People who smoke cigarettes, buy luxury products and drink alcohol, however, tend to stay loyal to their brands even if they're more expensive. Photo Unsplash/Louis Hansel
People who smoke cigarettes, buy luxury products and drink alcohol, however, tend to stay loyal to their brands even if they're more expensive. Photo Unsplash/Louis Hansel

Drinkers, smokers still coughing up

Soaring costs no deterrent
Far from buying cheaper alcohol and tobacco, shoppers are instead trading up.
Soaring inflation has made life harder for most of the world - but some people are still smoking expensive cigarettes and doing shots of fancy tequila.

From British American Tobacco (BAT) to Tanqueray gin maker Diageo, cigarette and alcohol companies cited strong demand for high-end products people can't seem to shake when they reported results this week. Far from buying cheaper alcohol and tobacco, shoppers are instead trading up.

"In hard times, I think people just want that little moment to celebrate, you know, to unwind with family, with friends with colleagues," Diageo's finance chief Lavanya Chandrashekar told Reuters.

The trend contributes to a pattern of affluent consumers spending big on luxury items following the Covid-19 pandemic. Lockdowns resulted in average bank balances rising and record stock markets boosted wealthy people's investment portfolios.

Diageo, the world's biggest spirits maker, on Thursday beat full-year sales forecasts, helped by demand for "super premium" brands such as Don Julio tequila, Johnnie Walker Blue Label and Bulleit Bourbon. Bottles of Don Julio start at roughly 40 pounds on Amazon.co.uk and go up into the hundreds, as do several special edition versions of Johnnie Walker Blue Label.

CHEAPER LABELS

Food and personal goods companies such as Procter & Gamble and Kraft Heinz have seen increased competition from cheaper private label brands as consumers trade down in the face of a cost-of-living crisis.

People who smoke cigarettes, buy luxury products and drink alcohol, however, tend to stay loyal to their brands even if they're more expensive.

"There's a fundamental difference in how consumers think about something like baked beans versus a cocktail when you're celebrating a special occasion," Chandrashekar said.

Diageo doesn't have much competition from supermarket-owned brands, she said, highlighting the United States where private label represents less than 2% of the spirits market.

STICKING BY THEIR BRANDS

Alcohol consumption increased worldwide during the pandemic as people stuck at home had limited options for entertainment.

Many are now trying to drink less, but better, said Tineke Frikkee, fund manager at BAT and Diageo investor Waverton Investment Management. But the cost of living crisis and rising energy bills this winter mean that trading up may not last.

"As consumer budgets come under pressure, we may see some downtrading, so still buying a bottle of spirits, but maybe the next price tier down," Frikkee said.

AB InBev, the world's biggest brewer and maker of Stella Artois and Budweiser, on Thursday reported higher-than-expected profits, helped by many drinkers switching to premium beers.

Since the start of the Russia-Ukraine war, US sales of premium spirits have risen nearly 3% to US$3.76 billion, according to NielsenIQ. Globally, sales of fine wines, champagne and spirits are expected to rise about 6% to US$155.2 billion in 2022, according to Euromonitor.

Meanwhile, sales of luxury tobacco products - cigars, cigarillos and smoking tobacco - are expected to rise 7.5% to over US$95 billion, according to Euromonitor.

LUXURY GOODS

BAT has raised prices more than its competitors in some categories and is investing more in its high-end New Port and American Spirit brands, chief executive Jack Bowles said in an interview. He highlighted growth in BAT's American Spirit organic range.

Price hikes and luxury brands helped BAT beat first-half revenue and margin forecasts on Wednesday.

"Consumers are sticking much more with their [cigarette] brands and that's why we didn't see downtrading. We see premium growing in a lot of places," Bowles said.

Outside of alcohol and tobacco, earnings on Thursday continued a pattern of affluent consumers trading up.

Stellantis said strong pricing power and sales of high-margin cars including electric ones helped it top profit forecasts in the first half, despite rising energy and raw material costs, and semiconductor shortages.

While production problems hampered Volkswagen's mass-market businesses, premium brands boosted the carmaker's finances, with Audi seeing a 51% jump in operating profit and Porsche up 22%. – Fin24/Reuters

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Premier League: Aston Villa 3 vs 3 Liverpool | Manchester United 0 vs 1 Arsenal | Nottingham Forest 2 vs 3 Chelsea | Newcastle 1 vs 1 Brighton | Wolves 1 vs 3 Crystal Palace | Everton 1 vs 0 Sheffield United | West Ham 3 vs 1 Luton Town | Bournemouth 1 vs 2 Brentford | Tottenham Hotspur 2 vs 1 Burnley | Fulham 0 vs 4 Manchester City LaLiga: Barcelona 2 vs 0 Real Sociedad | Real Betis 3 vs 2 Almería | Valencia 0 vs 0 Rayo Vallecano | Atletico Madrid 1 vs 0 Celta Vigo | Cadiz 1 vs 0 Getafe | Athletic Club 2 vs 2 Osasuna | Granada 0 vs 4 Real Madrid | Villarreal 3 vs 2 Sevilla | Mallorca 1 vs 0 Las Palmas SerieA: Fiorentina 2 vs 1 Monza | Lecce 0 vs 2 Udinese | Atalanta 2 vs 1 AS Roma | Juventus 1 vs 1 Salernitana | Genoa 2 vs 1 Sassuolo | Hellas Verona 1 vs 2 Torino | SS Lazio 2 vs 0 Empoli | AC Milan 5 vs 1 Cagliari | Napoli 0 vs 2 Bologna European Championships Qualifying: West Bromwich Albion 0 vs 0 Southampton | Norwich City 0 vs 0 Leeds United English Championship: West Bromwich Albion 0 vs 0 Southampton | Norwich City 0 vs 0 Leeds United Katima Mulilo: 13° | 31° Rundu: 13° | 30° Eenhana: 17° | 32° Oshakati: 17° | 32° Ruacana: 18° | 32° Tsumeb: 15° | 28° Otjiwarongo: 13° | 27° Omaruru: 13° | 29° Windhoek: 12° | 25° Gobabis: 14° | 25° Henties Bay: 15° | 32° Wind speed: 26km/h, Wind direction: S, Low tide: 13:52, High tide: 07:51, Low Tide: 02:00, High tide: 20:47 Swakopmund: 17° | 24° Wind speed: 27km/h, Wind direction: SW, Low tide: 13:50, High tide: 07:49, Low Tide: 02:00, High tide: 20:45 Walvis Bay: 20° | 32° Wind speed: 30km/h, Wind direction: SW, Low tide: 13:50, High tide: 07:48, Low Tide: 02:00, High tide: 20:44 Rehoboth: 14° | 26° Mariental: 15° | 29° Keetmanshoop: 19° | 30° Aranos: 16° | 28° Lüderitz: 18° | 35° Ariamsvlei: 19° | 31° Oranjemund: 14° | 29° Luanda: 24° | 27° Gaborone: 13° | 27° Lubumbashi: 13° | 27° Mbabane: 12° | 24° Maseru: 9° | 24° Antananarivo: 14° | 22° Lilongwe: 13° | 26° Maputo: 19° | 26° Windhoek: 12° | 25° Cape Town: 16° | 20° Durban: 17° | 26° Johannesburg: 15° | 23° Dar es Salaam: 23° | 31° Lusaka: 16° | 26° Harare: 12° | 23° Currency: GBP to NAD 23.08 | EUR to NAD 19.87 | CNY to NAD 2.54 | USD to NAD 18.37 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.3 | EGP to NAD 0.38 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.71 | ZWL to NAD 0.04 | BRL to NAD 3.55 | RUB to NAD 0.2 | INR to NAD 0.22 | USD to DZD 134.05 | USD to AOA 834.06 | USD to BWP 13.6 | USD to EGP 46.8 | USD to KES 129.48 | USD to NGN 1498 | USD to ZAR 18.37 | USD to ZMW 25.25 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 78632.56 Down -0.07% | Namibian Stock Exchange (NSX) Overall Index 1710.9 Down -2.52% | Casablanca Stock Exchange (CSE) MASI 13501.46 Down -0.29% | Egyptian Exchange (EGX) 30 Index 25339.77 Down -0.16% | Botswana Stock Exchange (BSE) DCI 9151.06 Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 358.63/OZ UP +0.86% | Copper US$ 4.85/lb UP +2.16% | Zinc US$ 3 006.00/T UP 0.27% | Brent Crude Oil US$ 82.74/BBP DOWN -0.0132 | Platinum US$ 1 034.34/OZ UP +3.29% Sport results: Premier League: Aston Villa 3 vs 3 Liverpool | Manchester United 0 vs 1 Arsenal | Nottingham Forest 2 vs 3 Chelsea | Newcastle 1 vs 1 Brighton | Wolves 1 vs 3 Crystal Palace | Everton 1 vs 0 Sheffield United | West Ham 3 vs 1 Luton Town | Bournemouth 1 vs 2 Brentford | Tottenham Hotspur 2 vs 1 Burnley | Fulham 0 vs 4 Manchester City LaLiga: Barcelona 2 vs 0 Real Sociedad | Real Betis 3 vs 2 Almería | Valencia 0 vs 0 Rayo Vallecano | Atletico Madrid 1 vs 0 Celta Vigo | Cadiz 1 vs 0 Getafe | Athletic Club 2 vs 2 Osasuna | Granada 0 vs 4 Real Madrid | Villarreal 3 vs 2 Sevilla | Mallorca 1 vs 0 Las Palmas SerieA: Fiorentina 2 vs 1 Monza | Lecce 0 vs 2 Udinese | Atalanta 2 vs 1 AS Roma | Juventus 1 vs 1 Salernitana | Genoa 2 vs 1 Sassuolo | Hellas Verona 1 vs 2 Torino | SS Lazio 2 vs 0 Empoli | AC Milan 5 vs 1 Cagliari | Napoli 0 vs 2 Bologna European Championships Qualifying: West Bromwich Albion 0 vs 0 Southampton | Norwich City 0 vs 0 Leeds United English Championship: West Bromwich Albion 0 vs 0 Southampton | Norwich City 0 vs 0 Leeds United Weather: Katima Mulilo: 13° | 31° Rundu: 13° | 30° Eenhana: 17° | 32° Oshakati: 17° | 32° Ruacana: 18° | 32° Tsumeb: 15° | 28° Otjiwarongo: 13° | 27° Omaruru: 13° | 29° Windhoek: 12° | 25° Gobabis: 14° | 25° Henties Bay: 15° | 32° Wind speed: 26km/h, Wind direction: S, Low tide: 13:52, High tide: 07:51, Low Tide: 02:00, High tide: 20:47 Swakopmund: 17° | 24° Wind speed: 27km/h, Wind direction: SW, Low tide: 13:50, High tide: 07:49, Low Tide: 02:00, High tide: 20:45 Walvis Bay: 20° | 32° Wind speed: 30km/h, Wind direction: SW, Low tide: 13:50, High tide: 07:48, Low Tide: 02:00, High tide: 20:44 Rehoboth: 14° | 26° Mariental: 15° | 29° Keetmanshoop: 19° | 30° Aranos: 16° | 28° Lüderitz: 18° | 35° Ariamsvlei: 19° | 31° Oranjemund: 14° | 29° Luanda: 24° | 27° Gaborone: 13° | 27° Lubumbashi: 13° | 27° Mbabane: 12° | 24° Maseru: 9° | 24° Antananarivo: 14° | 22° Lilongwe: 13° | 26° Maputo: 19° | 26° Windhoek: 12° | 25° Cape Town: 16° | 20° Durban: 17° | 26° Johannesburg: 15° | 23° Dar es Salaam: 23° | 31° Lusaka: 16° | 26° Harare: 12° | 23° Economic Indicators: Currency: GBP to NAD 23.08 | EUR to NAD 19.87 | CNY to NAD 2.54 | USD to NAD 18.37 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.3 | EGP to NAD 0.38 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.71 | ZWL to NAD 0.04 | BRL to NAD 3.55 | RUB to NAD 0.2 | INR to NAD 0.22 | USD to DZD 134.05 | USD to AOA 834.06 | USD to BWP 13.6 | USD to EGP 46.8 | USD to KES 129.48 | USD to NGN 1498 | USD to ZAR 18.37 | USD to ZMW 25.25 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 78632.56 Down -0.07% | Namibian Stock Exchange (NSX) Overall Index 1710.9 Down -2.52% | Casablanca Stock Exchange (CSE) MASI 13501.46 Down -0.29% | Egyptian Exchange (EGX) 30 Index 25339.77 Down -0.16% | Botswana Stock Exchange (BSE) DCI 9151.06 Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 358.63/OZ UP +0.86% | Copper US$ 4.85/lb UP +2.16% | Zinc US$ 3 006.00/T UP 0.27% | Brent Crude Oil US$ 82.74/BBP DOWN -0.0132 | Platinum US$ 1 034.34/OZ UP +3.29%