Growth of spirits industry appears to be slowing

NEW YORK The spirits industry growth slowed in 2007, due in part to a slowing economy and increased consumer interest in craft beers.

Although final year-end data has yet to be released, Eric Shepard, executive editor of trade magazine Beverage Marketers Insight, said growth in the number of spirits sent to sellers slowed in 2007 while beer shipments remained about the same. According to ACNielsen monthly retail sales data, beer outperformed spirits from September to November.

In a conference call with investors in November, Brown-Forman Chief Executive Paul Varga said wine and beer companies have benefited from slower growth in spirits, particularly in a weaker economy. Consumers faced with fewer discretionary dollars to spend due to increasing food and gas costs and declining home values—also are drinking more at home, Varga said.

Heightened interest in craft beers also may account for some of the slowdown, Shepard said. Crafts currently are one of the fastest growing beer categories and domestic brewers have been trying to get in on the success by buying smaller craft brewers and by developing brands like Blue Moon—made by Molson Coors Brewing Co.

Not everyone, though, thinks that the popularity of spirits is slowing down. John McDonnell, chief operating officer of tequila-maker Patron Spirits Co., said sales seemed to have picked up in the past week and believes growth will continue in 2008 as new drinkers enter the market with less money to spend on larger luxury items. “The cocktail culture is getting stronger,” he said, adding that liquor represents “an affordable luxury.”

Final year-end shipment and sales data is expected to be released January 11.