The strong US showing for the “super-premium” segments of wine and spirits in recent years is in danger of softening in the coming months, an analyst has warned.
In a note last week, Rabobank’s global strategist for beverages, Stephen Rannekleiv, highlighted a correlation between higher-priced wine and spirits in the country and the wealth of consumers. The value of real estate and stocks, Rannekleiv claimed, has historically matched the growth rates at the super-premium end of the two alcohol sectors.
“In hindsight, the biggest change affecting affluent consumers during the Global Financial Crisis [in 2008 and 2009] was not income, but wealth,” Rannekleiv said. “Both housing values and equities took a severe beating during the Global Financial Crisis, leading to a meaningful decline in household net worth …, and they did not being to recover until 2010.
“The growth rates of average annual household net worth during the years prior to and following the Global Financial Crisis are highly correlated with the growth rates of super-premium wine and spirits.”
Turning to recent economic developments in the US, Rannekleiv cited figures showing that interest rate increases earlier this year have resulted not only in house prices falling by an average of 6% in August from two months earlier, but also equities sliding by 17% from the start of this year.
“According to our estimates,” Rannekleiv added, “we will likely see softening demand for super-premium wine and spirits … felt mostly in Q4. Our modelling suggests [they] will likely see modest (mid-single-digit) declines in the coming year.”
The note concluded with a forecast that the price segment should “eventually return to its more historical growth trends”.
Rabobank took the definition of ‘super-premium’ for spirits from the Distilled Spirits Council of the US – the segment includes brands such as Bacardi’s Patron Tequila, Diageo’s Ciroc vodka and Pernod Ricard’s The Glenlivet single malt – and for wine as a per-bottle SRP of US$20+.
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