I read a thought provoking article U.S. News and World Report a few days ago, entitled Will Beer Be the Next Casualty of the Crisis? The author’s essential thrust is that Beer, in particular Craft Beer, is likely to take a severe hit from our economic doldrums. She speculates that a loss in disposable income, government hunger for revenue, a coming ease with nanny state policies, a possible return to Prohibition(?!), and anything else she can come up with are going to doom the Beer (and by Beer, she means the Premium Craft Beer) industry. Probably around Thursday. The reporter’s single source for this interview disguised as a story is Amy Mittelman, author of Brewing Battles: A History of American Beer. I feel a bit sorry for the U.S. News reporter, as a reasonably careful read of the piece finds that Mittleman shoots down most of the points she wants to make. The article is an example of a reporter looking for a story, not finding it, and writing it anyway.
I’m being a bit harsh, of course. But if a reporter wants to write a story to advance a specific theory, she needs to find multiple sources so she can get quotes that better support her thesis. (Back when we had journalism in this country, such work was called a
Reporting, but that’s a rant for another day) To be fair, the writer is prolific, and there are lots of stories of how Soccer Moms will deal with the Coming Depression to be written.
Now that I’ve got my marginally unfair snark off my chest, I think the concerns she brings up in the piece are something we need to consider in the cocktail world as well. To be sure, I am no expert, I just act like one on the Internet. But I do have more than a passing familiarity with business, marketing, politics, and cocktails, and I’d really like to see some discussion about this subject from those among us who have backgrounds that exceed mine, especially in the cocktail business itself. So I’ll dive in first.
I think that there are two areas to consider: Are we likely to see as severe an impact in the high-end spirits arena from the downturn as we have and will in industries like Autos, Consumer Electronics, or (God forbid) Banking? And if there is such a hit, how will it affect those of us who are not in the business, especially those of us who do most of our cocktailing in the comfort of our own Basement Bar?
The first item for discussion applies equally to craft cocktails as to premium beer: What has caused the recent rise in popularity? Mittleman’s answer applies equally as well to both and centers on two important words, Commoditization and Authenticity. Alcohol is an important element in people’s lives, for well or for weal. Giving us a mechanism by which we can feel more personally connected or invested in that element of our lives has genuine economic value to us. If anything, for the home mixologist, this dynamic is even more important.
The next thing to consider is the effect of economic hard times on the affected consumer. On the one hand, times of stress and dread lead us to seek at least some comfort in drink. In other words, will these times actually drive an increase in demand? On the other hand, a really smart dude who gets not nearly enough respect these days (to our peril) notes rather perceptively that when price goes up, demand must be depressed. (In this case, price is a function of share of disposable income.) How inelastic is our demand for alcohol? And could that elasticity first show itself in a return by people to the more commoditized version of their desired product?
I tend to think that these factors will largely balance each other out. Many of us will want to drink a bit more, while many others will have to curtail their consumption, due to thinner wallets and more restricted expense accounts. Many will return to the safe commodity zone of Budweiser and Jack and Coke, while others will seek out the Craft option as a way to connect more fully with their comfort, thus improving its value. The end result of this dynamic balancing act, I suggest, will be just that—a balance. Sales will settle in place at present levels, perhaps a bit lower, and the growth in the craft market will largely stall, but market share will not decline significantly. Barring a complete collapse of Western Civilization, the Spirit World (har!) will be hit by the economic times, as will everyone else, but will suffer far less damage than most.
The last element we ought to consider is the non-economic political forces out there which might impact our industry/hobby. There are first off the direct enemies of Alcohol. These would include for the most part the neo-Prohibitionists, such as MADD as it exists today (As opposed to the MADD of the twentieth century). Frankly, like Mittleman, I am unworried about too much traction here in the near term, though if you scream,
It’s for the children! enough, you can kill anything with a thousand cuts.
Of greater concern should be the forces that want to feed on the alcoholic beverage world. The last election has greatly strengthened the hands of these forces. Plaintiffs lawyers see booze as a giant cash cow. They intend to feed upon it in giant chunks, a la the tobacco industry, and in smaller, but still ruinous bits, through personal injury and similar suits against an ever-widening spectrum of people who have anything whatsoever to do with the industry. We don’t outlaw things in this country anymore (sorry, Neo-Prohibitionists), we just make it so hostile an environment that no one will dare provide. When’s the last time you or your kids jumped off a high diving board? The other feeders, the ones that could really quickly throw off the economic balance I described above are the taxers. Government hungers for your money. All politicians want your money, but the ones who are more comfortable taking it are in firm control now. Sin taxes are usually the first place taxers go. Our little corner of the economy may enjoy less elastic demand than most, but as I mentioned above, no demand is truly inelastic.
Let us assume however, that the new masters will be as incompetent as the old ones (our system is designed to ensure this, btw), and they will be unable to muster the strength to truly torpedo things during this crisis. After all, most of the things I see as serious concerns will likely manifest themselves over a much longer term. Worry about your children’s ability to order a Pegu at all, but for the next few years, let’s go with the scenario I outlined above in which your main concern will be only about affording said glass of perfection.
If that happens, it does not mean that there won’t be disruptions. Here is where I think my knowledge is lacking, and I’d love to see some more speculation. Nevertheless, I’ll stick my neck out for some predictions, and you can chop it off where you think appropriate.
- The phrase
Ultra Premiumis going to soon disappear. No one is going to want it associated with their product. Consumers will see it as a synonym for overpriced. Many of us already did, of course, but in times of plenty, overpriced can be a feature not a bug.
- Many Ultra Premium brands will also disappear. Particularly in Vodka. Premium Vodkas have several things going against them that makes me think the worst fallout will be here. First, it is the most crowded arena. Second, going back to Mittleman’s comments in the the U.S. News article, when shelf space wars take over, there will be lots of casualties among small producers. And third, I think the move away from Vodka to more complex spirits that many cocktail snobs have been predicting forever, seems to genuinely be taking hold at last.
- Growth in new brands will crater. Caution by distributors, and unavailability of financing will make it hard for new brands. But perhaps more dangerous than those is the expense of experimentation. I may still be willing to spend $35 for a bottle of Luxardo, but will I be willing to pop $35 to try a new competitor? Or $35 for a bottle of a new, similar beast based on say, Huckleberries? Some still will, but a small drop in the number of experimenters, and a small drop in the number of experiments that the remaining experimenters are willing to conduct will probably doom any number of startups to either an infant death, or never even getting out of the pitch meeting.
- This last one may be wishful thinking, but I’ll make the case anyway. Successful new bars, and restaurants, will be much less glitzy than the crop of the last ten years. Spending seven figures on furniture and fixtures will simply be untenable for the foreseeable future. Proprietors will have to concentrate on quality of product over sensory seduction. It requires more sustained effort to mix a better drink, or cook a better steak, than it does to hire a really good designer to make your joint look scrumptious at the opening. But it costs a lot less initially, and is more sustainable. Also, consumers will be looking for perceived value. A smart impresario will use that to convince them that all the revenue is going into the glass in front of them, rather than into the drapes and lighting over their heads. I’m not saying that The Velvet Tango Room is the universal business model of the future, I’m just saying places like that, new or established, will likely be a lot more comfortable in the next few years than say, here.
Jeeze, this is a long post. I’ll drop it here, before I lose the last of you. Am I insane? And if I’m not, what should we, as bartenders, bar owners, cocktail writers, and most importantly cocktail drinkers do about all this?