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Liquor Brands Bet Thrifty Drinkers Will Keep Making At-Home Cocktails

The Wall Street Journal · 01/07/2023 06:49

By Joshua Kirby

Many Americans took to mixing cocktails at home during the pandemic, boosting liquor sales. Now, with inflation squeezing disposable incomes, big distillers are betting on another round of home drinking as consumers economize.

Historically, around 80% of all U.S. alcoholic drinks sales were for home drinking, according to IWSR, a drinks market-research firm. That level rose to 90% during the pandemic, and sales at bars aren't likely to return to pre-Covid levels for another four to five years, IWSR says.

To capitalize, spirits brands are doubling down on efforts they started during the pandemic to meet drinkers where they are, launching new products and marketing campaigns catering to at-home drinking and putting greater emphasis on their e-commerce channels.

"People are really buying into this whole cocktail trend, and trying to do it themselves," said Pernod Ricard SA Chief Executive Alexandre Ricard. As household budgets tighten, drinkers "might dial up a little bit their home consumption versus on trade," he added.

Pernod, the owner of Malibu rum and Jameson Irish whiskey, in November launched a new business unit to focus on digital sales direct to consumers.

The company has also expanded its range of ready-to-drink canned cocktails, such as espresso martinis made with Absolut vodka and Kahlua, as a way to engage new customers away from bars. In November it said it would spend $22 million on a new canning line at a plant in Arkansas.

"After a period, consumers will upgrade to the brand itself," Mr. Ricard said. The pandemic helped spirits penetrate deeper into households, he added, citing Netflix cocktail-competition show "Drink Masters" as part of the cultural wave.

Davide Campari-Milano NV, known for its Aperol and Campari aperitifs, is also working to better position itself for home drinking.

Since the pandemic, the company's sales teams have been redirected to focus on channels other than bars and restaurants, and marketing aimed at making at-home drinking look as appetizing as being in a bar, said CEO Bob Kunze-Concewitz.

"We globally shifted our whole business model, which was very skewed toward on-premise," such as bars and restaurants, Mr. Kunze-Concewitz said.

To teach consumers how to make cocktails, Campari has put recipes on its websites, and the company has started selling complete cocktail packs -- such as a Negroni kit with Campari, vermouth and gin -- to make it easier to mix drinks at home.

"It was really all about, on the one hand, educating consumers about how to make our cocktails, because there were a lot of hangups there. And then via e-commerce, making it easier for them to get all the ingredients they need for the key cocktails," Mr. Kunze-Concewitz said.

The home-drinking trend in the U.S. helped drive a 47% rise in Campari's global sales for the first nine months of 2022, compared with prepandemic 2019, Mr. Kunze-Concewitz said.

Elsewhere, Smirnoff vodka owner Diageo PLC last year opened a canning site in Illinois to boost its ready-to-drink lines, citing consumer interest in enjoying cocktails at home.

And Rémy Cointreau SA, owner of the namesake orange liqueur, has also refocused its marketing toward home drinking, stressing its brands as staples of the home bar cart and central to many famous cocktails. The company has employed "Schitt's Creek" actor Dan Levy to promote at-home recipes for Cointreau-based cocktails such as the cosmopolitan and the margarita.

For New York City-based Justin Miller, the pandemic drove his interest in mixing drinks. Instead of heading to bars for drinks with friends, the 32-year-old started making cocktails at home and has amassed a collection of some 40 bottles to mix drinks with.

"It was a really fun thing to do. It was an aspect of grappling with staying at home," said Mr. Miller, who works in advertising. He continues to mix cocktails at home with friends and says he is willing to spend up to $50-$60 for a bottle to drink at home.

"It poses a really great alternative to going out to bars," he said.

One big question for the booze industry now, analysts say, is whether consumers remain willing to buy pricier spirits as high inflation eats into disposable incomes. That question is particularly pertinent as distillers' sales have been boosted in recent years by selling more premium products.

Over the five years between the third quarter of 2017 and the same period in 2022, sales of luxury spirits brands -- those costing more than $50 for a 750-milliliter bottle -- rose 23% on average, including 15% in the last year, according to data from the Distilled Spirits Council of the United States, or Discus.

While some data has shown U.S. retail-store sales of superpremium spirits edged lower in 2022, big distillers have so far said their sales have held up.

"I don't know what's going to happen in the future," said Pernod's Mr. Ricard. "What I do know is, at this stage, we still do not see any consumer downtrading per se."

Brown-Forman Corp., owner of Jack Daniel's whiskey, similarly said last month that it hasn't yet seen any signs of consumers trading down to cheaper alternatives.

High-end spirits might be a luxury, but they are an achievable and accessible luxury, said Campari's Mr. Kunze-Concewitz. "At the end of the day, for 70 or 80 dollars, you can buy an exceptional spirit and really treat yourself," he said.

"As we might be going into a recession, we'll see more and more of the high end doing well," Mr. Kunze-Concewitz said.

Write to Joshua Kirby at joshua.kirby@wsj.com

(END) Dow Jones Newswires

January 07, 2023 06:49 ET (11:49 GMT)

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