VinePair Podcast: How Will the Coming Recession Change the Drinks Industry?
With the United States at the early stages of a Covid-19-sparked recession, there’s much that can be learned about how previous recessions have impacted the drinks industry. In the past, wine and spirits sales have remained constant while beer has struggled. Will that be what happens this time around? Will the fact that gathering in public remains either prohibited or at least ill-advised further change how the public purchases liquor? Will the demise of on-premise sales force more products into the retail market, and will big grocers and retailers change their selections?
These are the questions that VinePair CEO Adam Teeter, CCO and editor in chief Erica Duecy, and co-host Zach Geballe tackle on this week’s episode of the VinePair Podcast, as we look to understand where an economic and public health crisis will impact the industry, and how consumers may suffer or benefit as a result.
Listen online, or checkout out our conversation here:
Adam: From Brooklyn, New York, I’m Adam Teeter.
Erica: From Connecticut, I’m Erica Duecy.
Zach: And in Seattle, Washington, I’m Zach Geballe.
A: And this is the VinePair podcast. Guys! Are we…? What week are we in?
E: Who knows?
Z: One thousand.
A: I was about to say a week and, I actually have no idea what week it is.
A: Is it week seven; is it week nine? Someone told me it is week nine in an interview I did earlier today, and whoa, that’s a long time we’ve been doing this for. I just can’t, man, I can’t. It’s too much. I’m drinking through all my good stuff, and I’m getting really nervous. If you listen to the podcast, and you want to send me wine, please send wine. I’m more than happy, you know. Email us at firstname.lastname@example.org, and I’ll send you my address. Seriously, all of the good stuff is just gone. I have to do another wine shop run. What about you guys?
E: Yeah, I’ve moved into some Scotches. Some Scotches are treating me well right, right now. And other than that, I literally have gone through every single bottle of wine that I intend to drink from my very small collection. And now I need some new stuff. So also, we’ll take what you’ve got out there.
A: Exactly. See, for me, I have bottles that I still have but these are bottles I don’t wanna open right now. And I have a really tiny little wine fridge that holds 24 bottles.
Z: Wow, I still have some wine, but that doesn’t mean I won’t take some either. But I’ve always had the wine collecting bug, and so I still have a good number of bottles. Although it is definitely striking that balance between “Well, is this the night that I want to open that bottle?” But we’ve been trying to say, “You know what? We might as well.”
Z: Because for my wife and me, usually the bottle of wine at dinner is the thing that we look forward to most besides possibly any time when our son is asleep. That’s also a good thing.
A: I’m pretty proud of myself, I’m going to make a fat-washed vodka this week.
Z: Oh my goodness!
A: And I’m going to make an olive oil Martini tomorrow night.
E: Oh my gosh. Instagram!
A: You know, I’m so mad at myself though. I photographed the first part of the process of adding the olive oil and mixing it, then I put it in the freezer yesterday morning, and then took it out last night to take the olive oil. (Because the olive oil will separate and freeze at the top and take it off.) And I was going to take a picture of this, and I totally forgot and got so involved in making sure that I did it correctly that I don’t have that photo. So I will definitely Instagram the drink. I don’t know why I was really craving an olive oil Martini.
E: Did it pick up all of the notes of olive oil pretty well?
A: It has, yeah. And what’s really interesting is that I do not like vodka Martinis. Let’s be clear.
A: I’m a gin Martini person. But every single bartender I’ve read who does this olive oil washing says you have to do it with vodka because the gin has so many botanicals in it already that it’s not going to pick up anything. But it also has this sort of smooth viscosity to it now that’s very interesting.
A: I’m very curious to see how this will now taste. So I’m going to give it a try, I think, tomorrow. Tonight’s burger night, so…
Z: Probably not an olive oil Martini…
E: It sounds pretty good to me.
A: I also did the same thing, I have a huge batch of Negronis in the freezer, in the fridge now. So I just made a batch, and it’s getting better, so I keep coming back to it. Maybe it’ll be like a smaller Negroni before I open a bottle of wine and eat a cheeseburger.
E: Nice, nice!
Z: It’s party night in the Teeter household. I’m excited for you.
E: So are you noticing the Negroni flavors sort of mellow out and sort of smooth out a little bit, or what’s the change that you’re seeing?
A: They actually harmonize more. It all sort of tastes as one, as opposed to being very clear to pick out the Campari or the vermouth. It all seems to taste like more of a cohesive cocktail.
A: I don’t think it’s going to improve much more. I know people are saying, “Oh my gosh! I put my Negroni in the fridge and leave it for six months.” That’s not going to happen. It’s going to be gone next week. But it is interesting to think about being able to do that. I’ve been doing a lot of experiments. It’s the only thing I have to keep me focused besides work. I have to have these little side projects. I have a lot of other side projects that aren’t drinks-related, but I don’t think people want to hear about how I’m doing touch up painting in my apartment, and I have a list that’s being delivered to me that I need to accomplish every weekend. That’s not good podcast content.
Z: Not this podcast, at least.
A: I didn’t tell you guys that I’m going to be a guest on Bob Vila’s “This Old House” later?
A: I’ll tell you everything about it. But besides that, who knows? It’s crazy.
Z: Erica, I have a question for you before we get into the topic. I know that a couple of weeks ago we were talking about how one of the challenges for you being in Connecticut was there are very few options for delivery food. Have you guys already exhausted everything that is available to you? Or are there still places that think, “maybe we’ll try and order God-knows-what from this place.”
E: No, that was it. There were two places that were doing delivery. But I also have to say it does open my eyes much more to the challenges of wine buying and spirits buying as well. I have to say that some of the liquor stores up here are pretty well stocked with spirits, but the wine, I have got to say that I have tried out all of the stores in this little area, and there are really big commercial brands. There is really not much that I want to purchase, so now I have turned to online, and I’m ordering some wine up here. Because I’ve gone to the stores, I know what’s here, and I’m telling you, it is not that much. I think that that’s a challenge that in Seattle, Zach, or in New York, for Adam and I, we’re just not running into a limited, super, super-limited selection where they may be using one or two importers, tops, for their wines that are from outside the country. And then within the country, within the U.S., the wines are just the same exact labels from store to store to store, with very little variation. It’s not something I’ve run into that much.
A: It’s really interesting, though. It’s not what this podcast topic was going to be about. But when we first started VinePair, because Josh and I went to college in Atlanta, before Atlanta had become this amazing drinks scene since we’ve left (I’m from Alabama) we had this recognition — that is most of the country. And when you start talking about these specific Cru Beaujolais or Syrahs, you alienate so much of the wine-drinking population because they can’t find those wines. What they can drink is very limited. I think having that experience of now being in Connecticut for a few weeks and seeing this is what it’s like, unless hopefully more people will buy online, it should be pretty eye-opening, right?
A: It should be. It’s a return to at least seeing what everyone else drinks.
E: Yeah, absolutely. And you look for some of the importers or the go-to ones that you can rely on anything that they’re bringing in. If you can’t find any of those importers where you really typically drink from their portfolios, then what are you stuck with? So, pulling out that hard seltzer.
A: You have to. So speaking of pulling out hard seltzers, and all other things, today’s topic is an interesting one, which is basically: What happens in a recession? What happens to drinking in a recession? And you know we all talked about discussing this because most people, most economists, believe that is going to be what occurs. The idea of a check mark rebound is probably not an accurate one. Although again Cheeto-in-chief may believe so, I hate to tell him that it’s not going to work. Just like it doesn’t work to inject sanitizer into yourself as he claimed yesterday.
E: Or sunlight? Sunlight was the latest.
A: Yeah, I just can’t, man. The things this guy says. You know we were sort of curious to look back at a bunch of recessions and see what happens. And what happens is normally what most people assume, but there are some surprises. So, the biggest things that we’ve realized is, first of all, obviously spirits sales go way up, right? I mean, alcohol has always been considered to be recession-proof in general. But spirits sales definitely skyrocket, followed by wine, and then, actually what I think is really interesting is that beer lags behind, and that was surprising to me looking at a lot of the data. Simply because I think a lot of people assume times of economic uncertainty mean we turn to beer. Because we’re America, and we turn to beer. I think it’s interesting that actually no, we don’t. That at least if history is any guide, we lean into spirits, and we lean into wine. So as we start thinking about the recession, what do you guys think in terms of drinking during this time? These economic times.
E: I have a little bit of data I can share just to set the stage… for listeners who may not be familiar with what happened in the past recessions. So, if we look at where we are since 2012, the total beverage alcohol volume sales has been pretty flat with slight ups and downs but growing at about 1 percent a year from 2012 to 2019. During that time wine, spirits and RTDs (RTDs would be hard seltzers and so forth) are all driving growth, and then beer has been in decline. That’s the more recent picture. But looking at the Great Recession, which was 2007 to 2009, even when unemployment was at 10 percent, the highest of the most recent recessions, the wine, spirits and RTD volumes were flat to slightly up and beer was down. It’s interesting that beer was down. At the 2001 to 2003 recession, unemployment was around 6 percent, and all of the volumes were growing except for beer. So it’s consistent that wine, spirits, and RTDs have all been growing at either flat to slightly up in recent recessions, and all of the time continuously beer has been down. I think it’s an interesting question. Why has beer been more impacted? And what might we see, moving forward from where we’re at now?
Z: I didn’t know those numbers before we started this podcast, I guess that in ignorance there is some sort of bliss. And it really, really surprises me because as Adam was mentioning a minute ago, a lot of beer is relatively inexpensive, certainly compared with much in the way of wine and spirits. Although there are also obviously very inexpensive spirits and wine available as well. I think that maybe part of why I would’ve assumed that beer would’ve been doing better in this period of time would be that it is something that fits into that sort of grocery store model that Erica was describing before.
Z: Where, if you like your macro lagers, every time you grab a 6-pack or a 12-pack you know exactly what you’re going to get. The availability is consistent throughout the country for the most part. And those things I assume still drive the bulk of sales. But I do wonder if there is some sense in which we see maybe one pattern out of this, and it’s just a guess, I have no real answer. But, I’m wondering if that part of what’s going on in these recessions is that something like a bottle of wine or a cocktail or a spirit in general, however you consume it, is seen by people as a sort of affordable luxury, right? You might have to cut out a lot of the things in a recession that you would otherwise consider to be pleasurable. Maybe you don’t go on vacation, or you don’t buy a new car, which is maybe not a luxury but it’s still an item that you might not buy in those periods of time. But a bottle of wine, and it doesn’t have to be an expensive bottle of wine, but a $15 or $20 or $25 dollar bottle of wine, or a bottle of gin or something like that, feels like the kind of luxury that you can still indulge in. And for the most part beer, with very few exceptions, doesn’t convey the same sense of indulgence. Especially the same kind of macro lagers that I described. Maybe people think, if I’m going to drink, maybe I’m going to drink something that I’m going to feel like is taking my mind off of this situation in more ways than just intoxicating me, but also making me feel a little bit of luxury in the way that I can afford.
A: I think that that’s a nice perspective to have. It’s a nice theory. I would like to think that that’s why. I think it has more to do with bang for buck, though.
Z: Could be.
A: I think beer just traditionally is lower alcohol, and while I support drinking to numb pain, a lot of studies show that in times of recession, even what’s happening now, people do turn to alcohol as a very quick way to deal with depression, anxiety, sleepless nights, etc. Again, I do not support that that is why anyone would turn to drinking. But also, people are much more budget-conscious. So, if you’re out and you want to have fun with your friends and you want to have a little bit of a buzz, it’ll take you a much quicker time getting there with a glass or two of wine or one or two whiskeys than it would with a traditional macro beer. The other thing is that beer has always been seen as something that’s very affordable, but when you get to these beers that are higher-end that are higher in alcohol, the crafts, you get to a price point that people start saying, well I can see why I would’ve paid that during boom times. Beer became a luxurious item to me but now in a recession, why am I spending $14.99 or $15.99, $16.99 on a 4-pack of beer? Which is basically what has flooded the market in the craft beer world, right? And so they probably turn away from that and say, I’d much rather spend $20 on a bottle of wine than $14.99, $15.99 on a 4-pack of beer. That’s also what I was thinking, because what we’re seeing now in the coronavirus is that the price of wine — a lot of people are paying around 20 bucks. Which indicates that people are still willing to pay for quality. But I wonder if the thought process there is: Well it’s more glasses, it’s a little bit more communal. Spirits, I understand. Spirits is the easiest one, right? Spirits is just bang for buck. But the beer one is hard to understand for sure.
E: Yeah, and I think one takeaway, I should mention all the recession data that I was referring to is the IWSR. Their takeaways both now and Nielsen’s takeaways as well is that we’re seeing double-digit sales growth at retail. We’re seeing a ton of sales happening at retail. The most of that volume that is moving through retail right now is value brands. People are definitely focused on value brands, and I think that takes us into the macro-lagers. That takes us into all of the less-expensive, not craft spirits and wines. There’s definitely that value proposition that consumers are looking for right now.
Z: It’s kind of interesting to think going forward about the specific contours of what this recession would look like. Because unlike everything else that we’ve discussed, you know the previous couple of recessions going back as far as you want, one element that’s going to be very different with this recession is the lingering questions about public health and safety and to what extent that is going to work alongside a recession to drive consumer business. Adam, I was just listening to and editing your upcoming interview with Francesco Zonin, and it was really interesting to hear him talk about how for their company, which has wineries not just in Italy but in other parts of the world, work across a wide range of price points from very affordable value brands to luxury wines. To think about looking ahead to this upcoming, the ongoing and upcoming recession and selling higher-end wine might be challenging in the first place. You’re also going to be combining the challenge with the fact that for a lot of people things like on-premise, or restaurant and bar sales may not return at all. Or may return in a much more constrained manner.
Z: What I really wonder is what some of these producers (and it’s not just the high-end wine, it’s high-end spirits, high-end beer as you were talking about), do we see these things in grocery stores? Because a lot of what Erica is talking about has to do with the product mix at your typical grocery store, as she’s experienced. It is oriented around the kind of person who is going to, in normal times, do their wine shopping day-of at a grocery store. Which is a lot of people. It’s the bulk of the market.
Z: But those people are generally looking for $15 to $20 bottles of wine if that, and they’re not necessarily saying: ‘Oh, let me think about what I’m going to want to drink for the next two months. Let me collect. It is wines that are grab-and-go in a functional sense and beer and spirits, too, for the most part. One of these questions, and I don’t have a clear answer, it’s just been kicking around my brain for a while: To what extent does the limited opportunities to buy, combined with perhaps limited purchasing power, really drive what people are buying in the next six months or a year? I wonder if it’ll be skewed even more heavily towards these value brands than it normally would be.
A: I don’t know. I think… I think there’s a few things that we’re seeing now that could be interesting. One, I think we’re going to have to see these brands, that are normally restaurant-focused brands, move to off-premise. I read a news analysis this morning actually, I should’ve sent it to you guys, but Terlato has put out a bunch of numbers that show that within the first week they shifted a bunch of brands that were on-premise only, including Gaja, or primarily on-premise only, to lots of off-premise retailers, and the sales have started to boom. What they’ve seen is that there were lots of off-premise retailers that really wanted these wines. They were just never offered them because Terlato had positioned them as restaurant wines. And there are people in these areas where they are selling them now that have wanted to buy them, saying “Holy crap, this is what that wine looks like without a three-times mark-up.” Because they were only ever buying them at restaurants. So, I think you will see that re-positioning, and that is I don’t completely agree about the Francesco Zonin interview, where he said there are certain brands that can only exist in restaurants. I actually don’t think that’s true. I think good wine can exist everywhere, and I think that that’s an old-school wine-industry idea. There are certain wines that can only become who they are in the restaurant. It’s not true. If it’s a good wine and you go to a great wine shop, and the person behind the counter is knowledgeable (which a lot of these wine shops nowadays are), they can sell that wine to a consumer and explain to them why: what they should make with it and how they should drink it at home. I also think that in addition to that, right Zach, we’re talking about the risk of going out, right? So how much are you going to be willing to pay and take the risk? I know Erica and I were having this conversation about a week ago in our editorial meeting. Am I willing to go out and sit at a restaurant, first of all, in a recession? So, hopefully everything goes well and everyone that you know still has a good job? But someone you know maybe doesn’t, and they’re a guest with you, so you’re being more budget- conscious because of that. Also because there’s just uncertainty. Plus, there’s the social distancing that we may have for the next X amount of time so are you willing to pay $27 for a cheeseburger? Or $20? Are you willing to pay $16 anymore for a cocktail, or is only $10 what you’re willing to spend out? Because you’re saying, if I’m already taking the risk, I’m also not going to get what I feel like is now fleeced. I wonder how much that will play, too, in this recession. Because at least in past recessions, as we’ve said, there wasn’t the added risk of feeling like you were vulnerable being in the restaurant. Now there are some people who could feel that. Although people are saying that obviously in China opening back up, they don’t see that as much, but we’ll see, once the Western world gets ahold of this thing, how we react because we’re all neurotic. So I wonder if that will impact it. Erica what do you think?
E: There’s so many facets. It’s just so hard to really know what is going to come out of this, and where we’re going to be moving forward. One of the things I was just thinking about and we were discussing as part of an article we just did, was about low- and no-ABV wine — well, spirits mostly — but the low- and no-ABV movements that have been emerging and are in their nascent stages. But a lot of brands and even Distill Ventures backed by Diageo has incubated a lot of these brands, that are these low- and no-ABV spirits that are selling out there these bottles, $30 dollars for a 700-milliliter bottle, for example. Now you have small brands, which may be low- and no-ABV brands, which don’t have that bang for your buck. What’s going to happen to this whole other sector of craft? Where are we going to go in literally every single different sector? There is a different challenge that we’re facing, and it’s really hard to know how this is all going to shake out.
A: It’s going to be really interesting. I think we can have some idea from the past, but I think Zach, what you bring up is really important to remember. The reason that we’re gonna have this recession is very different than the past. And it adds a whole new layer to things that I think we’ve never thought about before. I think coupled on top of that is this idea that a lot of us, we’ve seen this. Last week we had our best traffic week ever besides New Year’s Eve, besides the week of New Year’s, right? And we are seeing massive traffic to our wine recommendations and cocktail recipes. And so we know from that, that people are drinking better at home and making cocktails at home. I guess what I’m trying to say in a way too long way is….
Z: For the first time ever on this podcast.
A: I know, seriously. Hey, you’re guilty of it, too.
Z: Oh, me? Definitely.
A: Prior to 2008? I didn’t know how to make a drink. Even though there was a recession I still, if I wanted a really good drink, was going to ultimately go out and treat myself. Now I feel like I’ve perfected how to make pretty good drinks over the last X weeks. I feel like all of us on this podcast have gotten even better at it. I feel like there’s a lot of my friends who have been sending me pictures of all the great drinks they’ve been making and all the great wines they’ve discovered, and again then it comes into starting to do this calculus in your head: Why would I go out? I know how to make a good drink here, and I know that I can buy the spirit I like and these ingredients. I do the math and it comes down to costing me $3 to make this one cocktail. And out there it’s $15.
Z: That was the point I was going to make, and I have one other thing to add to it. It’s good! We’re on the same page here. Adam, you mentioned earlier that people are going to look at some of these wines that they maybe didn’t totally realize what the wholesale price was. Or even what the price at retail would be and say, “Well, why do I wanna pay two-and-a-half, three, three-and-a-half times markup in a restaurant when I can buy that bottle, if I can buy that bottle somewhere else and open it at home? And whether it’s people being more willing to cook after this because they’ve had to, to some extent, or even just more familiar with or comfortable with delivery services, or even picking up for takeout. I think those are things that are going to stick around for a while because even as restaurants reopen, they’re going to have to have some significant delivery presence just to keep volume up. You’re right, I think we’re going to be in an era. In some ways as someone who’s worked in restaurants for a long time it depresses me, but also as someone who likes to entertain and to cook, I do think we’re going to see when people start moving back out into the world in some controlled way. I think a lot of what you’re going to see is people getting together with their friends, with their family and showing off their skills, right? Showing off their cooking skills, their baking skills, their ability to make cocktails. Maybe some wines that they really like. It does mean that for brands of all sizes, what they’re going to have to do going forward to remain a vibrant part of the marketplace is they’re going to have to figure out how to get inside that loop, right? And whether that’s through recommendations on sites like VinePair or whether that’s through being more present in grocery stores, the sorts of liquor and wine shops that are open. The gatekeepers are going to be a little different than they have been in the past and that I think is actually not a bad thing. Adam, you and I have sort of bemoaned a couple times on this podcast way back, 10 thousand years ago, the gatekeeper effect that sommeliers had taken on in some parts of the wine world and it’s no different with other categories as well.
Z: And this is, you know, shaking the snow globe up and while there’s a lot of negatives and I’m not saying this is good, but it is the case that there is an opportunity here for everyone involved, whether you’re a producer, you’re a consumer, you’re someone who is on the on-premise or off-premise side, to say how do I get inside that loop, and how do I connect with people who are going to be enjoying these products in a functionally different way than they did six months ago?
E: And one interesting thing is, I have been so interested in the past year or two years about the premiumization trend… That was the trend around more consumers wanting to drink less, but better… with a little bit of the lower ABV or not quite sober-curious but moving into that idea of just not drinking as much volume, but drinking better quality. So, the question I have related to entertaining at home and really understanding your products better and experimenting more with making cocktails and so forth is: In this recessionary environment, will we see that trend continue? I think that’s something that could be really, really interesting to explore in an article or something. In this environment, will consumers, now that they know more, now that they’re entertaining in small, intimate groups and really understanding their products better, will they continue that move?
A: That’s really interesting. I think that’s a good place for us to leave it, too. With that question of what will happen? And will people continue to move premium or not? Because I honestly don’t know. I would like to hope yes.
Z: Yeah, this is like our first ever cliff-hanger ending podcast.
E: Now we’re going to have to write about it.
A: I know. I would like to hope yes. That the premiumization trend will continue. I have to think that it will a little bit just because you have an entire generation who have gotten used to these nice things. I don’t see them all of a sudden turning away from them. I see them as you were saying, Erica: maybe buying less. But when they do buy, buying higher quality. I don’t see this whole millennial generation that’s embraced organic and biodynamic and craft all of a sudden saying, “You know what, I’ll just take whatever the $6 jug is.” I just don’t. But, maybe that’s me. I think that what could skew the data unfortunately in the short term is there’s still a lot of boomers out there, and they for sure will in this recession. But I do think that the Gen Xers and the millennials and the Gen Zs will probably continue to move premium just because that’s what they’ve been doing. And I don’t think you’ll see a massive reverse.
Z: I agree.
A: This was another interesting one. Everyone listening, thanks for spending your morning, afternoon, evening with us – whenever it is you’re now listening to this podcast. We really appreciate it. If you continue to enjoy the VinePair podcast of course always drop us a line at email@example.com. Let us know what you enjoy, what you don’t, and topics you’d like to see us cover in the future. And, of course, always please leave a review, rating etc. on iTunes, Stitcher, Spotify, or wherever it is that you get your podcasts. It helps everyone discover what we’re doing here at VinePair. Erica, Zach, talk to you next week.
E: See you then.
Z: Sounds great.
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