Pop open a bottle of your favorite spirits. It’s time to celebrate. Liquor sales rose by 4% last year, and growth was particularly strong in terms of exports of American spirits (up 16.5%) and sales in the pricey “super premium” category of vodka (up 15.9%). Liquor also posted slight gains in market share against beer, indicating that consumers feel good enough about the economy to splurge on upscale beverages.
When rough economic times arrive, consumers tend to scale back on all sorts of purchases, including big-ticket items like cars. At the same time, there’s a corresponding uptick in other purchases, such as fast food, lottery tickets, donuts, and condoms.
How does alcohol figure into the mix? By most accounts, during recessions, alcohol sales don’t suffer. After all, tough times unfortunately bring with them an excuse for some to turn to the bottle. But an economic downturn is usually accompanied by a shift in what kinds of booze people drink. For instance, while $20 and $30 bottles of wine were popular in the carefree pre-recession times when homes seemed to increase in value 20% annually, once the housing market collapsed and unemployment soared over 10%, the $9 to $12 bottle became the fastest-growing segment in the wine market.
The trend for cheaper mind-altering substances goes beyond alcohol. By some account, cocaine sales plummeted during the recession era because it was easier, and much less expensive, for addicts to turn to prescription drugs and other cheaper narcotics.
Using last year’s rise in liquor sales as an indicator, good times appear to be coming back. The Distilled Spirits Council of the United States (DISCUS) has just released 2011 sales data, and consumers seem to now have more money to spend on quality hooch.
Last year, liquor sales hit $19.9 billion, up 4% from 2010. Top-shelf brands performed particularly well, rising 8.9% as a group, with revenues increasing 15.9% for “super premium” vodkas and 11.4% for top-quality bourbons and whiskeys.
David Ozgo, chief economist for DISCUS, says that the rebound constitutes “a classic pattern we see during a recovery.” Speaking with the San Francisco Chronicle, he explained:
“During a recession, we see consumers go to value brands,” he said, adding that even though the employment rate is still lagging, people are feeling more confident and are willing to spend.
The broad shift from cheapo to top-shelf liquor, then, bodes well not only for bars, liquor stores, and spirits manufacturers, but for the economy as a whole.