No, the above are not prime numbers, but they do signify important milestones for the wine and spirits industries. Nine refers to the number of consecutive years of volume growth for distilled spirits in the U.S. According to the just-released Adams Handbook Advance 2007, distilled spirits consumption rose by more than 6.6 million 9-liter cases in 2006 to just under 176.6 million cases, an increase of 3.7% over 2005. Wine consumption, for its part, improved by 3.4% in 2006, to 283.1 million 9-liter cases, a more than 7 million case gain over 2005, and the fourteenth straight year that wine consumption has grown in the U.S.
These are heady numbers, but when we drill down even further, the good news gets better, as we detail in our annual Growth Brands report. According to a recently published study by the Economic & Strategic Analysis Department of DISCUS, spirits products priced at the superpremium and above level increased their volume by a healthy 17.5% in 2006, almost five times the growth rate of spirits overall.
This increase in high-end sales resulted in overall dollar growth that substantially exceeded volume growth percentages: retail sales revenue (combined on- and off-premise) of distilled spirits jumped 9.5% in 2006, to $58.6 billion, while retail dollar sales of wine increased 7.2%, to $26.0 billion.
We are all familiar with the positive trends affecting wine and spirits sales, but they are worth noting here: the increasing cultural acceptance of moderate beverage alcohol consumption as a potential health benefit; the continuation of a thriving cocktail culture; more product access, with the liberalizing of archaic blue laws nationwide, especially the growth of Sunday sales; a more spirits- and wine-savvy public, responding to increasing efforts on product education from retailers, restaurateurs, distributors, suppliers and the media; and a general modernization of retail outlets, as they focus on making beverage alcohol shopping a more enjoyable and less intimidating experience, especially for women.
The golden thread weaving its way through all of these positive trends is the American consumer’s ongoing migration toward luxury products. More than most retail product categories, wine and spirits are so-called “affordable luxuries.” Essentially, this means that even at the ever-expanding high end, they are inexpensive enough to appeal to a wide segment of consumers while still delivering the prestige that accompanies a luxury product. This is an admirable sweet spot to be in.
Even so, the value side of the retail equation still represents a powerful dynamic in the marketplace. As you know as well as I, the most successful operations are those that manage to embrace the many disparate elements of the business and refine their message to satisfy the most, and hopefully best, customers.