Bottles of Beam Inc.’s Jim Beam bourbon whiskey, center, are displayed on the market at a liquor store.
Uriko Nakao | Bloomberg | Getty Images
The maker of Jim Beam said some price-sensitive whiskey and tequila drinkers are choosing cheaper bottles, making it the newest company to notice diverging behaviors amongst lower- and higher-income customers.
Beam Suntory CEO Albert Baladi told CNBC that the spirits company is beginning to see “a little bit little bit of tempering” of the super premium and ultra-super premium categories.
Still, the corporate said its financial results weren’t dented much by the shift in behavior, since many consumers are still grabbing high-end tequila and other spirits. Lately, Beam Suntory has shifted its portfolio toward costlier spirits, upgrading to brands like Knob Creek bourbon and Bowmore Scotch whisky.
It’s the newest company to report signs of a split amongst its customers amid soaring inflation and recessionary fears. Executives have said lower-income consumers are cutting back their spending, while higher-income shoppers keep buying pricy restaurant meals, airline tickets and cars. Molson Coors, for instance, said it saw increased demand for each its higher-end Blue Moon and Peroni and more value-oriented Miller High Life and Keystone Light beers.
For the primary half of 2022, the Jim Beam owner reported global net sales growth of 13%, fueled by strong growth markets including the USA, Spain, Australia and India. Because the corporate is privately owned, it is not required to reveal its financial results like a lot of its publicly traded competitors.
The corporate said sales growth was greater than double that of case volume growth, fueled by its pricier higher-end bottles. Baladi said the corporate raised prices last 12 months and this 12 months, and a few brands even hiked their prices twice already in 2022, depending in the marketplace and the strength of the category. But he estimates that the increases were still lower than overall inflation levels.
As economists and business leaders share concerns a few potential recession, Beam Suntory is not fearful about its business. Historically, the spirits industry fares well during tough economic times.
“It’s something that is prone to stick with us as consumers cut down on large expenses,” Baladi said. “They’re prone to wish to treat themselves with little day by day luxuries.”
Besides price sensitivity, Beam Suntory also saw differences across geographic regions. The corporate said Spain’s strong tourism this 12 months drove growth at bars and restaurants for its spirits. But demand in Poland and Germany weakened, fueled by soaring inflation and wobbly consumer sentiment, each of which it attributed to the war in Ukraine.
In early March, Beam Suntory suspended shipments to Russia because of this of the Kremlin’s invasion of Ukraine and as a substitute distributed a lot of those bottles to other European markets. Last month, the corporate announced it would exit the country entirely, selling its three way partnership with Edrington to the local management team.