Recession? Eat, drink, smoke and be merry - East Valley Tribune: Business

Recession? Eat, drink, smoke and be merry

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Posted: Tuesday, August 12, 2008 7:41 pm | Updated: 10:22 pm, Fri Oct 7, 2011.

LONDON - As a global recession looms, what better way to cope than to eat, drink and be merry?

Even as consumers face soaring energy costs, rising food prices and higher mortgages or rent, it seems clear they’re not prepared to forgo many of life’s little treats — alcohol, cigarette and candy makers are all reporting healthy sales amid the gloom.

“I would never give it up, not unless I was dying of alcohol poisoning or something,” said Kelly Piggeln, a 62-year-old retired nanny, as she indulged in her favorite two vices of a cigarette and a glass of wine on the patio of a London bar.

Piggeln’s stance is being echoed by cash-strapped consumers around the world, a trend that is reflected in strong financial reports this season from some of the biggest so-called “sin stocks” even as banks and many retailers report sliding income.

Sin stocks, ranging from gambling to liquor, are usually a safe bet in hard times. While shares in some of those companies have fallen along with stock exchanges this year, lots are still seeing strong revenues and sales.

“It’s inelastic demand as far as many of these stocks are concerned,” said Hargreaves Lansdown analyst Keith Bowman, using the economists’ term for consumption that is not deterred by higher prices. “So far there’s signs that they are holding up, although there’s still concern that these industries will see some impact.”

Among the winners, though: Anheuser-Busch Cos, the biggest brewer in the United States, turned a profit in the most recent quarter despite fears that rising costs for raw materials like glass, barley and wheat and fuel would cut into The King Of Beers’ bottom line.

The company is so confident that consumers won’t abandon the beer that it plans to increase prices for popular brands like Budweiser and Bud Light to stay ahead of the higher costs.

Similarly, Denmark’s Carlsberg A/S reported a 36 percent rise in second-quarter net profit, saying stronger sales, particularly in eastern Europe and Asia, helped offset rising costs.

In Milwaukee, Katie Brozovich — a teacher who also works three part-time jobs — said she makes choices in her spending, such as not having her hair and nails professionally done, so she can keep drinking the pricier craft brews she prefers.

“I’d rather spend $4 or $5 on quality beer than $3 on hopped up water,” said the 46-year-old, who was sipping on a craft beer from nearby Michigan. “It’s worth the extra buck or two to get quality.”

Diageo PLC, the world’s largest producer and distributor of spirits, dubs many of its brands — including Johnnie Walker whiskey, Smirnoff vodka, Captain Morgan rum and Guinness stout — “affordable luxuries” that people are loath to give up, even in an economic downturn.

London-based Diageo expects its Scotch whisky business to continue to grow at least 8 percent to 9 percent annually, amid growing demand from emerging markets in Asia and Latin America.

Those emerging markets, particularly the developing economic powerhouses of China and India, are playing a key part in the buoyancy of such companies in the current turbulence, boosting demand for alcohol and cigarettes, which are increasingly used as status symbols denoting success and wealth.

But much of the demand is also still coming from the United States and Europe, which have been hardest hit by the credit squeeze, with price rises not dissuading many consumers in those regions — Constellation Brands Inc., the world’s largest wine company by volume, posted a 35 percent rise in branded wine sales in North America in the first quarter.

Sam McQueen, a 29-year-old teacher taking a lunch break outside Starbucks in Camden in north London, said she and her boyfriend had recently revised their spending strategy — and stop buying prepackaged foods at the supermarket to free up money for the treat fund.

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