Cheers: Wine and Liquor Keep Flowing Despite Sour Economy

Liquor sales are up, but profit is down!

The point this article misses is that across the board, premium spirits are selling at lower prices than a year ago. This is especially true in the overcrowded vodka segment: Grey Goose, Chopin, Belvedere, Ketel One, etc -- all are offering deals to distributors and retailers in an effort to maintain market share by presenting more attractive prices to consumers. As a consequence, profit margins have declined significantly.

We see this trend throughout the entire spirits industry, and across all retailer segments, from the luxury retailers to the cost-cutters.

Yes, the public is looking for an escape from the financial worries and bad news every day, but they are not as free-spending, and they're looking for bargains. ...and they are not as likely to experiment with new high-priced brands -- they will stick with the tried and true, with opportunistic ventures to the lower priced brands to save a little cash.

The impact of all this will be seen in next quarter's operating results, and we will see the multiple-of-earnings valuation fall; at the same time the dominant brands will acquire struggling emerging brands at bargain prices.

John Macaluso of CA @ Nov 30, 2008 12:10:56 PM