Allegrini 2018

Inflation and alcohol consumption: in the US, average spending remains unchanged thanks to those who earn the most

In June, the budget rises again (34 dollars per capita), but those with an income of less than 50,000 dollars a year spent 17% less
Inflaction does not stop alcohol consumption among the wealthy classes

The strong dollar is an important lever to support exports of Italian wine to the US market, which in the first five months of 2022 have already reached 769.5 million euros, a figure that seems to presuppose a new record (here the WineNews analysis on the latest Istat data). Overseas too, the impact of inflation on consumption, including wine and other spirits, which Americans find it hard to give up, must also be weighed, as the “Morning Consult's H2 2022 State of Food & Beverage report” says (https://morningconsult.com/).

In fact, in June 2022, the average monthly spending on alcohol was even higher than a year ago: 34 dollars against 33 dollars per capita. A good sign, at least at first glance. Going deeper into the analysis, it emerges that during the spring consumers had reduced both the expenditure and the frequency of alcohol consumption due to the increase in the price of gas, and the consequent and generalized increase in the prices of other goods. With the contraction in the price of gas, and a slight slowdown in inflation, spending has started to grow again, mainly supported by high-income consumers, that in the second quarter of 2022 they returned to travel, to eat out and, of course, to drink. As for low- and middle-income consumers, instead, inflation involves budget cuts, including those for alcohol. According to the Morning Consult study, therefore, the ability and propensity to spend of the wealthier classes is masking the deterioration in the purchasing power of the US middle and lower classes.

To understand even better, between April and May 2022 the average spending on alcohol among those earning more than 100,000 dollars a year grew by 31%, while among those earning between 50,000 and 99,000 dollars it fell by 3% and among those who earn less than 50,000 dollars dropped 17%. At the same time, the type of consumption changes: high-income consumers, not suffering the pressure of inflation, will continue to buy wines and other premium products, perhaps focusing more on home consumption, rather than out of home. On the contrary, those who earn less will chose wine, beer and spirits of a lower price range, to try to keep the expenditure dedicated to alcohol constant.

The effects of these changes in spending patterns become immediately apparent on consumer behavior. For example, between October 2021 and June 2022, the share of adult Americans reporting that they habitually drink alcohol rose from 63% to 58%, and of those, 3 in 10 (29%) said they drank less in July than in previous months, and only 15% of having drunk more. On a generational level, among the Millennials in July, 36% said they had drunk less than the previous month, a percentage that rises to 27% among Gen Xers and 23% among Baby Boomers. In terms of income brackets, almost specularly, among those earning less than 50,000 dollars a year, 37% drank less in July than in June, a percentage that drops to 25% among those earning between 50,000 and 99,000 dollars and 17% among those who earn more than 100,000 dollars a year. The reasons for this - however uneven - decline in alcohol consumption are quickly explained: for 36% the reason is savings, followed by the lack of social plans (and therefore by a contraction in public spending, 23%) and the need to absorb the pressure of costs in the other categories, from gas to food (23%), despite the fact that wine, beer and spirits are significantly lower than average.

Motivations related to caring for one’s body persist, a concern shared by 23% of consumers and which will obviously resist the settling of inflationary pressures. In addition, there is a push for moderation that leads many consumers to take a month off from alcohol, marrying the now famous “Dry January” and “Sober October”. Likewise, in July 30% of drinkers (and 36% of Millennial drinkers) said they intentionally took breaks of a month or more. For all, or almost all (91%), the goal was the protection of health.

In conclusion, while it is true that changes in alcohol-related spending and drinking habits are more evident among low-income consumers, the volatility of the stock market and prolonged inflation can potentially impact even high-income consumers, which are however experiencing some difficulties on the financial front. Furthermore, in the long term, consumers attention to physical and mental health will continue to transform their relationship with alcohol, starting with when, what and how much they are consuming, which is why wine and beer producers must keep the focus on important innovations such as low-alcohol and no-alcohol products.

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