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BIN
2009 • ISSUE 1
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BIN
Beverage Industry News
VOLUME 95, ISSUE NUMBER 30FOUNDED IN 1934
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SIN CONSUMPTION DURING BAD ECONOMIC TIMES
Bad news about the economy, job cuts, and the sub-prime mortgage mess is all over thenews. When people’s income goes down in bad economic times, there is pressure to rethinkspending decisions. There is not much room to cut essential expenses like food and shelter.But what about expenses related to the consumption of alleged “sin” products like alcohol,cigarettes, chocolate and greasy food?A closer look shows during bad economic times consumption of alcohol actually rises,presumably because it provides an escape from reality. But while consumption increases,consumer expenditures on alcohol decrease as a result of the reduction in consumer’sincome. To put it another way, people consume more but cheaper brands of alcohol whenthe economy is bad than when it is good. Moreover, reduction in alcohol expenditures ismild. Many consumers still consider alcoholic beverages an “affordable indulgence,” despitethe hard times.Cheaper alternatives abound in the alcohol industry. If imported wine is too expensive, you might try the domestic wineries. If Russian vodka is too expensive, how about a beer?Don't have enough for an import? Try a domestic. If the bar tab is too much to handle, stopoff at the store and drink at home.Interestingly, the chocolate market very much mimics that of alcohol consumption. In badeconomic times people consume more chocolate, while the overall expenditure on choco-late tends to go down during economic downturn. The basic explanation for this phenome-non is the same as in the alcohol industry: people substitute cheap chocolate for the moreexpensive and imported chocolate.Smoking is a vice, but many smokers aren't kicking the habit, even as prices continue torise. Cigarette and tobacco product and sales are not significantly affected by bad econom-ic times. Because smoking is an addiction, the demand for cigarettes is inelastic and doesnot decrease much as the income of consumers goes down.According to research, during past difficult times in the United States, the overall healthof the nation was better because people only ate the necessities and stayed away fromexpensive, fatty foods. People cooked from scratch to save money, and in the process pre-pared healthier meals.Economic studies suggest that when the economy does poorly, people tend to spend less on eatingout, alcohol, and chocolate, yet almost the same amount on cigarettes. Our current economic crisis shouldprove an interesting test of many of these theories of sin consumption.Alan Forester is an attorney, CPA and an expert witness in Alcoholic Beverage ControlLaw. For more information, please visit www.ABClawyer.com or call 877-LIQUOR-8 (877-547-8678)
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Disclaimer: This article is not to be construed as legal advice. Please check with an attorney before taking action.
INDUSTRY INSIGHT
BY
ALAN FORESTER, CPA, ATTORNEY
WWW.ABCLAWYER.COM 1-877-LIQUOR-8
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