Cheers? Liquor Sales Slow Along With Economy

The distilled spirits industry expects its U.S. revenues to increase 4.6 percent in 2008, down from last year's growth rate, a trade group said Friday, as the weaker economy forces people to tighten their budgets for going out.

The Distilled Spirits Council of the United States (DISCUS) expects U.S. revenue to spirits makers to reach $19 billion in 2008. Revenue rose 5.6 percent to $18.2 billion in 2007.

Sales by volume are expected to go up 1.9 percent in 2008, the trade group said, reaching 185 million 9-liter cases.

Volume sales advanced 2.4 percent in 2007.

David Ozgo, DISCUS's chief economist, said he expects the economic slowdown to take a toll as people cut back on going out to restaurants and bars, but that the industry will outperform other areas of the economy.

"Nobody is recession-proof," Ozgo said. "However there are a number of mitigating factors for us. We'll react to a recession, but it's not like we're the real estate industry or the auto industry ... where you would expect sales to go into the tank."

Still, Ozgo said that even if people don't go out to drink, liquor is an "affordable luxury" they can have at home.

"Maybe you can't go on the nice vacation you used to go on, but you can certainly buy a nice bottle of Scotch and enjoy it on the deck," Ozgo said.

Ozgo said that the spirits segment increased its share of the alcoholic beverage market last year, while beer lost market share.

Ozgo said the 2007 growth was due to the continuing trend of people trading up to premium brands, more consumers switching to spirits from beer, price increases and population growth.

The trend of "premiumization," or people "trading up" to the most expensive brands, is a "solid trend still impacting the industry," Ozgo said, adding that it should continue, recession or not.

In 2007 tequila was the smallest segment of the liquor industry, which is dominated by Diageo , Pernod Ricard and Fortune Brands , but the fastest growing.

Tequila sales, which made up 15 percent of the industry total, jumped 10.5 percent to $1.6 billion in 2007.

Conversely, whiskey, the largest segment with 29 percent of total sales, saw the slowest growth last year, rising 3.8 percent to $5.2 billion.