Shoppers are feeling the pressure as inflation pushes up prices for gas, groceries and a range of other goods and services. While people still appear willing to shell out to travel, go to the movies or have a drink or two, surging prices and fears of a recession also have them pulling back in other areas.
Alcohol is still a category that remains generally protected from economic downturns. People are going out to bars again after drinking more at home during the early days of the pandemic and, even as brewers, distillers and winemakers raise prices, companies continue to bet that people are willing to pay more for better-quality alcohol.
“Consumers continue to trade up, not down,” Molson Coors Beverage CEO Gavin Hattersley said on the company’s earnings call in early May. It might seem counterintuitive, but he said the trend is in line with recent economic downturns.
Alcohol sales have also been shielded in part because prices haven’t been rising as quickly as prices for other goods. Back in May, alcohol prices were up roughly 4% from a year ago, compared with the 8.6% jump for overall consumer price index.
According to a survey from NPD Group, a consumer research firm, however, more than 8 in 10 U.S consumers report that they are planning to make changes and pull back on their spending in the next three to six months.
“There is a tug-of-war between the consumer’s desire to buy what they want and the need to make concessions based on the higher prices hitting their wallets,” said Marshal Cohen, chief retail industry advisor for NPD.
The restaurant industry is also seeing signs of potential trouble, although how eateries are affected could vary.
Fast-food chains have traditionally fared better in economic downturns since they’re more affordable and draw diners with promotional deals. Some restaurant companies are also betting that people will keep dining out as long as grocery prices rise faster.
The cost of food away from home rose 7.4% over the 12 months that ended in May, but prices for food at home climbed even faster, shooting up 11.9%, according to the Bureau of Labor Statistics. This gap is seen as an advantage for the restaurant industry.
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