A 30-year-aged version of Canadian Club is the latest in a growing number of luxury spirits offerings that have hit the market in the past year as the U.S. economy has worsened. The distillers -- including Canadian Club's parent, Beam Global Spirits & Wine -- say the luxury launches are still affordable enough that consumers will continue to spring for them, regardless of the downturn. It's a bold thesis that may soon be severely tested.
"We've reached an interesting crossroads," said Julian Cohen, Beam's VP-consumer and marketplace insights. "We're seeing the downturn but also the continued premiumization of every desire you can think of, and that desire for luxury doesn't just go away when the economy worsens."
Mr. Cohen said the Canadian Club launch is a limited-edition, limited-time offering aimed primarily at whiskey collectors. The launch is being supported by a series of 30 events at bars nationwide during the fourth quarter. It will not have advertising support. Instead, Canadian Club's ongoing campaign -- a retro effort dubbed "Damn right your dad drank it" from Energy BBDO, Chicago -- will continue to run, and Mr. Cohen said he hoped the prestige of the 30-year would rub off on the entire Canadian Club line.
He also noted that Beam -- which markets brands such as Sauza tequila and Maker's Mark bourbon -- intends to continue to introduce and emphasize so-called "ultra premium" brands, which generally sell for upward of $20 per bottle and often well above that level.
Beam is not alone in making that bet: According to Nielsen, 93 ultra-premium brands were introduced during the 12-month period ended Sept. 22, up slightly from 91 launches during the same stretch a year ago.
But while those luxury brands continue to roll out, they don't seem to be selling as well. Nielsen data showed those 93 brands introduced over the past 12 months saw a nearly 19% decline in dollar sales vs. the 91 introduced during the same period a year earlier. And that was before the stock market tumult of recent weeks, a turn of events some analysts think is ominous for the trend.
Standard & Poor's downgraded shares of liquor giant Diageo, which markets such upmarket brands as Johnnie Walker and Ketel One, to hold from buy last week , cutting its price target for the No. 1 distiller's shares to $63 from $80. "With signs in the U.S. and parts of Europe that consumers are trading down in their purchases, and with declines in consumer confidence in emerging markets, we think there is downside risk to industry wine and spirit forecasts over next 18 months," S&P said in a brief report on the rating change.
Overall, however, existing ultra-premium spirits sales have continued at a double-digit pace in most categories, according to Nielsen, which records only a 4% uptick in overall spirits sales. There has been a similar surge in downscale brands during the same period, with mid-priced labels suffering losses.
Diageo spokespeople didn't respond to phone calls, but the company's CEO, Paul Walsh, said in a statement to investors that the company would be "alert to the impact the recent dislocation in the financial markets is likely to have on trade-customer and consumer behavior during the rest of the financial year." Mr. Walsh said the company has yet to see any impact on its results.
Likewise, Michael Silverstein, a partner at Boston Consulting Group, whose 2006 book, "Treasure Hunt," explored the trading-up phenomenon among younger consumers, said he expected the trend to continue through a downturn, at least in public settings.
He predicted consumers would continue to drink luxury cocktails in public but might drink more cheaply -- and more often -- at home. "If you're at a bar and you have money in your pocket, you're still going to call out for a Belvedere," he said, invoking the Moët-Hennessy-owned ultra-premium vodka. "These consumers really care about their image."