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Beer sales don't go flat in tough economic times
Sunday, September 07, 2008

WASHINGTON -- Life's guilty pleasures usually thrive during tough economic times. Though we may forgo new frocks or fancy dinners out, we have traditionally turned to the three big vice industries -- gambling, smoking and drinking -- to help ease our pain.

But this time around is different. Smoking has fallen into such ill repute that many municipalities ban it. Fuel costs have made driving or flying to a casino an expensive proposition, and gambling has become almost an afterthought at many of the lavish new ones. Now it seems the only acceptable -- and affordable -- sin left is alcohol, namely beer.

More than 16 million barrels of domestic beer were sold in the United States in July, and annual sales through that month are up 1.4 percent, the largest increase since 1990, when the economy was headed toward a recession.

The uptick is significant for a mature industry with roughly $50 billion in annual sales, particularly as consumers reduce spending on other discretionary purchases, such as lattes and designer jeans. Trade groups for the liquor and wine industries report consumption of those beverages has also increased. But beer is America's most popular alcoholic beverage, claiming more than half the market, and the go-to drink during these times of economic distress.

"The beer industry and the alcohol industry seem to be fairly recession-resistant," said Nick Lake, vice president of beverage and alcohol at the Nielsen Co., a market research firm.

According to a Nielsen survey this summer, 13 percent of consumers said the economic downturn had significantly affected how much they spend on beer, the smallest percentage of any category. Nearly half said there had been no impact; they were still swilling the same number of six-packs. At supermarkets and convenience stores, Nielsen research shows, sales of "superpremium" beers such as Michelob and Rolling Rock have jumped by double digits this year.

Economist Donald Freeman, a professor at Sam Houston State University in Texas, published a report in 1998 titled "Beer and the business cycle" that examined sales from 1955 to 1994 -- through the post-World War II boom and the oil bust, Reaganomics and recession. He factored in income per capita and industrial production, unemployment and the excise tax. Beer held steady.

"No matter which way you test it, it turns out the economy really doesn't have much effect on beer sales," Dr. Freeman said of his four-page study. "That's why it's not a longer paper."

Anecdotal evidence suggests beer is benefiting from the downturn in several ways. Mr. Becker, the Beer Institute president, said "off-premise" sales are increasing as consumers eat out less and cook more meals at home -- and pick up a six-pack to go with dinner.

Although consumer demand remains strong, the beer industry is suffering from the high cost of grains and fuel, increasing production and distribution costs. Prices of beer have increased as much as 7 percent in some categories, according to Nielsen.

And still, we drink. Beer historian Maureen Ogle, author of "Ambitious Brew: The Story of American Beer," said even in economic times so bleak that a black market existed for food and commodities, beer remained in demand.

As she put it: "Beer will get you through times of no money better than money will get you through times of no beer."

First published on September 7, 2008 at 11:28 am
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