• by Aaron Baar , February 28, 2008

Does the thought of a slowing economy make you want to reach for a drink? You're not alone. The Beverage Information Group says that beer, wine and spirits sales continued to increase last year, although they did so at a slowing rate.

According to the Norwalk, Conn. research company, wine consumption increased 4%, while distilled spirits were up 3.2% and beer rose 1.2%. Distilled spirits sales reached more than 182 million nine-liter cases--their 10th straight year of growth--and wine sales reached 294.4 million cases, growing for the 14th consecutive year. After declining sales in 2005, beer sales continued to recover, reaching 2.93 billion cases.

The slowing economy, which has led to less spending at restaurants and bars, also has affected the beer, wine and spirits industry. Bars and restaurants have fueled much of the growth over the past few years, but consumers are much less likely to create exotic mixed drink--think mojitos or Cosmopolitans--for themselves at home, says Eric Schmidt, manager of information services at The Beverage Information Group.

"We are seeing a slowdown in people consuming on-premise," Schmidt tells Marketing Daily. "When the economy starts to slow down, they don't go out as much. What we're seeing is that they're not as apt to drink as much [at home] as before because they can't replicate [a restaurant] occasion at home."

Despite a receding economy, drinkers were trading up, with high-end products outperforming the general industry. For instance, sales of expensive imported spirits accounted for 40.3% of spirits sales last year, up from 39.7% in 2006. Craft beers also saw double-digit growth, while wine continued to find appeal with newer drinkers.

"A lot of people who are indulging in spirits or high-end beer, they're not as affected by the economic crisis in the country," Schmidt says. "This is something that's still very affordable."

In the spirits category, vodka remained the most popular spirit--growing 6.7% in 2007, and accounting for nearly 29% of the total category. Rum, the second-most-popular spirit, grew 5.1%. Tequila and Irish whiskey--while smaller than the other two spirits--grew 9.4% and 17.5%, respectively. Blended whiskey, Canadian Whiskey and pre-mixed cocktails all declined in sales last year.

Among table wines, which account for more than 90% of all U.S. wine consumption, imports continued to grow at a rate faster than domestics (up 7.3% versus 3.1%), even though domestics account for about two-thirds of total category sales. Italian wines grew 8.8%, while French wines grew 6.6%. Australian wine sales were flat.

"The Millennial generation has taken to [wine drinking]," Schmidt says. "We're seeing a lot of imports coming in, and they're willing to take a hit on the currency exchange just to get their products on the U.S. market."

Among beers, craft and light beers continued to lead the category. Total beer consumption increased 1.2%. Light beers grew 2.5% and now account for more than half of all beer sales, according to Beverage Information Group. "[Craft beers] will be interesting to watch in '08," Schmidt says, noting that several of them are facing a shortage of hops in the coming year, which could affect production.