RI Pernod Ricard

By Carol Ryan 

A year into the worst health crisis in modern history, French Champagne, chocolate novelties and tequila have all shot up consumers' grocery lists. Current trends bode well for liquor stocks, less so for some of the early winners of the pandemic.

This time last year, shoppers were panic buying after the World Health Organization declared a global pandemic on March 11. Supermarket shelves were stripped of essentials such as toilet paper, dried pasta, hand sanitizer and canned soup. Staples companies such as Lysol-maker Reckitt and paper-products giant Kimberly-Clark initially struggled to meet demand.

Today, Americans and Europeans are buying less at the grocery store overall. Data from Nielsen show that sales of fast-moving consumer products over the four weeks through March 21 -- the latest figures available -- were down 10% in Europe's five biggest markets compared with the same period of 2020. In the U.S., where so-called pantry loading was more intense, sales were down 16%.

The contents of shopping trolleys have also changed. The fastest-growing consumer products in Europe over the four weeks through March 21 were chocolate novelties -- perhaps partly due to the earlier Easter holiday -- Champagne, tequila, premixed alcohol and ready-to-drink coffee. In the U.S., sales of Champagne and prepared cocktails were up 78% and 69% respectively.

It has been tough for more mundane categories to maintain the blistering growth they saw in the early days of the pandemic. Sales of goods such as dried pasta and hand sanitizer must now be compared against last year's unprecedented sharp increase. For the four weeks in question, sales of toilet roll dropped 54% year over year in the U.S., while hand-sanitizer sales fell 27%. Bleach and soap sales are also off in Europe. Although demand for hygiene products is higher than before the pandemic, cleaning brands belonging to the likes of Reckitt and Domestos-owner Unilever will start to look like underperformers.

The indulgent contents of shopping baskets add to a picture of improving sentiment. Europe's consumer confidence index ticked up in March and is almost back to its long-term average. America's equivalent measure is at its highest level since the pandemic began.

Alcohol's strong showing in supermarket sales partly reflects the continuing closures of bars and restaurants in many markets. Social-distancing restrictions tightened in March in countries such as France and Italy.

Still, the shopping data should reassure investors who have piled into liquor stocks. Shares in Diageo, which makes Johnnie Walker whiskey, and its Paris-based rival Pernod Ricard are trading at close to decade-high multiples of projected earnings. Rémy Cointreau, which has higher exposure to the booming U.S. and Chinese cognac markets, now fetches 50 times profits.

If 2020 will be remembered for toilet-paper hoarding, 2021 is shaping up to be a good year for alcohol.

Write to Carol Ryan at carol.ryan@wsj.com

(END) Dow Jones Newswires

April 08, 2021 06:57 ET (10:57 GMT)

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