Hard Stuff

The current inflationary environment is producing some mixed movements – amongst brands and consumers alike. Alcohol and tobacco products are showing themselves to be less discretionary than other non-essential items. Alcohol, in particular, is proving distinctly resilient in the face of an overarching consumer pullback. This says a lot about the power of the lifestyle choices that drive demand. But it’s also a function of circumstances.

One of the contributory factors to the ‘sin’ goods’ resilience is a shift from out-of-home to in-home consumption. Local restaurants and pubs have confirmed a decline in traffic which in its turn is partly attributable to soaring fuel prices.

But the hard stuff isn’t untouchable. Pick n Pay reports a downgrading trend within these product categories – from premium to mainstream, and from mainstream to economy. SAB, whose products are just as stable as food, have noticed the same tendency to trade down. Mainstream beer brands are performing exceptionally well, while premium and speciality products are slowing.

In the US, the inverse holds true. According to research published by Nielsen in July, higher priced brands like wine and spirits traditionally hold up better than lower priced ones during economic cycles. This is because there is enough strength in the upper income groups – who are more disposed to those products – to withstand the storm. Data collected from the major retail stores revealed a 5.4% increase in spirits sales in May, and a 9% increase in total liquor sales.

But, regardless of the intra-category differences, alcohol represents a needful - and somehow always affordable – luxury. And it’s ironically reassuring that these vice spends can be relied upon to buck national spending trends when the going gets tough.