."