Is the alcohol industry recession proof?
MILWAUKEE — Drinking away your troubles? Possibly. But chances are you're doing less of it, and you're imbibing at home.
The alcohol industry is often thought of as "recession proof," but the spirits industry said Friday that its business softened last year, with revenue growth slowing and spending shifting away from bars and restaurants.
Revenue reported by liquor suppliers rose 2.8 percent from the previous year to $18.7 billion in 2008, according to the Distilled Spirits Council of the United States. Since 2000 there had been a 6 percent average annual growth rate. Volume grew 1.6 percent, also below the 2.7 percent average growth of recent years.
That there is still growth shows that the spirits business is "recession resilient," said council president Peter Cressy, but not immune to the pressures of the economy.
"It is absolutely not recession proof," Cressy said. "There's no question the fourth-quarter softened substantially."
He said 2008 wasn't "a great year," and the quarter that ended in December was one the industry was counting on. The industry is still compiling numbers for the fourth quarter, so it did not want to break out those results yet, but Cressy said he expected business in restaurants and bars, called "on-premise," and in stores, or "off-premise," to be down about 3 percent in the quarter.
Consumers are eating out less as they try to save money, and when they do go, Cressy said, they're limiting what they order. On-premise volume fell 2.2 percent last year.
Instead, people are drinking at home and buying from stores.
Off-premise volume rose 2.9 percent for the year.
So people are drinking, but they're paring back, said David Ozgo, the council's chief economist.
The number of drinking occasions is falling; he said he wasn't sure yet how much they were dropping.
"They still want to have a good time, so a certain amount of those drinking occasions will be shifted to at-home," he said.
What are people drinking? Whiskey, of all the spirits, is making a bit of a comeback, the council said, and showed good performance in a slow market.
Premium rum, super premium tequila and premium vodka also grew.
The market share for spirits fell slightly, perhaps as more people turned to beer, Cressy said. Beer had just over half the total alcohol market in 2008, with spirits at just about a third and wine with the remainder, Ozgo said.
And the beer industry isn't recession proof either, figures show. Earlier this month, SABMiller PLC, the maker of Miller Genuine Draft and Peroni Nastro Azzurro, said its beer shipments fell unexpectedly in the most recent quarter amid a worldwide slump in consumer spending.
Given the economy, Cressy was hesitant to predict how business would be this year. If the recession remains much the same, the effect should be minimal, he said.
If the economy worsens, so will the spirits business.
"If there were big, fast fluctuations, that would be harmful. No question about that," he said. "If this economy slides into an even deeper recession, the risk could be even greater."