Cheers: Wine and Liquor Keep Flowing Despite Sour Economy

The point this article misses is that across the board, premium spirits are selling at lower prices than a year ago. This is especially true in the overcrowded vodka segment: Grey Goose, Chopin, Belvedere, Ketel One, etc -- all are offering deals to distributors and retailers in an effort to maintain market share by presenting more attractive prices to consumers. As a consequence, profit margins have declined significantly.

We see this trend throughout the entire spirits industry, and across all retailer segments, from the luxury retailers to the cost-cutters.

Yes, the public is looking for an escape from the financial worries and bad news every day, but they are not as free-spending, and they're looking for bargains. ...and they are not as likely to experiment with new high-priced brands -- they will stick with the tried and true, with opportunistic ventures to the lower priced brands to save a little cash.

The impact of all this will be seen in next quarter's operating results, and we will see the multiple-of-earnings valuation fall; at the same time the dominant brands will acquire struggling emerging brands at bargain prices.

John Macaluso of CA 12:10PM November 30, 2008