Cheaper brands dominate Miss. liquor sales

By Nash Nunnery/Mississippi Business Journal

JACKSON — Mississippians may be drinking as much as they ever have but they aren’t drinking the good stuff

Despite a downtrodden economy and jobless rates in double-digits, Mississippians continued to reach for the wine and spirits in 2009.

While they drank more liquor last year, people turned to cheaper brands, according to a recently released report by the Distilled Spirits Council of the United States, a national trade association for the alcoholic beverage industry. The study also revealed that consumers drank more at home and less in bars and restaurants in an effort to ease the strain on the family budget.

“Instead of buying Grey Goose (vodka) every two weeks, I get Smirnoff,” said James Richards, who is retired and lives in Jackson. “In bad times, you have to save a nickel when you can. If I want a mixed drink, I make it at home.”

Charlie Abraham, general manager for Hal & Mal’s Restaurant & Bar, has been with the popular downtown Jackson establishment for over two decades. He said that the dismal economy put a significant dent in business last year.

“Last summer was the worst I’ve seen in 23 years with Hal & Mal’s,” he said. “I’m not surprised by the report — lots of people are still drinking, but they’re staying home. Folks aren’t drinking at bars.”

Consumption of distilled spirits in Mississippi was up by almost 4 percent in 2009. Nationally, 2009 sales volume growth stood at only 1.4 percent, but revenues held steady at $18.7 billion, the DSC report cited.

“Our sales were down 10 percent last year as opposed to 2008,” said Chris Jacobs, owner of Jackson’s Sportsman’s Lodge. “But, people still bought the same amount of premium liquor and beer.We just didn’t have the volume of customers as we did in 2008.”

The state’s Alcoholic Beverage Control (ABC), an arm of the Mississippi State Tax Commission that regulates the sale and consumption of alcohol, garnered a net profit of a little over $50 million — with alcohol and sales taxes added, the total ABC collections for FY 2009 was $91.6 million.

Surprisingly, beer sales were down in Mississippi last year. In 2009, there were 72 million gallons of beer purchased, compared to nearly 73 million the previous year. The actual difference was 955,587 gallons bought, according to data compiled by the ABC.

“What we have seen is a steady progression of selling more product (wine and spirits), but the selling price is lower,” said Kathy Waterbury, spokeswoman for the Tax Commission, which oversees ABC. “For instance, the total number of cases sold for wine increased in 2009 by 1.9 percent … but the sales value of those cases increased by only 0.1 percent.”

Waterbury added that spirits cases sold were up 1.2 percent but sales value went down by a half percentage point.

David Rushing estimates that for the past two years, his customers are trading downward but still buying wine and liquor. As operating partner for Joe T’s Wine & Spirits in Ridgeland, Rushing said people are still drinking, but they are spending less.

“The same faces that come through the door that used to spend $50 are now spending $25,” he said. “A couple of years ago, my high-end wine sales started going down and since then, I’ve seen sales ticket after sales ticket get lower and lower.”

Marianne Hill, a senior economist with the State Board of Institutions of Higher Learning, said she’s not surprised that consumers are spending less on a luxury item such as alcohol.

“When the economy is in a downturn, people will still buy items like a bottle of wine or a fifth of liquor,” she said. “But what they will do is simply substitute their usual brand for one that’s less expensive.”

Some may not be aware that their buying habits affect state revenues, she said.

“We normally think in terms of big-ticket items like refrigerators or televisions,” Hill said. “However, choosing a lower-priced wine as opposed to a top-shelf brand week-to-week does have an adverse affect on annual tax revenues, when you consider the number of people who purchase wine and spirits.”

Distilled Spirits Council CEO Peter Cressy attributed the slower growth compared to 2008 to the trading down trend. However, he said a long-term analysis of prior recessions showed a strong leaning toward consumers purchasing high-end brands as the economy improves.

“Our data shows that there is light at the end of the tunnel,” Cressy said. “The question remains, how long is the tunnel? We don’t know, but consumers will again gravitate to affordable luxuries” such as top-shelf alcohol brands.

Mike Cashion, executive director for the Mississippi Hospitality & Restaurant Association, said Cressy’s assessment is accurate.

“I’m certainly not an economist, but I don’t think we’ll see a reversal in the economy in Mississippi until the middle to the end of the year,” he said. “The state was a little slower to see the recession and we’ll be slower to come out of it. (Liquor sales) are a jobs driven industry and when consumer confidence returns, spending will eventually return.”

Rushing has increased Joe T’s advertising budget and he’s already witnessing results.

He said the last two months has seen the establishment’s average sales ticket increase $2 to $3 per customer.

“It looks like people are easing up a bit on their budget restraints,” he said. “We’re marketing more than ever but everybody in this business basically has the same prices. People have many options to purchase wine and spirits.

“We have to strive to provide the best in customer service.”

Miss. liquor sales

JACKSON — A look at Mississippi liquor sales in calendar 2008 and 2009 with number of cases and sales value in dollars.

2008

Wine: 1.01 million cases. $69.3 million

Spirits: 1.66 million cases. $205.2 million.

Totals: 2.67 million cases. $274.5 million.

2009

Wine: 1.03 million cases. $69.3 million.

Spirits: 1.68 million cases. $204.3 million.

Totals: 2.71 million cases. $273.6 million.

Source: Mississippi State Tax Commission.