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Australia's Liquor Industry Faces Challenges Amid Rising Living Costs

2024-09-07 07:38:59.016000

Australia's liquor industry is grappling with significant challenges as rising living costs and changing consumer behaviors squeeze profit margins. Sales growth for the industry was only 0.7% in the year leading up to June 2024, marking the slowest growth rate in 25 years [b90af9f2]. Alcohol sales volumes have also declined by 3.9% during this period, indicating a troubling trend for producers [b90af9f2]. Major retailers are feeling the impact; for instance, Coles reported a staggering 21% drop in liquor store profits, while Treasury Wine's mid-range unit profits fell by 7% [b90af9f2]. Asahi's operating profit in Australia and New Zealand also decreased by 11.7% [b90af9f2].

The overall Australian alcohol market shrank by 3% from 2022 to 2023, reflecting a broader shift in consumer habits. Notably, 23.1% of Australians reported not drinking at all in 2023, a significant increase from 16.4% in 2001 [b90af9f2]. This trend towards abstinence is expected to continue, with the International Wine and Spirits Research (IWSR) forecasting only 1% average growth in the Australian market until 2028 [b90af9f2].

In the context of these challenges, the retail landscape remains mixed. While the U.S. saw a 0.1% decline in retail sales in October, lower than the expected 0.3%, sales at restaurants and supermarkets remained strong [15ad46b8]. This suggests that while some sectors are struggling, others are resilient, reflecting varied consumer spending habits amid economic pressures [2e4be436].

In New Zealand, retail sales showed stability in Q3 2023, with no overall change compared to the previous quarter, countering predictions of a decline [a511c543]. However, motor vehicle and parts retailers experienced a 2.9% dip in sales volume [a511c543]. Meanwhile, Tasmania's retail trade is bouncing back, with a 0.4% increase in December 2023 compared to the previous month, attributed to strong business confidence [06074023].

In Australia, the broader retail sales dropped by 0.2% in October, following a 0.9% rise, indicating potential economic headwinds [aaca686d]. The Australian Bureau of Statistics reported that retail sales dropped by 2.7% in December, with significant declines in household goods and clothing sectors [64f8ee2c]. Treasurer Jim Chalmers acknowledged that weaker retail sales were expected due to cost-of-living pressures and interest rate rises [64f8ee2c].

As the economic landscape evolves, the liquor industry must navigate these challenges while adapting to changing consumer preferences and economic conditions. The interplay between rising costs, shifting consumer habits, and retail performance will be crucial in determining the industry's future trajectory.

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