No recession for spirits

J Herbert Silverman reports from the annual DISCUS review briefing in New York
27 August, 2008
Page 22 
Treading a path between caution and optimism, Dr Peter Cressy, president and CEO of the Distilled Spirits Council of the United States (DISCUS) forecast modest growth for the industry this coming year.

The trade association expects sales for the US spirits industry to rise 4.6 per cent to US$19 billion in 2008, slower than last year's growth of 5.6 per cent. Volumes are expected to rise 1.9 per cent to 185 million cases. Said Cressy: "Despite a slowing economy, spirits market share will continue to grow. In particular, acceptance of Bourbon and Tennessee whiskey is growing significantly overseas."

DISCUS senior vice president for international trade, Debbie Lamb, said 2007 exports grew by around 15 per cent in volume hitting a record $1.01 billion (preliminary).

In his review of the spirits industry year in 2007, DISCUS chief economist David Ozgo reported that vodka, representing 24 per cent of industry sales, saw a 7.65 per cent revenue growth to $4.3 billion; rum (18 per cent of industry sales) 8.9 per cent growth to $2.1 billion; Tequila (15 per cent of industry sales) 10.5 per cent growth to $1.6 billion; and whiskey (Bourbon, blends, Canadian, Scotch and Irish; 29 per cent of industry sales) 3.8 per cent growth to $5.2 billion.

Overall, spirits hold a 33.1 per cent share of the US alcoholic drinks market, continuing a steady rise from 28.7 per cent in 2001. While wine also increased market share in 2007, beer lost share for the sixth year in a row.

== Responsible message ==

The group's executive pointed to the ongoing success of the Industry Responsibility Programs focusing on health issues. Cressy pointed out: "Campaigns such as 'we don't serve teens' are meeting with significant acceptance." He acknowledged that binge drinking on campus continues to be a problem but inroads are being made in that area.

Cressy also noted that DISCUS gives strong support to state and local drinking and driving programs and works closely with various health groups.

In regard to advertising protocol, Cressy noted that increasing numbers of cable networks are now accepting spirit advertisements, along with hundreds of broadcast network affiliates following the same path, most notably the NBC flagship outlet. He emphasised, however, that the internet has become an increasing venue for spirits promotion, somewhat affecting gains in television advertising.

A rigorous advertising and marketing code has been strengthened.

== On-trade feels premium impact ==

Cressy added that "consumer fascination with the thriving cocktail culture and the overall trend toward premium product purchases persisted in 2007".

Will premium sales slow? "Not so far," Cressy noted, although he did concede that people were tightening their belts and drinking more at home with the growth rate of off-premise at 2.5 per cent. The spirits industry is already beginning to feel some impact from consumers spending less in bars and restaurants.

On-premise volume growth, which has in the past been a big driver for the industry, was almost unchanged in 2007.

"Obviously the reality of a softening economy will create new challenges in 2008," said Cressy. "With the 75th anniversary of Prohibition repeal coming, it is important that we continue to eliminate or roll back archaic and restrictive blue laws and regulations [laws dating back to the 17th century restricting, amongst other things, the sale and consumption of alcohol on Sundays]."

== Sunday trading ==

Ozgo said the "trend towards repealing blue laws and the restrictions placed on liquor sales on Sundays and some holidays is dramatically accelerating".

Supporters say repeal of the restrictions expands consumer choice and increases tax revenue.

Just in the past five years, 12 states have begun allowing either full or limited Sunday sales of distilled spirits through off-premise outlets such as package stores, bringing the total to 34. Sunday sales states include Delaware, Idaho, Kansas, Kentucky, Massachusetts, New Hampshire, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington.

Ozgo pointed out that the rising Sunday sales revenues, $120 million in all, show the importance of creating a level public policy playing field. "Having access to your customers on the second busiest shopping day of the week is enormously important. The customer enjoys the convenience, the industry gets new sales and the state benefits from new tax revenue. It's a win, win, win outcome." ----=== DISCUS membership ===The Distilled Spirits Council represents America's leading distillers and nearly 80 per cent of all distilled spirits brands sold in this country. Over the years, the Council has served as the distillers' voice on policy and legislative issues in the nation's capital, state capitals and foreign capitals. Members include Bacardi USA, Barton Inc, Brown-Forman Corporation, Diageo, Future Brands, Luxco, Moët Hennessy USA, Pernod Ricard USA, Rémy Cointreau USA, Sidney Frank Importing Co. and Suntory International Corp.