Analysis-Cash-strapped consumers are giving Australia's liquor makers a headache
By Byron Kaye
SYDNEY (Reuters) - A recent slump in sales means Sydney liquor store owner Louise Dowling has to work an additional 40 hours a week to make up for the staff she had to let go, as a prolonged cost of living crisis in Australia drives more people to drink less.
"Without the foot traffic, without the sales, you don't have the money to employ extra people," said Dowling at her P&V Wine + Liquor Merchants store in Enmore, a popular dining and nightlife suburb.
"Everyone's trying to tighten their belts, including us."
After a surge in sales propelled by pandemic lockdowns and unused savings, Australia's alcohol industry is in its sharpest downturn in memory as more people cut back on discretionary spending and turn to healthier ways to relax.
In the year to June, alcohol sales grew just 0.7%, the slowest pace in at least a quarter century, according to Australian Bureau of Statistics (ABS) data, and even that small increase was more likely due to rising prices, as alcohol sales volumes fell 3.9% in the same period.
Australia is one of the world's wealthiest countries per capita and one of its highest-spending on alcohol per capita, and the slowdown coincides with a decade-long decline in the number of people who drink globally, due to health concerns or just personal choice.
The effects of these downtrends were on display in the year-end earnings posted by alcohol sellers this month.
The second-largest alcohol retailer by sales, supermarket giant Coles,, said its liquor store profit fell 21%, largely due to a decline in discretionary spending, while the biggest wine producer Treasury Wine also reported a 7% drop in its mid-range unit's profit, partly due to "soft consumption trends" in Australia and Britain.
Endeavour, the biggest liquor store and pub owner by sales, bucked the trend with a meagre 1.8% increase in pre-tax profit, but was downgraded by analysts after it said retail sales rose just 0.6% in the first six weeks of the 2024/5 financial year.
Tom Kierath, an analyst at investment bank Barrenjoey, said that before the pandemic, alcohol companies benefited by marketing more expensive products, and then during some of the world's longest lockdowns, the same firms saw a surge in people stocking up their cellars.
But as inflation soared after the pandemic, two years of soaring bills for housing, energy and petrol have left drinkers looking to spend less, he added.
"People are looking to save money now, and in a bunch of consumer categories people are downgrading," he said. "Alcoholic drinks is no different."