Trying to balance inflationary pressures and the need to allow themselves at least some indulgences, shoppers are trading up on beer but not springing for premium wine and spirits.
Heineken reported Wednesday (April 24) that beer sales were up in its first quarter fiscal 2024, with beer volume organic growth of 4.7% and with premium beer up even more, at 7.3%.
“Premium beer … continues to outperform in total, and in the majority of our markets,” Heineken CFO Harold van den Broek told analysts. “We remain cautious in our outlook as we continue to see the economic environment as challenging and uncertain.”
Conversely, premium wine and spirits company Pernod Ricard reported Thursday (April 25) in its third quarter fiscal 2024 earnings report that net sales were roughly flat in the quarter and down slightly year-to-date.
Similarly (in both respects), beer, wine and spirits giant Constellation Brands, owner of a range of popular brands including Modelo, Corona, Casa Noble Tequila and others, shared in its earnings results earlier this month that its beer business was a highlight, with growth fueled by high demand for premium beers, while its wine and spirits sector saw an 8% year-over-year decline in net sales.
“The high end, which is the only place where we compete in beer, continues to see an increase in buy rate, so that … speaks to the fact that the consumer continues to premiumize,” Constellation Brands CEO Bill Newlands told analysts on a call, noting that the firm does “not expect ongoing challenges in the wine and spirits category to immediately subside.”
Overall, shoppers are feeling ongoing budget pressures, prompting them to rethink their spending decisions. “The Pessimism About Pay Rises Offsets the Effect of Falling Inflation,” part of the PYMNTS Intelligence series “New Reality Check: The Paycheck-to-Paycheck Report,” found 83% of consumers say they are at least somewhat concerned about near-term economic conditions.
As such, consumers are making more conservative purchasing choices, per data from the February/March installment of the series, “Why One-Third of High Earners Live Paycheck to Paycheck.” The study, which drew from a survey of more than 4,200 U.S. consumers, found that 60% of shoppers have cut down on nonessential retail purchases. Plus, 45% of low-income shoppers (those who make less than $50,000 annually) and 41% of middle-income ($50,000 to $100,000) shoppers said they had traded down on product quality in the previous year.
Still, consumers want to find ways to treat themselves, and look for affordable indulgences. This not only leads them to, say, opt for the nicer beer, but also to want better product options from their favorite value-focused retailers.
Retail giant Walmart, for instance, earlier this month announced a partnership with celebrity-helmed apparel line The Jessica Simpson on a clothing collection more affordable than the latter’s typical fare. While dresses from Jessica Simpson’s line might typically sell for high double-digit or low triple-digit prices, the majority of items in the Walmart collection sell for under $30.
Plus, consumer-packaged goods (CPG) giant Procter & Gamble is seeing consumers spring for name brands for their everyday essentials, per the company’s last earnings call.
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