US Drinking Rates Surge to Record Levels Since 1970s Inflation Crisis

US Alcohol Consumption on the Rise

The consumption of beer, spirits, and wine in America has been on a steady incline since the Dot Com bust, with per capita levels nearing the peaks last witnessed during the inflation-driven turmoil of the 1970s. Economic hardship and increased alcohol consumption often coincide. According to Olivier Nicolaï of Goldman Sachs, during times of economic recession, US per capita alcohol consumption from beer, spirits, and wine has shown remarkable resilience. While the total beer volume decreased in 2009, the volume of spirits continued to grow. Nicolaï further pointed out that within the overall US alcohol consumption, beer has been consistently losing share to spirits over the past two decades. Within the spirits category, tequila has been gaining market share over vodka in recent years.

Impact of War and Economic Hardship on Drinking Rates

Data on US per capita alcohol consumption over the past six decades reveals how war and economic hardship can influence drinking rates. From the 1960s to the 1970s, alcohol consumption per capita skyrocketed, likely due to foreign wars and high inflation. As the Fed regained control of inflation with interest rate hikes in the late 1970s and early 80s, consumption rates peaked and then declined as economic conditions improved leading to boom cycles. However, drinking rates hit rock bottom at the end of the 90s, started rising just after the Dot Com bust, increased further with ongoing Middle East wars, dipped slightly but jumped following the 2008 GFC, and surged in recent years due to government-imposed lockdowns during the pandemic, Ukraine War, and the ongoing inflation crisis.

Shift in Drinking Trends

Nicolaï noticed a significant trend in the recent surge in drinking rates: spirits have become increasingly popular in the US market as the demand for beer declines. He stated that tequila has emerged as the top spirit of choice among US drinkers, a trend that became noticeable in 2016. The US spirits market is dominated by just five players who control about 50% of the spirit volumes.

Latest US Spirits Market Data

Here's the latest US spirits market data from Nielsen, showing drinking trends on a 4-week basis to October 5... Nicolaï also shared his rating coverage on each of the top spirit producers: Diageo (Sell): The USA accounted for 35% of Diageo's FY23 sales and 45% of EBIT. Diageo's volumes, including RTD, declined -0.6% (-2.9% Aug/Sept). Sales were up +3.4%, ahead of the market at +1.9%. Pernod (Buy): The USA accounted for 19% of Pernod's FY23 sales and 24% of EBIT. Pernod's volumes, including RTD, declined -0.2%, sequentially improving from -3.4% in July/August. Campari (Neutral): The USA accounts for 28% of FY23 group sales. Campari volume declined -0.4%, with sales up +2.2% still above the market. Remy (Buy): The USA accounts for 35% of FY24 group sales. Remy saw volumes decline -13.8%, with sales down -15.6%, implying -2.1% negative price/mix.

Increased Alcohol Intake Amid Economic Misery

The key takeaway is that US consumers have been steadily increasing their alcohol intake over the past few years, particularly spirits, due to the backlash of failed economic policies igniting an inflation crisis - unleashing economic hardship - reminiscent of the 1970s. Furthermore, disastrous foreign policy, sparking some of the highest World War III threats in a generation, has also driven more people to alcohol.

Bottom Line

The surge in alcohol consumption in the US, particularly spirits, is a reflection of the economic and political turmoil the country is currently facing. As history has shown, alcohol consumption often increases during times of economic hardship and war. It's interesting to see how these external factors shape consumer behavior and market trends. What are your thoughts on this? Do you think this trend will continue? Feel free to share this article with your friends and discuss. You can also sign up for the Daily Briefing, which is available every day at 6 pm.