Alcohol Sales in U.S. Retail & Food Services

Alcoholic beverage consumption in the United States is breaking the weak trend in retail sales. On a real basis, sales at beer, wine and liquor stores, as well as at alcoholic beverage drinking places, are booming.

Surging Sales at Drinking Places

One of the sectors of retail that has been breaking the weak sales trend has been sales at drinking places. This sector of real retail sales is a small sector, about 0.4 percent of real retail and food services overall sales (or about 0.45 percent of real retail trade), so the strength of the sector is not capable of changing the fate of the overall retail and food service sector. However, the sector is booming. On a real basis, sales at drinking places' were up 13.4 percent on a year-earlier basis in May, down from a 13.7 percent year-over-year growth rate in April. The sector was weak up until August of last year but has taken off since then on a year-earlier basis. This sector has not reached the peak in sales achieved back in July 2007 but got close to that level on April of this year. Furthermore, the sector weakened considerably during the recovery from the Great Recession, a trend that remained in place until late last year when it started to grow again at a strong pace.

Stores Selling Beer, Wine and Liquor Continue to Improve

At the same time that Americans are consuming more alcoholic beverages outside their homes, they are also bringing more beer, wine and liquor into their homes. This sector is also small, representing about 1.0 percent of overall real retail and food services sales. In inflation adjusted terms, sales of beer, wine and liquor at stores for home consumption skyrocketed since the end of the Great Recession and have not looked back. Sales of beer, wine, and liquor for home consumption peaked in July 2008 then weakened somewhat during the Great Recession. However, sales of beer, wine, and liquor for home consumption are, today, 24 percent higher in real terms than at its pre-Great Recession peak.

Price Matters for Beer, Wine and Liquor Stores

Thus, the behavior of these two sectors of alcohol consumption have followed two different paths since the Great Recession with alcoholic beverage for home consumption outpacing the growth of alcoholic beverage sales at drinking places over the period. An econometric analysis of these sectors during these periods indicates that the sectors do not compete against each other. Furthermore, our analysis indicates that consumers at drinking places are not concerned with prices, i.e., they probably value the drinking experience at these places more than the price of what they are drinking. This was true before the Great Recession and after the Great Recession. However, the same is not true for stores that sell for home consumption. While consumers in this sector were not price sensitive before the Great Recession, they became price sensitive after the Great Recession. This is probably what explains the change in pricing strategy by this sector before and after the Great Recession and one of the reasons sales in this sector have increased so much since the recovery started.

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