December 24, 2008 / 4:19 PM / in 9 years

Recession cocktails may take edge off dark year

NEW YORK (Reuters) - Liquor companies and bartenders are finding inspiration in the financial crisis, devising new recipes and reviving old cocktail standards to keep spirits alive during the holidays.

They hope to lure Americans who are drinking more at home or finding that parties are drying up to cut costs.

The industry has seen a resurgence of drinks that hark back to the prewar eras of Prohibition and the Great Depression, such as the Sidecar, the Old Fashioned and the Manhattan.

Julian Cohen, head of the consumer insights team at Fortune Brands Inc’s beverage division, said those “heritage cocktails,” traditionally made with heavier-flavored spirits like bourbon and cognac, mirror a wider preference.

“You’re seeing a lot of darker flavors -- honeys, blackberries and raspberries, versus things like pomegranate and papaya,” Cohen said. “When times are tough we want to go to things that are comfortable ... that are part of our history.”

That may help explain the rush at the Edison, a swank bar in downtown Los Angeles, whose menu boasts vintage drinks like the Singapore Sling and the Vesper Martini, introduced in Ian Fleming’s 1953 James Bond novel, Casino Royale.

During “Happy Hour” on Thursdays, the speakeasy-style lounge charges the Depression-era price of 35 cents for libations with names like Bourbon Bailout. Your 401K is a drink served with a postcard soliciting comments on whether patrons’ retirement accounts are half-empty or half-full.

“On Fridays, we have massive lines -- about 300 people turn up at the bar,” said Greg Rogers, a bar spokesman. “We have seen an uptick in recent months in sales as well as patrons.”

On a recent evening, Rebecca Mulligan, a 27-year-old painter, drank a cocktail called The Hemingway instead of her usual glass of merlot.

“I have (become) more adventurous now,” she said of the drink, made with champagne and absinthe. “You need to keep your mind off the depressing depression talk.”

Stolichnaya, a Russian vodka brand, has been working with bartenders to concoct drinks with names like Rejected Resume, Battered Bull and Welfare Punch, said a spokeswoman. Absolut vodka owner Pernod Ricard is packaging its unflavored vodka in a mirrored bottle holder reminiscent of a disco ball to liven up home parties.

BREAD, MILK, BOOZE

According to a survey conducted in October, about one-fifth of U.S. businesses were choosing not to have office parties this year. Out of those that were having parties, only 71 percent planned to serve alcohol.

On a personal level, declining home values, job losses and drained stock portfolios have forced many Americans to become more frugal in their purchases and leisure time.

Spirits makers therefore have good reason to reconsider their tactics.

“We’re having to take a second look at everything we do just to ensure that we’re in tune with the consumer out there, aware of what their concerns are and how they’re having to adjust their lives,” said Monsell Darville, a marketing executive with privately-held Bacardi USA Inc, which sells Bacardi rum, Grey Goose vodka and Bombay Sapphire gin.

Consumers are “cocooning”, said Ivan Menezes, president and chief executive of Diageo Plc’s North American business. They are still drinking, but if they can no longer afford a Cosmopolitan at their favorite hotspot, they may be making a Sidecar in their kitchen instead.

U.S. sales of spirits at retailers like grocery and liquor stores rose 1.2 percent by volume in the four weeks ended November 15, according to Nielsen data, while sales of table wine rose 0.9 percent.

In both cases, that is an improvement from the 1.1 percent increase for spirits and the 0.3 percent increase for wine in a year earlier.

Such trends mean the maker of Johnnie Walker whisky and Smirnoff vodka is focusing more this year on in-store promotions, rather than events at bars, Menezes said.

COCKTAILS ON THE COUCH

The alcohol business will still benefit from a move to drinking at home.

Diageo, the world’s top alcohol company, expects underlying profit growth of 7 to 9 percent for its current fiscal year, which ends in June.

France-based Pernod, the No. 2 drinks group, expects double-digit annual profit growth. Brown-Forman Corp, maker of Jack Daniel’s whiskey and Finlandia vodka, posted better-than-expected profit earlier this month and raised its 2009 earnings view.

“While the recession that we’re in may keep (people) from going out and buying that $10,000 cocktail with the diamond in it on New Years Eve, they are trying different cocktails while they’re out, and experimenting with them at home,” said Danielle Eddy, a spokeswoman for the U.S. Distilled Spirits Council (DISCUS).

To capitalize on that trend, which is expected to last into the new year, spirits makers are offering ready-mixed cocktails for home consumption, such as Seagram’s Gin & Juice, Bacardi Mojitos and Smirnoff Cosmopolitans and Pomegranate Martinis.

David Ozgo, chief economist for DISCUS, a spirits trade group, is expecting U.S. spirits sales to grow about 2 percent by volume this year, and 4 to 5 percent by revenue.

That compares with annual growth rates of about 3 percent by volume and 7 percent by revenue up until 2007, when growth began to slow with the start of a recession.

“We’re not exactly like the auto industry or the housing industry, where we completely tank when the economy goes into a recession,” Ozgo said. “But at the same time, we do see our ups and downs with the economic cycle.”

Reporting by Martinne Geller; Additional reporting by Syantani Chatterjee in Los Angeles; Editing by Michele Gershberg and Eddie Evans

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