Booze should flow for holidays despite economy

A pullback in U.S. consumer spending should not dampen holiday parties or sales of distilled spirits in the liquor industry’s biggest season, executives of several companies said this week.

A sluggish housing market and what until recently were soaring oil prices have weighed on consumer sentiment and sparked concern about the strength of holiday sales. While some drinkers may trade down to cheaper choices, executives said, others, who see it as a luxury they can afford, will stay loyal to their favorite brand.

Speaking after a dedication ceremony for the reconstructed whiskey distillery of first U.S. President George Washington, Michael Keyes, managing director of Brown-Forman Corp.’s  Jack Daniel distillery said high gas prices hurt sales of its bourbon whiskey, but that things were looking up.

“We broach a very broad demographic,” Keyes said in an interview. “I think the price of gas for some of our franchise actually does impact their buying decisions. So if the economy slows down, we have the potential to also slow down.”

Keyes said U.S. sales growth of Jack Daniels had slowed by a few percentage points, from growth in the mid- to high-single digit range over the past few years to the mid-single digit range this year. He guessed that some Jack Daniels drinkers were reaching instead for Fortune Brands Inc.’s  Jim Beam, which he said was about two-thirds the price of Jack Daniels in the United States.

“At-home consumption with the slowing economy is something that worries us,” Keyes said. But “it’s rebounded a little bit in the last couple months, so we’re guardedly optimistic now about the U.S.A. business.”

December accounts for about 13 percent of the year’s total sales volume, Keyes said, compared to a range of 6 percent to 9 percent for the other months.

Paul Walsh, chief executive of Diageo Plc. , maker of Smirnoff vodka, Johnny Walker whiskey, and Tanqueray gin, said his company was not immune to a consumer slowdown but was more insulated than other sectors because spirits are an infrequent purchase that serve as an “affordable indulgence,” even when times were tough.

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“Given all the pressures and all the stuff you read in the press about this horrible consumer slowdown and how times are getting tougher,” Walsh said, consumers sometimes feel that they deserve to splurge on a bottle of their favorite spirit.

“This is your drink and you’re going to keep drinking it,” said Alain Barbet, president and chief executive of Pernod Ricard USA when asked at a lunch in New York if he expected consumers to rein in holiday spending.

Bill Samuels, president of Fortune Brands’ whiskey Maker’s Mark, said the holidays always boost sales and that this year was shaping up similarly. In general, Samuels, whose parents developed the recipe in 1951, said the brand was gaining traction with new customers.

“Seems to me that with the interest growing overseas, interest emerging in the West(ern United States) in urban centers and among professional women ... that we’re just starting to gallop.”

Wine and spirits companies have been growing at a decent clip as U.S. consumer tastes have shifted away from beer toward cocktails and wine.