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Alcohol retailers are doing fine despite recession

BEAR, Del. – When times are good, people drink. When times are bad, people drink.

It’s a cliche that liquor store owners are trotting out often these days, to make a point. Even though most sectors of the economy are suffering, store sales of wine, beer and spirits are holding up, larger retailers and industry officials say.

And that’s a good thing for the industry, because it is making up for lost sales at restaurants, hotels and resorts, which have found business swooning as customers cut back on discretionary spending.

Industry officials say people are changing what, how and where they drink.

As fewer people go out to eat or patronize taverns, they’re reluctant to give up that end-of-the-day drink, or glass with dinner, said Bob Kreston, owner of Delaware’s Kreston Wine & Sprits in Wilmington and Middletown.

“I don’t see people necessarily drinking more or less, but they’re just drinking in different places,” Kreston said.

Jeff Becker, president of The Beer Institute, said recently that he expected profit margins to remain about 1 percent nationally through the end of 2008. That’s not bad, even for good times, he said.

Recessions during the last 50 years haven’t had much of an impact on sales, he said. The biggest slowdown in sales came in 1991, when the beer tax was doubled.

“Beer is a big, mature, slow-growth industry,” said Benj Steinman, editor of the trade publication Beer Marketer’s Insights.

Gladys Horiuchi, of the Wine Institute of California, said the national wine industry is holding up fine. During the last quarter of 2008, dollar sales and volume were up over the previous-year period.

“People still consider wine an affordable luxury,” Horiuchi said.

The one sector that hasn’t been holding up as well has been distilled spirits. Restaurant and tavern business has been off since late 2007, as the recession began to take hold, said David Ozgo, chief economist for the Distilled Spirits Council of the United States. A pickup in the package store business hasn’t been enough to make up for those losses, he said.

Alcoholic beverage sales have varied from state to state depending on the economic conditions, said John Bodnovich, director of communications for American Beverage Licensees. He expects sales to hold up, but thinks retailers could be harmed by new or higher “sin” taxes, as governments seek to raise revenue to balance budgets.

As in the retail field generally, bargain brands and top-shelf luxury labels are doing the best.

Mark Harrison, operations manager at ABC Liquors in Bear, said he’s seeing people “trade down,” with the person who used to spend $17.99 on a case of Budweiser now spending three or four dollars less for Miller High Life, Busch or Milwaukee’s Best.

Harrison said his store has cut profit margins on some products to make sure they sell, despite recent price increases by the manufacturer. Anheuser Busch, Miller and Coors all raised their prices in recent months, he said.

Nevertheless, his profits are “on the plus side from last year,” Harrison said. Being a large retailer helps, as he can sell larger volumes, he said.

Wine still brings people joy, and even if they’re not going out as much, they’re still having dinner parties at home, said Frank Pagliaro, owner of Frank’s Union Wine Mart in Wilmington. He said he hasn’t seen much of a change in people’s buying habits in recent weeks, but he has seen a drop-off in corporate sales, as some companies canceled their holiday parties.

Tom Durnan, 81, of Bear, said he’s always enjoyed a glass of wine before supper. He was at ABC Liquors recently, buying two 5-liter boxes of Franzia Cabernet Sauvignon.

The price has increased by a dollar in the last month, “but Social Security hasn’t,” Durnan said. He’s cut other expenses, like travel, but is reluctant to cut what he called “a small luxury” as well as a “bad habit.”

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