THE AFFORDABLE INDULGENCE

BENJAMIN FRANKLIN FAMOUSLY DECLARED that in life “nothing is certain but death and taxes.” That certainly is true, but it can also be added that, in times of recession, one thing is certain: drinking. According to a recent Nielson Company trends report, consumers continue to see alcoholic beverages as an affordable indulgence, despite the grim economy. Nielson data shows that the recession is really hitting on-premise establishments hard. With consumers staying in and entertaining at home more often, restaurants, bars and nightclubs are facing serious challenges. Consumers are going out to eat less often, as evidenced by a recent Nielsen survey, where two-thirds of fine dining patrons admitted they are going out less often compared to a year ago. Their sentiments were echoed by 65 percent of nightclub patrons, 55 percent of bar patrons, 59 percent of casino and resort patrons, and 52 percent of casual dining visitors. When they do go out, some consumers are cutting back on their restaurant bills by ordering fewer or lower-priced alcoholic beverages, especially as it relates to higher-priced wines and spirits. Others are trading down by visiting “fast casual” restaurants and quick service restaurants that may offer limited or no alcoholic beverages. However, off-premise retailers are using the lure of one-stop shopping to their advantage. Nielsen also expected to see a continued increase in online alcoholic beverage shopping, especially for wine, where legal to do so.
Buying imported used to be the trendy thing to do but with exchange rates unfavorable to the dollar, imports have been forced to raise prices, making it more difficult for these products to compete with domestic alcoholic beverages. For example, while both domestic and imported wines were growing at the same double-digit rates last year, domestic growth is now ahead of imports. Imported beers have also suffered, showing steady declines in the last six months. Consistent with the “localization” trend, craft beers and US wines from outside California have been gaining share, and there are now more than 2OO “micro-distilleries” across the country.
“In tough economic times, consumers are often biased toward national or local products, further enhancing the prospects for domestic brand growth, whose prices have remained relatively stable through the year,” said Richard Hurst, senior vice president, Beverage Alcohol, The Nielsen Company. “At the same time, the weak dollar has helped tourism and despite the dollar’s recent recovery and the threat of a global economic meltdown, major cities should continue to expect to see the benefits during the holiday season.”
Given that wine and spirits are common gifts during the holidays, Nielsen expected a rise in the purchase of alcoholic beverage as gifts for the 2OO8 holiday season. “Alcoholic beverages as gifts, especially those with value-added packaging, can fit most holiday shopping budgets and represent a more economical alternative to bigger ticket items,” said Hurst. “Historical as well as more recent consumer trends indicate that alcoholic beverages are much more recession-resistant than many other product categories,” he stated. “With the prospect of limited economic recovery in 2OO9, consumers are likely to consider alcoholic beverages as an affordable indulgence during the holiday season.” Here’s hoping that the affordable indulgence trend never dries up.