Truck and Barter: Booze Sales

April 24, 2005

Booze Sales

By Bob

It shoudn't be amazing that the ability to advertise helps sell product. The hard liquor business had been in decline for years, but a few years back they ended a self-imposed ban on T.V. advertising. The recession also helped convince stations to start running them. It should come as no surprise that sales actually grew last year. The article doesn't seem to mention the effect that advertising has on the sales increase. Of course, part of it is that hard liquor has become fashionable among the young. From Barron's:

U.S. liquor consumption rose 4% last year, following a similar gain in 2003, a sharp contrast with the slowing beer business, in which volume was flat in 2004. Spirits-industry revenues increased an estimated 6% last year, as American consumers favored trendy premium brands like Grey Goose vodka, stalwarts like Jack Daniel's Tennessee whiskey and oddballs like Jägermeister, a licorice-flavored liqueur popular with college students, who often down it in straight shots. The developing world also is fertile ground for distillers, thanks to rising demand for Western spirits, notably scotch, in places like China.

Liquor's U.S. market share rose 2.6 percentage points, to 31.3% over the past three years, while beer fell by a similar amount, to 53.2%, and wine was about flat at 15.5%.

"Spirits are taking share from beer," says Bill Pecoriello, Morgan Stanley's beverage analyst. Pecoriello cites flavor innovations, increased liquor advertising, dieting concerns and the popularity of shows like Sex and the City, in which Carrie Bradshaw and her girlfriends made cocktails glamorous by drinking cosmopolitans and green-apple martinis in Manhattan clubs.

A recent consumer survey by Morgan Stanley found that liquor was the No. 1 alcoholic beverage among 21-to-27-year-olds, belying the notion that liquor skews toward the middle-aged drinkers. Spirits are particularly popular among young women, who tend to view cocktails as more fun and less fattening than beer. Liquor is prominent in hip-hop culture, which is influential among young and soon-to-be-legal drinkers. A top-selling rap song a few years ago was Busta Rhymes and P. Diddy's "Pass the Courvoisier."

In the article is this interesting tidbit:

The strength in the U.S. liquor business contrasts with its weakness in the 1980s and early 1990s, when Brown-Forman (ticker: BF-B), the maker of Jack Daniel's, felt the need to diversify by purchasing the Lenox china business. Now Brown-Forman wants to sell Lenox to focus on liquor.

Posted at April 24, 2005 06:33 PM

Comments

Who knew that Jack Daniels was trendy?

Comment by Michael at Half Sigma at April 25, 2005 03:13 PM | Permalink