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Key takeaways
- Sales of spirits costing $100 or more are down, and consumers are shifting from “premium” to “premium” tequila, liquor company executives said.
- Business leaders said the “people’s circulation” shows that Americans still want to buy and drink alcohol.
Fewer liquor buyers are reaching the top shelf.
Americans are no longer thirsty for the premium tequila that once flowed freely, with demand for $100 spirits declining, spirits companies said. Consumers appear to be trading up or opting for less expensive versions of their favorite beverages, Brown-Forman CEO Lawson Whiting said Thursday, as sales of more affordable bottles fell less.
“We are seeing some weakness, for the first time, in terms of a decline in trade,” Whiting said on a conference call, according to a transcript made available by AlphaSense. “When you look at $100 and up or $50 to $100 [segments]”These price points have weakened significantly.”
Industrywide, the number of bottles sold worth more than $100 has fallen 18% in the past three months, according to market research firm NielsenIQ.
Why this news matters to investors
Consumers are trying to cut back on drinking alcohol amid concerns about the labor market and inflation. Many are likely to back away first from discretionary items, such as fine alcohol or meals out.
Diageo, which makes Johnnie Walker and Crown Royal, said sales of its “ultra-premium” tequila brands had weakened, including Don Julio, which can cost up to $470 for a 750 ml bottle of Ultima Riserva, as well as Casamigos, which sells for $40 to $62, according to Total Wine & More prices in New York.
Some customers are turning to Astral, a “premium” alternative that Total Wine sells for $32, Diageo interim CFO Deirdre Mahlan said, explaining that the tequila category has also become competitive with the spirit’s explosion in recent years.
Spirits companies provide a signal that consumers are cutting back on their alcohol consumption because of the economy, rather than in response to health concerns and changing standards, which are also reshaping consumption and spending in the sector.
Research shows that younger Americans drink less than previous generations. There may be several factors at play: health and wellness is the biggest priority; Some social media has moved online; Disposable income is tight. Legal cannabis may also rival its appeal, and many are now buying non-alcoholic spirits and beer. But some companies believe that money is the root cause of change.
“It’s largely economic,” Mahlan said last month, according to a transcript. “Look at the changes we’re seeing in terms of down trade both in formats and price points.”
This article has been updated since it was first published to reflect industry data from NielsenIQ.
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