UBS says the fundamentals are still strong for the US spirits market

US spirits wholesalers are continuing to show only “muted” levels of optimism about the category, according to a survey. 

In its quarterly poll of wholesalers, published last week, analysts UBS revealed that 37% of traders are “more optimistic” about their business now than three months ago. The optimism score is above the record low of 32% from last September’s survey, but is still the second lowest level since the survey began in 2009, UBS said. 

“Anecdotal concerns remain about on-trade softness - 25% of (US spirits) market volumes - driven by consumer confidence volatility,”  the analysts said. 

Volumes remained “lacklustre” in Q4, but 63% of wholesalers expect year-on-year volume growth over 2014’s first quarter, the poll showed. Around nine out of ten wholesalers expect price increases in the quarter, which UBS branded “encouraging”. 

The analysts said it was still confident about the category in the US, but short-term concerns remain.

“While we remain structurally optimistic on the outlook for US spirits, we believe that consensus expectations are quite full with more risk on the downside than upside in the short-term,” the analysts concluded. 

UBS noted that the that the US is the biggest profit pool for international spirits companies - 38% of EBIT - but has “low visibility due to country's three-tier system for the distribution and sale of alcohol.