The VinePair Podcast: Will the Looming Recession Slow Premiumization?
With much of the economic world projecting a recession in the near future, Adam, Joanna, and Zach discuss how previous recessions have impacted the drinks industry, and whether a recession would actually eat into the premiumization trend or not. Tune in for more.
Or Check Out the Conversation Here
Adam Teeter: From VinePair’s New York City headquarters, I’m Adam Teeter.
Joanna Sciarrino: And I’m Joanna Sciarrino.
Zach Geballe: And in Seattle, Washington, I’m Zach Geballe.
A: And this is the “VinePair podcast.” Joanna, what is this red drink you’re drinking?
J: A hibiscus iced tea.
A: Oh, I was just sitting here in the studio and I was like, “This is very red.”
A: Where’s that-
J: Little refresher.
Z: You’re burying the lead here, it’s Joanna’s birthday. Happy birthday, Joanna.
A: It is Joanna’s birthday, but it won’t be by the time it airs.
J: That’s true.
A: I was like, “I don’t know if Joanna wanted me to blow up her spot that way.”
Z: That she has a birthday. I mean, she’s talked about being a Scorpio a few times on the pod, so I think…
A: Well, happy birthday.
J: Thank you.
A: What are you doing? Are you going anywhere?
J: No, just to dinner in the neighborhood tonight. Nothing crazy.
A: Anywhere special?
J: Just a place we haven’t tried before because I’ve been wanting to try it. Otherwise, we have just some travel coming up for work, so just keeping it low-key.
A: Cool. Very cool.
Z: You guys are going far. Should be exciting.
A: Yeah, we are. Verona.
Z: Fair Verona where we set our podcast.
J: Cool 72 hours in Verona.
A: It’s going to be so fast. So fast. And then back here, I mean we don’t even have to record in Italy. We’re going to be back here to record, so it’s that fast. Well, Zach, what have you been drinking man?
Z: So I had something that weirdly connected amazingly well to a topic we, I think, discussed just last week on the Monday pod.
Z: Which was the… Maybe it was two weeks ago. You guys can correct me. The presence of white truffle in a cocktail, so-
Z: Yeah. Right? I know. I couldn’t believe it when I was out to dinner and saw it. So I was out with a good friend of mine, was in town visiting or well, traveling for work. He works for the New York Giants. He produces their radio broadcast. And so a friend of mine from college and he was here because the Giants played the Seahawks this past week and-
Z: That’s the end of the sports portion of the conversation, Joanna.
Z: But, so he came into town and we went out to dinner the night before the game, which was great. Got a chance to see him, hadn’t seen him in a little while. And we went to a restaurant here in Seattle called Salt District, which is down by the waterfront and had a cocktail there called Saint Amaro’s Inferno, which I was a little bit dubious about at first because I was like… It sounds like the setup for a spicy cocktail. Thankfully, not a spicy cocktail. I confirm.
A: Saint Amaro’s Inferno.
Z: I will read you the description as presented on the menu because I think it’s fun. Prosciutto washed mezcal. Interesting.
A: Okay. That’s weird.
Z: Amaro del Cansiglio, which I was not familiar with. Amaro zucca, which I was familiar with. Fig bitters and truffle oil. And I was like, well I mean we just talked about truffles in cocktails, granted not white truffle shaved in but still. And I was very curious so I ordered the drink and actually the way the truffle oil was integrated with the cocktail I thought was really fascinating. The drink was served in a rocks glass with a single large cube and there was a dried fig that had some truffle oil sprinkled on it, positioned on top of the cube. And the bartender said, you really want to… Obviously if the thing gets into the drink, that’s fine, but it’s like we really use the truffle oil more for the aromatics to complement the flavors than to really get into the drink proper. And I was like, well that makes some sense to me. And it was really good. I was really surprised at how tasty it was. The savoriness from the prosciutto-washed mezcal was good, obviously some smokiness from the mezcal, and it was a really tasty drink and just a fun thing to think about. And I think we had talked about — Adam, I think you brought up a cocktail you had a few weeks ago that had orange blossom water in it and we talked about these aromatic ingredients in cocktails and I think they have a place, but I really like them in this way where they’re really just used for their aromatics, they’re not really integrated into the cocktail, exactly. And it reminds me of how important that can be. Whether it’s a fresh sprig of mint on your Julep or your Mojito, or in this case your truffle oil applied to your dried fig, maybe less common than the mint, but it’s a really nice reminder that that aromatic component of the garnish actually can be a thing that sets a cocktail off. And obviously, I guess we talk about bitters on top of egg whites in certain cocktails, that kind of thing too, sort of fitting into this realm of adding a layer to the cocktail that you may or may not actually taste. So that was the standout of the week for me; obviously I had some other fun things but I felt like I had to share that with you guys. What about you Joanna?
J: Yeah. I feel like that truffle oil integrated into the drink might have been overpowering.
Z: Or just really hard to balance because truffle oil is so strong. You just kind of-
J: Yeah, exactly.
Z: Yeah. If you don’t get it exactly right, it’s all you’ll taste.
J: Yeah. For me, I haven’t had a ton of outstanding stuff this week. Last weekend we went hiking upstate in New York outside of Peekskill and we stopped at Peekskill Brewery on the way home.
A: Is that on the east or the west side of the Hudson River?
A: East. So you take the train?
J: We drove.
A: You drove?
J: Yeah, it was only about an hour and a half.
J: So that was good and, I don’t know, felt appropriate for the season.
A: For the season.
J: Oktoberfest was really good. I don’t know, I don’t drink it often.
A: I don’t drink Oktoberfest beers ever.
J: But I know people get really into them.
A: Yeah, I’m not a “get into seasonal beers” person.
J: Oh no?
J: Oh, you kind of strike me as that kind of person.
A: Don’t ever say that again. Get out of the studio.
Z: Well, we know Adam’s feelings about pumpkin beer.
A: You really think? You’re full of sh*t.
J: I’m just joking.
A: I took that really personally.
J: I know you’re a Haze Boi bro. What is it?
A: I don’t even really drink those anymore. I don’t really drink beer anymore.
Z: I will say-
A: Haze Boi, is what it is.
Z: All beer-
Z: I do think that an Oktoberfest can be a really good beer. You’re kind of like that category of beer I do enjoy, and they do fit the season fairly well.
A: Yeah, that’s true.
Z: I think — and I will say too — to me, each season for beer has a great style of beer that I mostly enjoy in that season. But I don’t think that… I’m not anxiously awaiting the release of the Oktoberfest beer.
J: Fresh hops you are.
Z: Well, that one?
A: Fresh hops.
Z: That one I do wait for. That’s true. But outside of that… But I’m glad you enjoyed it and I think that is, like I said, it’s a style of beer that fits the season well. If you’ve got a nice crisp fall day, a nice crisp fall beer might go down well after a day of hiking.
J: What about you, Adam?
A: So geez, what have I been drinking recently? This one’s a horrible one because again, I don’t really have anything that was very memorable, either, recently.
J: Did you have a shot last night or something?
A: I don’t even know what it was called. It was like this-
J: I’m curious about a shot, though.
A: The bartender was like, “Oh, can we make you this shot?” And it was Amaro and lemon juice and it was disgusting.
J: Oh no.
A: And Tim and I both, because they knew that we were from VinePair and they were like, “Oh, we love VinePair. We’ll make you a shot,” and we were down.
J: That’s nice.
A: But I don’t want to name the bar because they were really nice people.
J: But I thought it would be interesting.
A: It was just a really bad shot. Who thinks Amaro and lemon juice? It was very… A lot of acid. But I’ve been making Martinis at home so that’s been delicious. And then, actually, I did do one thing that was really fun. My in-laws were in town and my wife and her mom wanted to go do a little shopping and so I took my father-in-law to Manhatta, right when it opened at 4 o’clock and he was like… He loves the city and loves doing all the historical stuff, so of course you’re-
J: So beautiful.
A: And so I had just their Astoria cocktail and he had the Consider the Cookie, which is their black and white cookie cocktail. And he never had a cocktail like that before and he just kept being like, “This is the most delicious thing I’ve ever had. Adam, how did they make this so good? This is the most delicious cocktail I’ve ever had.”
J: I think it’s a standout for them.
A: He just went on and on and on. But I was very upset that Always Money is no longer on the cocktail list. So if anyone from Manhatta’s listening, could you put that back on because I’d really appreciate it? That was such a good cocktail.
J: Do you feel like they thought it was maybe seasonal?
A: Probably. I didn’t go into too much investigative journalism. I was just enjoying the view with my father-in-law and having a nice cocktail.
J: What’s the Astoria again? I can’t remember.
J: Oh, okay.
A: I’m pretty sure. That’s what I had so I’m hoping the Astoria is actually what it was named, because they had that center of the cocktail before-
J: Yeah, for New York.
A: The Manhattan, the Brooklyn, the Astoria, the Red Hook. I mean, I get that Brooklyn’s the best so we get two. No other borough gets two cocktails, but the Brooklyn does. Which is funny because it’s from Manhatta. But yes, that’s what I had and that was really about it. Just taking some time off. I’m also getting ready for Italy. There’ll be a lot of really delicious wine so I’ve been trying to not drink a lot recently. So we wanted to talk today about something I think that’s in the news a ton and that is the recession and whether or not… I’m not going to debate whether or not we’re going to have a recession. I think there’s a lot of people who are still having that debate. I mean there was this really amazing analysis in The Times recently about just what’s going on with the recession and looking at the job market and some people saying, “Well, there are so many jobs available still and there’s still so much resignation that perhaps we’re not going to have a recession. Because if employers still want to hire, then that usually indicates that there’s money and demand and all that stuff. And if people are resigning from their jobs, that means they’re resigning. Usually you don’t resign to not have a job, you resign to have a better job with more pay.” So we’re not going to debate whether or not there’s going to be a recession. We’re going to take the… I think what will be interesting is to have this conversation based on whether there is one. So the conversation that we would need to-
J: Assuming there will be one.
A: Let’s assume there’s a recession. And so then if we assume there’s a recession, the conversation now that I want to have is, what happens to this premium wine and spirits market? So you’ve had a boom in both for a few years now and you have lots of people who are divesting from lower-end spirits and wines, buying higher-end spirits and wines and talking about the larger companies. And you have this belief that that’s where the market is headed and that may or may not be true. So I’m curious what both of you think, if we go into a recession, what will happen to premium wine and spirits?
J: From a consumer point of view?
A: Yes, from a consumer point of view. When I talk about the regular, the business side, we will a little bit, but I don’t care if Diageo buys another brand, it’s more will the consumer buy the brand Diageo buys?
Z: Yeah, I think-
J: I think what we’re going to… Oh, go ahead, Zach.
Z: Well, I was just going to say, before we go any further talking about what we think will happen in the future, I think we should spend a moment discussing what the conventional wisdom surrounding consumer behavior and especially what consumer behavior regarding alcohol has been in prior recessions or periods where a recession might have been happening. And the general consensus and conventional wisdom is that people drink their way through recessions. Consumption does not stop. In fact, in some cases it might even increase. But the general knowledge has been that people become much more price-conscious, much more sensitive to that sort of thing and therefore may look to, whatever, de-premiumize their drinking, looking for more affordable options, for lesser premium options, consuming at home more and going out less. And so I think we should start our conversation from the baseline that that’s what the, I think again, conventional wisdom is and that’s why people are curious to see and or have been predicting that this imminent recession is bad for this premiumization trend. Just wanted to put that out there before we went any further.
J: Yeah, I mean I think there’s a lot of speculation that the category or super premium will continue to grow; it just won’t grow as much as we’ve seen it in the past couple of years. So what I think will happen is that people will continue to purchase super premium but just not as much and they’ll balance it with other less- premium offerings. You can’t have it all the time, you can’t have it exclusively if we’re going through a recession. But you can still have it sometimes and maybe we’ll go back to seeing it more for celebrations.
A: So I think the one thing that no one has really talked about yet when it comes to these recession predictions is the impact of Covid. So basically what everyone keeps saying is sort of what Zach, you were saying, right? We’ve gone through them before, what we always know is that people drink. And that is true and I think that will be the case, right? The vices are usually pretty recession-proof. People are willing to buy less paper towels or do something else less first before they get rid of something that helps them relax or that’s part of being social, etc. Alcohol is really one of the last things that people cut. But then you know what? You’ll hear some people say is the conventional wisdom says yes, but they’ll trade down a little. So maybe if they drink X brand of bourbon, they’ll buy the bourbon that’s $10 cheaper and say it’s fine. That, I actually am not sure, will happen this time. And the reason for that is I think this is going to be the recession that, if it comes, I think what it hits really hard is on-premise, because consumers in Covid learned how to make cocktails, how to cook, how to bake bread, and that these nice bottles of wine and spirits that they were drinking at restaurants were a lot cheaper when they bought them off-premise.
J: Yeah, I think people are hip to the markup now.
A: Yes, totally hip to it.
J: And it’s really bad. It feels really bad now.
A: Yeah, the markup is very high right now. I don’t know what you’re seeing in Seattle, Zach, but here it is very rare that you see restaurants with wine lists that have a lot of bottles under $75. And people are going to say, “Cool. I can go to the wine shop and I know that there are bottles for 30 bucks that I like that I can get two to three of for the price I would get one bottle here on your list. That’s what I’m going to do and I’m going to go back to making Martinis and Negronis at home and be just fine and have a nice time and I’m not going to go out to dinner as much and I’m definitely not going to have drinks out.” And I think that is where, if I were in the on-premise business, I would be very cautious right now. If this happens, am I prepared? Because I think it really is going to hit much harder than it has in the past because usually in the past, people have traded down in both. But I think again, just from looking at the lens of what Covid did, Covid taught everybody how to do this stuff at home and I think that there’s a lot more confidence in people’s ability to do this at home. People bought wine fridges, people bought nice glassware, people have all these things now. And right now going out is more of a part of living life. We’re done. People think the pandemic’s passed, whatever. It hasn’t, but it has, whatever you want to say about Covid. So they like going out to dinner now and it’s a nice thing and it’s fun and the restaurants are packed and that’s great, but if a recession comes they’ll be more than happy to go right back to their houses and do what they had done before very confidently this time, which I think is really, really important to note.
J: Yeah. I also think this is wrapped up in the conversation we’ve been having around service and hospitality and restaurant staffing and that as well. I think initially people were really happy to get back into restaurants but perhaps at this point, when they’ve had a few experiences that haven’t been wonderful at restaurants, it’s an even better reason to stop going and to be at home.
A: And you’re already seeing people who are starting to complain about the prices and they’re being felt more.
J: Prices and service on top of that is like…
Z: Well, and I think the other thing that is important to note here is that in addition to a recession perhaps lining up with behavioral changes that Covid brought, there’s also the reality that a recession might be lining up with some other kinds of changes that we have seen in the drink space which is, even though on the podcast I think we have fairly been a little bit dubious of this notion that there’s this huge group of people who are really trying to be either mostly sober or drinking in a limited fashion, I do think that there’s this thing that you see in recessions and it is probable that we’ll see it in this one as well, which is people don’t say, “Well, I’m going to cut this thing out of my life entirely,” be it drinking, going out, whatever, “But I’m going to cut back, I’m going to reduce the amount I do this because it feels more manageable to cut my spending on this thing that I enjoy a little bit than to excise it entirely.” And I do think that we might see that across all channels, that might be both an on-premise and off-premise thing and might feed into this sustained success of premium categories. Because when people are going to drink they may decide, “You know what? Yeah. I’m only going to drink three nights a week, but those three nights I’m going to have a $40 bottle of wine. Because in the end it’s still less than me having a $20 bottle of wine every night, say.” Or, “I’m going to have a nice bottle of bourbon. I’m going to drink a little less of it, or with less frequency than a cheaper bottle and drink more.” And that I think is one possibility. The other thing I would say, too, is that in this question of people going out and their behavior in restaurants and bars and stuff like that is, I also think that you’re going to see, if we’re not seeing it already, we talked about markups and menu prices as being one way in which businesses are responding to the current economic environment and climate. Another one, and I don’t know exactly how this will play out, but I again think I’m seeing it more here in Seattle where the restaurant market industry has never been as robust as it is in New York and has never been as vibrant. I mean, it’s a good restaurant scene but it’s not New York City, is a lot of places limiting hours, being open fewer days, in the way that they were in the early return from Covid when people were dining only outside or they had limited capacity inside, you had limited hours because you had just limited, either people, there was a limited audience because a lot of people were uncomfortable going out or whatever. I think you will see, especially once we get through the holiday season when I think people will still expect a fair bit of going out in revelry, but in January and February and March I think you’re going to see a lot of places cut back on hours where they can, limit to maybe four dinner services a night, or a week, rather, and maybe limited hours because all the costs that go along with it are so high and if consumers are not eager to go out and spend money, and not just go out and eat but go out and drink. Again, to talk about what you said at the outset Adam, this question of whether people are willing to pay restaurant and bar prices for drinks. That’s what has traditionally floated restaurant top lines is the drinks program.
J: Of course.
Z: And I think that as we’ve been pointing out, that fact has become more acutely clear to the broad drinking public in a way that it never was pre-Covid. And so a recession where people are maybe feeling a little bit more insecure about finances or just wanting to be more cautious is only going to heighten that tension and that person might decide, “You know what? Do I need another $18 cocktail? Maybe not. Do I need another $75 bottle of wine? Maybe not. Maybe I’m still wanting to go out to eat because I don’t want to cook because I may have dabbled in it in Covid, but you know what? I realized I f*cking hate it or I’m bad at it or I don’t like doing dishes or I don’t like going grocery shopping or whatever.” But the truth is that for most restaurants, food is not a profit center. It’s at best, break even. Often it’s a loss leader. And if people are making the decision to not drink out or to drink less out, that’s going to create, again, real problems for on-premise that I think won’t have anything to really do with premiumization and it will have to do with the financial model for the restaurant industry in this country.
A: I agree. It’s going to be really interesting to see what happens, especially because as we’re all noting, I think the desire will be to drink at home, but I do think that at home, the drinks will be premium. I don’t think… So the other thing is I think a lot of consumer behavior… This idea that consumers trade down hasn’t been as strongly proven in drinks. You’re usually loyal. Like if you’re a Dewars drinker, you usually stay a Dewars drinker.
J: It just feels like it’s a hard thing to do once you have something really good.
A: Like if you’ve decided that you like Napa Cabs, you’re probably not going to substitute and you’ve drank… Maybe Napa Cabs, the wine you’re drinking, you’re used to them. You probably are not going to say, “You know what? I’ve heard Paso is a good substitute.” You’re going to keep drinking Napa Cabs. That’s just what you’re going to do. And that’s the same with most of these categories. You’re going to find people who say, “This is what I like. This is what I’m going to drink,” and they just won’t drink them out, but they’ll continue to drink them. So I think in the world of premiumization, we’re on that trend now. millennials and Gen Z and Gen X are all trading up from the price points that their parents paid. And that’s just going to stay that way. It just depends on where they trade up. Do they trade up on-premise or do they just abstain from drinking on-premise and do they drink nicely at home? But I think the idea of them drinking nicely is now what they’re-
J: Used to.
A: Used to. When they drink, they drink nicely. We’ve said this a bunch over the years. It’s fewer, better things. And that’s this idea of everything amongst, especially the millennial and Gen Z, X, like fewer better clothes. So higher-end jeans, buy two or three pairs, you don’t have to have 20 pairs. It’s like a nicer jacket, one. It’s more, it’s higher-end staples and premium, and that is a trend that’s been going on in things like fashion for the last five, six years and it’s definitely, I think, what we’re seeing happen in alcohol as well. And I don’t see how that just immediately… The person who drinks a nice, I don’t know, bourbon is almost like, “You know what? I’m going to trade down to…” I don’t know.
Z: Well, it doesn’t even matter the brand.
J: A less-nice bourbon.
A: A bottom-shelf spirit, a bottom-shelf brown whiskey. They’re just not going to do that.
Z: And I think part of that-
A: This is the one pleasure they have.
Z: And I think part of it, too, is that, in a way that has never been, or not never, but a way that has been less true in this country in the past, for a lot of people, what they choose to drink has become a part of their self- identity in the same way that, as you pointed out Adam, the shoes and clothes and things they choose to wear became a part of people’s identity. And we accept that in fashion someone might have made the decision to buy fewer pairs of jeans, but if they’re a, I don’t know the high-end jeans companies very well, or brands very well, but if they have a brand that they believe in or that they feel like is connected to them in some way, they’re just going to not buy a new pair as often, they’re going to maybe take a little better care of them, etc. And I think the same is very much true with drinks. If you become the person who really has interest in having the bourbon collection or the tequila collection or whatever, you’re not going to suddenly decide that actually you just will take anything that says tequila on it and costs $18. That’s just not going to be how you see yourself. And so your decision will be to, like I said, either to just suck it up and that’s the thing that you continue to spend money on or you’ll drink a little less, you’ll buy a little less, but you’re not going to suddenly revert to a much less expensive version of the equivalent of a knockoff brand in that category. And so I have one last question in this, or I have a question in this vein for you guys, too, because I think it’s something that is really interesting as it comes in conflict with this conventional wisdom about recessions. I assume you guys, like me, have been, I feel like recently, barraged with a lot of press releases and information about a lot of really high-end collaborations on products, which, I mean look, it’s not to say that individual brands or companies can’t misjudge the market and some of these could be ideas that they thought would be good and now they’re like, “Oh sh*t, we’re putting this out into a hostile market.” But I tend not to believe that. I think these companies generally have a pretty good idea of where the economy and where the market is going. And so the fact that they’re releasing these $300, $400 bottles of spirits that are these cross-collaborations or just special bottles, etc. these wineries are putting out, especially these California, Napa wineries are putting out these, again, high-end products that are, again, collaborations. Some of them might be connected to cryptocurrency. It’s a little weird to me, but again, who am I to judge? I think-
A: That’s just stupid.
Z: Yes. Not the purview of this specific conversation, but I just, I’m curious if either of you have thoughts on that or if it just feels like another sign that whatever this recession is going to bring, it’s not what previous recessions have brought in beverage alcohol.
A: So what’s the question again?
Z: Well, it’s like we-
Z: Well, just like, do we think that-
A: Hot collabs?
Z: I don’t want to talk about collaborations as a whole, I think that’s another conversation entirely. But just assuming you’re seeing all these product releases and announcements that are multiple hundreds of dollars a bottle for whatever spirit or wine, is that a sign that these companies as a whole are like, “Yeah, we’re not scared of this recession. We think people are spending.”
A: I think so. Yeah. I think 100 percent it’s a sign.
Z: It’s not just the people who are buying a $50 bottle of bourbon, but it’s people buying a $300 bottle that are being served by these kinds of products.
A: Yeah. I think that they’re saying there’s still demand, we’re going to fill it. And there clearly is and usually in… And also, it’s also worth noting, usually in recessions, the high end, the top tier of the population still does very well. They still usually have lots of capital. It’s the lower end and the middle that get the most get f*cked, if you will. But that’s where I think that this one’s going to be a little more interesting. I do think the middle class will still continue, who are fueling the true rise in premiumization, I think will still continue to drink premium, just at home. I think it’ll be really fascinating but I think you’re going to see a lot of people who feel very comfortable doing that and are like, “Cool, I don’t need to budget two drinks, two nights of treating myself nights out a week to get a good cocktail. I know how to make a good cocktail at home and I’m just going to revert to doing that and I can have a nice cocktail four nights a week or five nights a week.” It’ll be really interesting but I do think Covid really did that.
J: Well, I feel like for me it’s, I will go out and have those experiences far less frequently.
A: But I think it’s interesting. Let us know what you think, firstname.lastname@example.org. What are you going to do if it comes for you? But I don’t know if it’s going to, that’s the thing. It’s so weird. The whole conversation is so weird. But let us know what you think, email@example.com, and I’ll chat with you both on Friday.
J: Have a great week.
Z: Sounds great.
Thanks so much for listening to the “VinePair Podcast.” If you love this show as much as we love making it, please leave us a rating or review on iTunes, Spotify, Stitcher or wherever it is you get your podcasts. It really helps everyone else discover the show.
Now for the credits. VinePair is produced and recorded in New York City and Seattle, Washington, by myself and Zach Geballe, who does all the editing and loves to get the credit. Also, I would love to give a special shout-out to my VinePair co-founder, Josh Malin, for helping make all of this possible, and also to Keith Beavers, VinePair’s tastings director, who is additionally a producer on the show. I also want to, of course, thank every other member of the VinePair team, who are instrumental in all of the ideas that go into making the show every week. Thanks so much for listening, and we’ll see you again.
Ed. note: This episode has been edited for length and clarity.