Alternative Indicators: What Pinched Consumers Are Buying at the Liquor Store

Summary

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WSJ What’s News – Alternative Indicators: What Pinched Consumers Are Buying at the Liquor Store

Date: November 19, 2025
Host: Alex Osola (Wall Street Journal)
Guests: Nadine Sarwat (Bernstein, Director & Equity Research Analyst), Spencer Jacob (WSJ Investing Columnist)

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Episode Overview

This episode is the finale of a four-part series on “Alternative Economic Indicators,” exploring how changes in U.S. liquor store shopping—specifically, a noted surge in small-format liquor bottle sales—shed light on broader consumer behaviors in a time of financial pressure. Host Alex Osola investigates why Americans are squeezing their spending, what it means for the liquor industry, and how this fits into the larger economic landscape.

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Key Discussion Points & Insights

1. Trend: Shift Toward Smaller Liquor Bottles

• Big Brands See ‘Small Format’ Growth: Liquor giants Diageo and Brown Forman report increased sales in smaller bottles (50ml, 100ml, 375ml), despite overall declines in U.S. liquor sales.
• Quote:
  • Diageo CEO:

    "I think the small format that we have of the 50 CL in the Don Julio 1942 has been doing amazingly well... because people are able to use that from an affordability play or a cash outlay play." (01:03 – 01:28)

  • Brown Forman CEO:

    "...we have noticed recently...small sizes are driving momentum and share in the US Market." (01:34 – 01:47)

• Widespread Trend: Nadine Sarwat confirms this rising preference for smaller bottles is observed across all major spirits producers and even in beer, indicating broad changes in consumer behavior. (03:37 – 04:19)

2. Drivers Behind the Trend

• Economic Pressure, Not Down-Trading:
  • Even as wallets tighten, consumers prefer to maintain brand quality, choosing to buy less rather than "down-trading" to cheaper brands as happened during previous downturns.
  • Quote (Sarwat):

    "The consumer today is saying I still want to purchase premium brands. I do not want to down trade the quality or type of brand that I am buying. I'm just going to buy less." (04:24 – 05:21)

• Unprecedented Pattern:
  • Unlike the Great Financial Crisis, when people chose cheaper brands, today people stick with their favorites but purchase smaller quantities—a "break in the pattern." (05:24 – 06:06)
• Pressure Across Income Levels:
  • Economic pinch spreading from low to middle-income Americans—reflected in spending patterns and affirmed by both sales data and consumer surveys. (08:04–08:54)

3. Other Contributing Factors

• Health & Wellness Trends:
  • While moderation is part of the story, the size discrepancy suggests economics play a bigger role, as only large-format sales are dropping significantly.
• Changing Social Habits:
  • Some of the trend could stem from different ways of socializing and showing up to gatherings with premium—albeit smaller—bottles.
• Broader Economic Challenges:
  • Tariffs, concerns about inflation, and even immigration enforcement affecting certain brands’ sales (notably in beer geared towards Hispanic consumers).
  • Quote (Sarwat):

    "A lot of Hispanic consumers for fear of immigration crackdowns are not shopping and socializing. So that is clearly another factor that is driving weakness in alcohol from the beer perspective." (09:44 – 10:39)

4. Bigger Picture: Piecing Together Economic Indicators

• K-Shaped Recovery:
  • Wealthy consumers maintain spending, buoyed by stock and housing wealth, while everyone else feels notably pinched.
• Significance of Small Bottles in Context:
  • Surging small-format sales seen as a microcosm: Americans want to preserve quality-of-life choices, but are forced to cut back in volume.
  • Quote (Jacob):

    "You have pockets of extreme strength... and then you have general moderation to even weakness in almost everything else. Normal people... are feeling a bit anxious, a bit pinched for various reasons.” (11:43 – 12:11)

  • The top 10% of earners now drive about half of all consumer spending:

    "...if you look at the top 10% by income or by wealth versus the other 90%, about half of personal consumer spending is happening from that 10%. Everyone else is the other half." (12:24 – 13:07)

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Notable Quotes & Memorable Moments

• Alex Osola’s personal reflection on "inner bargain hunter" sets a relatable tone.

  "I'm always tempted to buy those big bottles of liquor. Less money per ounce, right? ...But even so, I usually don't get them because I get sticker shock." (00:16 – 01:03)

• Sarwat: "Death by a thousand cuts" vividly describes extended inflation’s impact on consumers' ability to enjoy former staples. (04:24)
• The "billion dollar question": Sarwat’s phrase for whether these shifts are temporary or a sign of something structural. (08:04)

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Timestamps for Key Segments

• 00:16 – 01:47 – Introduction, anecdotes, and recent earnings call quotes from Diageo and Brown Forman CEOs.
• 03:37 – 06:06 – Nadine Sarwat details the surge in small-format sales and explains it as unprecedented behavior.
• 08:04 – 09:34 – Discussion of consumer health, spending pressure, and how different income groups are affected.
• 09:44 – 10:39 – Exploration of other factors (e.g., immigration, tariffs) impacting alcohol sales.
• 11:43 – 13:07 – Spencer Jacob connects the liquor market indicator to the broader theme of economic divergence and spending inequality.

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Conclusion

This episode underscores how close scrutiny of liquor sales, particularly the surprising growth of smaller bottles, serves as an "alternative indicator" of American economic anxiety and resilience. Instead of sacrificing brand and quality, more consumers choose to cut back quietly, one bottle size at a time—a microcosm of how many Americans are navigating today’s bifurcated economy. The discussion puts these subtle economic signals in context alongside other unconventional indicators, revealing both the strengths and vulnerabilities running through the current U.S. economic landscape.

Transcript

[A]

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[B]

My inner Bargain Hunter quite like a trip to the liquor store. Hi there. Just host you? Oh no, I got one. Thanks. I'm always tempted to buy those big bottles of liquor. Less money per ounce, right? In some ways it's the thrifty choice, but even so, I usually don't get them because I get sticker shock. 60 bucks for a bottle of gin. Why not get the same gin in a smaller bottle for less money? Turns out I'm not alone in thinking this. Some of the biggest liquor companies in the world are reporting a rise in the sales of their smallest bottles. Here's the CEO of Diageo, the company behind brands like Johnnie Walker Smirnoff and Don Julio Tequila, on the company's fiscal 2025 earnings call in August.

[C]

I think the small format that we have of the 50 CL in the Don Julio 1942 has been doing amazingly well because you might not see that in the volume numbers, but you see that in the transactions because people really are able to use that from an affordability play or a cash outlay play, but still will be able to enjoy what is great, great liquid and the.

[B]

CEO of Jack Daniels parent Brown Forman on the company's third quarter and year to date earnings call back in March.

[C]

I do think something that is new at least, or at least new to me, but that we have noticed recently is how much the small sizes are driving momentum and share in the US Market.

[B]

The rise of small liquor bottles is particularly notable because U.S. liquor sales overall have been on the decline in the past few months. Diageo, Brown Forman and French distiller Pinault Ricard have said that their US Sales have fallen. So I wanted to understand, is this a trend and if so, what's driving it? I talked about it with Nadine Sarwat, a director and equity research analyst at brokerage firm Bernstein. First, though, we needed to establish what size liquor bottles we were talking about. What's the technical term for that? Because I've heard like nips. I've heard airplane bottles. Like what do you call them?

[D]

I just refer to them as a smaller format bottle. I think the Nipser airplanes are likely the very small ones.

[B]

It's part of Sarwat's job to track what's going on with these big liquor companies. She said that during the six years she's been covering this space, she's never seen consumers behave the way they are right now. But is it because of short term economic pressure or are they changing their habits for good? And what can it tell us about the broader economy? This is a special episode of what's News. I'm Alex Osola for the Wall Street Journal. This is the fourth and final installment of our series on alternative economic indicators. In our first three episodes we dug into Nevada's employment rate, copper prices and heavy truck sales to provide different snapshots about how the US Economy is doing. Now we're turning to liquor sales as a way to glimpse into consumers minds and their wallets. At the end of this episode we'll zoom out and consider what all of these indicators together show us about the state of the U.S. economy. Here's my conversation with Nadine Sarwat. I had been reading there was a rise in the small bottles of liquor in the spirit space.

[D]

Yeah. So the three sizes where we have seen growth ahead of the overall market have been 50ml, 100ml but also the 375ml bottles. So that is all smaller than the standard 750ml bottle that you would normally associate with full strength liquor.

[B]

And are you seeing this across the companies that you cover that there's growth in these sort of smaller sizes or only among certain ones?

[D]

We are hearing that from all of the spirits companies that we cover. And to be perfectly honest, we are seeing similar behavior in beer as well. So this does seem to be a broad behavior that we are observing in the consumer in the alcohol space more generally.

[B]

So of course my question is what's driving the rise in this size?

[D]

So what's interesting is what we are seeing consumers today is death by a thousand cuts on the back of inflation for many years. At the end of the day alcohol is a staple product but it has discretionary elements. It's not toilet paper, it's not laundry detergent. So what we're observing is a consumer that has a pressured wallet. Groceries are more expensive and many other things are more expensive, especially if you're thinking of a low income consumer and increasingly a middle income consumer. Now the consumer today is saying I still want to purchase premium brands. I do not want to down trade the quality or type of brand that I am buying. I'm just going to buy less. So data from the Bureau of Economic Analysis implies that the Share of wallet that is being spent on alcohol is actually flat to slightly up versus 2019. But people are getting less volume for their buck now. They're choosing to keep that premium consumption and not downtrend.

[B]

Have you seen other fluctuations like this?

[D]

No. This is so unprecedented. We look at the great financial crisis, what we saw is that volume was impacted in spirit. However, you didn't see meaningful decline. Instead what you saw is people chose to down trade. Instead of buying a super premium vodka, you're going to buy premium vodka instead of premium, you're going to buy mainstream vodka instead. Today what you're seeing is consumers want to keep the brands that they love but are going to consume less. This is a break in the pattern and this is why we're hearing a lot of questions as to how much of this volume decline is cyclical versus structural, which is questions on health and wellness, et cetera.

[B]

I was going to ask about that because my understanding was that people are generally drinking less and sales of at least the bigger sizes are going down. Where does that feel fit in with this trend?

[D]

There are a couple of ways to answer that. The first is that if you thought that the weakness we're seeing in the alcohol market today was all about this health and wellness moderation trend, we would expect all sizes of liquor bottles to be down. Instead, we're seeing a discrepancy between which are doing better and which are seeing most strict decline. One answer could be that people are simply socializing differently today. Another is that your wallet is pressured and you still want to show up to your friend's barbecue or party with a very good quality liquor, but you have less money to spend on it and so you will get a smaller bottle size. That doesn't imply that people are anti alcohol. That's actually more an indication of pressured on wallet.

[B]

Coming up, we hone in on what other factors might be tipping the scales on liquor sales. That's after the break.

[A]

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[B]

We're back with Bernstein analyst Nadine Sarwat talking about liquor. My next question for her, how can we tell if the fall in liquor sales more broadly is because of changing long term habits like consumers who stop or cut back on their drinking or short term financial pressure?

[D]

Oh, that's the billion dollar question. So if we start really high level, the number one question is the health of the American consumer spending. We're starting to see points of pressure, low income consumers mostly it seems to be spreading to some middle income consumers. So from that perspective, anything that relates to consumer health are important things to watch. When it comes to alcohol in particular, the one thing is we're going to get a new set of dietary guidelines this month or any day now. And that was a key focal point of what is the recommendation going to be on alcohol.

[B]

So back to that high level data that you were talking about. That's part of the reason I wanted to take a look at this. Because consumers feel generally frowny face but they keep spending. Looking at that high level data, are you going to be looking for one of those things to shift?

[D]

I think the discrepancy between those two data points is the best indication we have that Americans are feeling the pinch differently today. Higher income Americans have a huge amount of savings, they are in high paying jobs and therefore many companies that are exposed to that consumer are doing well. If you then turn to low income and middle income consumers, that's where you have seen a lot of the squeeze. And we never even had that deficit during the great financial crisis. So I think the only way you can make sense of the disconnect is to say that Americans are experiencing the economy differently.

[B]

Are there any other factors or variables that could be affecting these lower volume sales? Like immigration, like tariffs, Are those factoring in here?

[D]

Immigration absolutely is. You look at beer consumption, Constellation Brand, the company that I cover has super premium Mexican imports and their core consumer is Hispanic. And a lot of Hispanic consumers for fear of immigration crackdowns are not shopping and socializing. So that is clearly another factor that is driving weakness in alcohol from the beer perspective. The other consideration, tariffs. Many surveys have consumers worried about inflation in the coming quarter or months. Nielsen CGA just put out their September survey that showed that the number one reason for some people cutting back on alcohol was health and wellness. But the number two reason, and a very close number two was economic and financial constraints. And that number was even higher for young Americans who are experiencing the pinch, even stronger.

[B]

That was Nadine Sarwat, director and equity analyst at Bernstein. Up next, what do all four indicators we've looked at in this series show us about the current state of the US economy? That's after the break. Throughout this series we've focused on indicators to take the temperature of the US economy, especially during the government shutdown, when the normal data that can do that has been unavailable. We've looked at Nevada's flat year over year employment rate to understand how consumers are feeling about spending. Dr. Copper's high prices as a sign of global economic activity, falling heavy truck sales as a glimpse into the manufacturing sector, and as you just heard, growing sales of small liquor bottles which show what kinds of corners pinched consumers are willing to cut. So what kind of picture are they painting altogether about what the US Economy looks like right now? I brought this question to WSJ investing columnist Spencer Jacob.

[E]

I think the story that those indicators are telling about the economy is that you have pockets of extreme strength which many people are focusing on. For example, a boom in data center construction, AI everything, and then you have general moderation to even weakness in almost everything else. People are not feeling too confident. Normal people and not very wealthy people are not spending freely, are feeling a bit anxious, a bit pinched for various reasons.

[B]

Let's talk about that for a second because that's something that came up in the series as well. This sort of K shaped economy. The wealthy are doing fine. The not so wealthy are doing not so fine. Does the data that you've seen for these and other indicators back that up?

[E]

It absolutely does back it up that the wealthier are doing better than the rest of people. And specifically, if you look at the top 10% by income or by wealth versus the other 90%, about half of personal consumer spending is happening from that 10%. Everyone else is the other half. So someone who's wealthier, their likelihood of spending is very much tied to their wealth. Stock market wealth and housing wealth, both of which could hit a reversal. Stock market obviously can turn on a dime. You've had this epic boom, especially in tech stocks. If that reverses, they might pull back spending a bit. And since they are such big spenders now, that is going to have a big effect on the whole economy.

[B]

That was WSJ Investing columnist Spencer Jacob and that's the end of our Alternative Indicators series. Today's show is produced by Julie Chang with supervising producer Jana Herron. I'm Alex Osola and we'll be back this evening with a brand new show. Until then, thanks for listening. Want to break free from the AI frenzy and truly transform your marketing? With Adobe, the path to ROI is clear and the opportunity is all around you. Let's turn AI's promise into your marketing reality.

[A]

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