No bailout needed for booze, alcohol is recession-proof
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What do people do for fun during a recession? They certainly aren’t buying cars and eating out. The Starbucks lines are shorter, the craps tables are empty and there has been a reported decrease in sexual activity. One thing that hasn’t decreased, as any bar-going drunkard can attest to, is alcohol consumption.
They’re called counter-cyclical assets – goods that defy economic trends. Even during recessions, they remain popular and may even see an increase in profits. They tend to be more practical and intuitive goods like safes, shoe repair and used cars, all of which have seen an increase in sales during the current economic crisis. You may have guessed, though you may not believe it: alcohol can indeed be considered a counter-cyclical asset.
PT’s Pubs are dying all over town, but the parking lot of my favorite bar, The Crown and Anchor, was so full on Friday, I had to park across the street.
“People keep asking us if we’re going to close,” Crown general manager Peter Graves said. “We’re not closing. Sales are higher now than this time last year.”
Stories of unemployment and lay-offs are as prevalent as pints of beer. The recession has definitely affected people here.
“People are saying ‘F— it, I can’t pay my mortgage, I’m going to the bar,’” Graves said.
A gentleman who just won $1,200 at the video poker machines informed me he’ll now be able to pay his rent this month.
Others recognize their financial concerns, but in a detached manner that suggests they aren’t too worried at the moment. After all, they do have enough to cover their bar tabs.
The Crown and Anchor is certainly an anomaly. Many bars around town sit empty and desolate. “I’ve heard about three bars a month are closing in Vegas,” Graves said.
In fact, on-premise sales have decreased, and generally do so during recessions. Off-premise sales, however, usually increase, and many brands see an increase in take-home sales.
“The economy does seem to be driving increased off-premise sales, suggesting that people are buying more liquor at grocery stores for less-expensive home consumption,” said Kevin Boyer, spokesperson for Kilo Kai rum.
Kilo Kai is a fairly new and popular brand of rum that launched in Nevada last April. “Kilo Kai sold as much in January of 2009 as we did in the entire last six months of 2008,” Boyer said.
Despite the recession, Kilo Kai is actually expanding. They just launched in Pennsylvania and will be available in two more states by the end of this month.
Boyer credits Kilo Kai’s success not only to the fact that rum is a counter-cyclical asset, but also to the brand itself, namely the cool logo and great taste.
“The adult beverage industry is so pervasive in our society,” he said. “If you can get people to view your product as an affordable luxury, or a reasonably priced way to party, you can actually expand sales in a down economy.”
Reports on name-brand liquor sales are conflicting. Many people admit to buying cheaper brands at the stores. Other data suggest there has been no significant decline in top-shelf liquor sales.
Regardless, people are still buying. So don’t feel bad if you’ve stopped paying off your credit card, but are in the mood for a drink.
Whether you’re feeling good or feeling down, a tasty beverage sits right up there with life, liberty and the pursuit of happiness.