Liquor Industry needs to stand its ground

The liquor industry sales are falling and the negative consequences to the industry are real. Wine sales are down, beer sales are down, and spirits sales are up only because of RTD sales.

 

But we should not think of this negative impact as falling faceless numbers, we should think of the human element of what these numbers mean.  Behind these numbers is a real life playing out of bad events occurring across the industry. Vineyards are being torn up, craft breweries with little room for growth are closing, and craft distillers are shuttering at an alarming rate.

 

There are some headwinds working against the industry and how these headwinds are fought will determine the future of the industry. Further, the industry must fight to open up markets and provide small producers the tools to grow.

 

Headwinds

 

The alcohol industry faces recent headwinds from various forces including cannabis legalization, preferences of a younger generation, campaigns against alcohol such as dry January, and government bureaucrats going after alcohol in the name of science.

 

Cannabis

 

The cannabis trend is interesting to me as alcohol is being attacked in a very high-profile way for its impact on health, cannabis although there are alarms raised, has not triggered the same health debate.

 

Will we see cannabis plants replacing vineyards in the near future? There is a distinct possibility, as cannabis use increases and wine numbers go down, this will happen.

 

So, how does the liquor industry combat the threat from cannabis as an alternative to alcohol? When we look at Dry January numbers, 25% of those abstaining from alcohol in January gravitated towards cannabis.

 

Does the alcohol industry take on cannabis with a counter campaign or do they ignore cannabis and hope people gravitate back? With cannabis taking market share, I am not sure the latter option is a realistic one.

 

To combat the loss of market share, I think the liquor industry will eventually need to take cannabis head on. Without a direct attack and demonstrating the difference between the two, liquor will keep losing ground to cannabis.

 

They are not complimentary but are competitors.

 

Trends of a younger generation

 

The younger generation does not have the same taste for alcohol as the older generation does. This is driven by perceived health concerns and driven by these health concerns, non-alcohol as a category has exploded.

 

Even with these trends I would not give up on this age group. The alcohol industry needs to tell its story effectively. How moderation is the key to enjoyment, and how the alcohol industry has a positive effect on communities from the agricultural jobs to brewers, distillers, and wineries that become a strong part of the community. The story needs to be more than a health debate about alcohol, it also needs to be about the industry’s economic impact.

 

Health studies

 

The World Health Organization (WHO) riding the momentum of their disastrous COVID policies wrote an article labeling alcohol as a Group 1 carcinogen. [1] Group 1 carcinogens include asbestos, radiation, and tobacco.

 

The alcohol industry should not take alcohol’s association with these other carcinogens lightly. A rational person would not equate having a glass of wine with being exposed to asbestos or radiation. Unlike radiation and asbestos where even a small to moderate amount of exposure is extremely harmful to your health, a person can consume alcohol in moderation and still not put themselves at grave risk.

 

It is time for pushback on the absurd claims and raise questions on others. It does no one any good when the radical WHO position goes unanswered and causes great damage to the industry.

 

Policy choices

 

The U.S. Treasury report on competition in the liquor industry discussed a well-known problem. The number of producers is growing and the number of wholesalers is shrinking. What results is a system where it is harder for small players to get access to the marketplace.

 

Even with this problem becoming so glaringly obvious, state governments have not stepped in to remedy the situation by opening up markets. Instead, state governments have sat on their hands or actively fought for laws that limited market access for producers.

 

Unless producers have access to sell direct-to-retailer or for spirits or beer direct-to-consumer, there is little potential for growth, which means the death of many small businesses will come on the horizon.

 

The three-tier system is not working for a large part of the industry.

 

Conclusion

 

The numbers don’t lie about the industry declining and it is due to several forces. The industry needs to defend itself as there is way more positive than negative in the alcohol space. Without us taking the lead no one else will.