Rabobank Sees Demand for Superpremium Spirits Turning Negative Next Year

But the long-term growth trend of superpremium brands remains intact, Rabobank's global beverage strategist, Stephen Rannekleiv,  says in a report just released to clients.  

It notes the only divergence from the superpremium growth tremd in the U.S. bev/al market in the last two decades occurred during the global financial crisis of 2008-09.  Since then, from 2010 to 2021, superpremium spirits growth rate has averaged 8.8% a year, while superpremium wine has averaged 7.7% a year.

The superpremium growth trend has driven M&A agendas, qnd even activity at the lower-priced end of the spectrum has been driven by the seller's interest in financing acquisition of higher-end products.  

Why do superpremium brand appear to have staying power?  Rabobank nots the consumers are more recession-resistant.  For instance, the 21% of consumers who have college degrees represent 28% of all wine drinkers and 33% of all high-end wine drinkers, and the mean household income of all U.S. households is $67,846, but among wine drinkers it's $106,600 and among high-end wine drinkers, it's $126,900.

As we have often noted, bev/al is recession resistant but not recession proof, and that is true as well for superpremium wines and spirits, Rannekleiv says. Both took significant hits during the global financial crisis, and for superpremium wine in particular it took several years to fully recover from the decline in sales.

A decline in wealth was the biggest driver in the superpremium segment during the global financial crisis, Rabobank says.  "While the highest income earners were the least affected by rising unemployment, they were disproportionately adversely impacted by the high to housing and equities values," it explains.  

Rabobank expects superpremium wines and spirits to see softening demand in the fourth quarter, and perhaps mid-single-digit declines next year.