June Data Insights: Ending on A Sour Note, but Planning for Improvement

Jul 29, 2024

WASHINGTON, D.C.

Let's Start by Looking back!
Sipsource's March Data Insights, ended with a "What's Next?" section that predicted "the impact of destocking at retail will stay top of mind as long as interest rates remain at current levels." Interestingly, the 30-year Fixed Rate Mortgage Average is almost identical today to where it was on March 28th, at 6.8%. As such, inventory management at the retail level continues to have a negative impact on depletions. The increase to the cost of working capital is putting pressure on many businesses, driving an increased focus on cash management. While it is easy to point at things like interest rates, we all need to remember the single best cure to reverse current trends is an increase in consumer demand which has not been seen in the first half of 2024.

First Half of 2024 challenging for Spirits and Wine Depletions
Newly available June-ending SipSource data (July 2023 - June 2024), continues to indicate the challenging environment for Spirits and Wine depletions as consumer demand seems to have stalled. June ending 12-month trends for Spirits are down -3.4% and -8.1% for Wine. The numbers for the latest 6-months (January 2024-June 2024) are significantly softer with Spirits down -4.8% and Wine -9.0%.

As we look to the back half of 2024, we expect these trends to improve but it is highly doubtful either Spirits or Wine will return to anything close to actual growth. Comparable sales trends for the back half of 2024 and two additional shipping days give SipSource analysts reason to believe this improvement will occur.

Declines in Points of Distribution are a significant headwind
In June 2024, SipSource added Points of Distribution (PODs) as a measure in the database and the initial results are telling on the negative depletion trends. For the June-ending 12-month period, total PODs are down -5.1% with Spirits down -3.9% and Wine -6.6%. This is another indication that inventory management is key for retailers as they are hesitant to take risks on unproven new products.

What's Next?
Performance in the beverage alcohol category is impacted by the larger economic environment and inflation has taken its toll on consumers. The June Consumer Price Index (CPI) decreased by 10-basis points compared to a May, sitting at 3.0%. Any significant drops in inflation can be a tailwind for consumer spending and helpful for Spirits and Wine depletions.

EXPLORE MORE MEDIA >