'Cheap vices' stay popular in hard times

People's cheap vices remain popular. Photo / Herald on Sunday

Troubled economic times are turning New Zealanders away from high-cost entertainment and big-ticket items, but the simple pleasures are still very much in demand.

People are determined to have a good time, with nights out at restaurants, takeaways and home entertainment such as a DVD or a good bottle of wine still popular.

According to the Wall Street Journal, virtually the only United States companies to fare consistently well on Wall St during the Great Depression were the purveyors of "cheap vices" like tobacco and sweets.

The same trend is being seen in New Zealand this year. While retailing is flat overall - core retail sales values (excluding car-related spending) rose by just 0.6 per cent in the December quarter - certain sectors are resilient.

The Statistics New Zealand survey showed takeaway food sales were unchanged from the previous quarter.

Russel Creedy, chief executive of Restaurant Brands, which operates KFC, Pizza Hut and Starbucks, said his company's sales increases might be in single digits but they were holding up.

Caffeine addicts were still going to Starbucks for coffee, but they might not get the muffin to go with it.

Fast-food chains were winning as people traded a meal out in a restaurant for a takeaway at home, Mr Creedy believed. "That trend will continue, and I'd say if the fast-food industry starts to see a tailing-off like the restaurants have, then probably it's an indication that things are getting a lot tighter."

The recession seems to have delivered alcohol sales no more than a glancing blow to date.

Sales remained steady throughout 2008, dipping slightly in the December quarter.

Figures released last Friday revealed alcohol available for consumption rose 3.4 per cent, showing that retailers were stocking up.

They also show that the number of available cigarettes increased 4.3 per cent, to 2.5 billion in 2008.

Rob Chemaly, acting chief executive of Liquorland, said customers were becoming a little more discerning in their purchases.

Premium beer sales, for example, were growing, as were sales of wine varieties such as sauvignon blanc and pinot noir.

"It looks like there is a quality approach rather than a quantity approach."

He also believed liquor retailers were gaining from people choosing to entertain at home rather than go out.

However, he said corporate business had slowed. "In the run-up to Christmas we would normally see significant sales to the corporate sector and there was certainly a decline on that."

Richard Sigley, owner of the Nourish Group which runs bars and restaurants in Auckland and Wellington including Danny Doolans, Euro and the Jervois Steak House, agreed the age of the long corporate lunch had faded.

Mr Sigley said mainstream outlets attracting a younger crowd were doing well - sales at Viaduct Irish bar Danny Doolans were ahead of last year.

People were still frequenting the higher-end outlets, but were spending less. "Instead of having a $100 bottle of wine they might have a $50 or $60 bottle of wine."

The most successful sector in the December quarter retail survey was supermarkets.

Although the 1.3 per cent rise in sales values was due largely to higher food prices, Progressive Enterprises managing director Peter Smith said supermarkets did well at any time because they sold essentials.

In charge of the Foodtown, Woolworths and Countdown chains, Mr Smith said customers had become focused on value for money.

The fresh food sections - fruit and vegetables, bakery, deli and seafood - were growing because people did not mind paying to get quality.

He said own brands had also gone through a resurgence, but people still wanted quality. "If they buy it and they're not happy with it, it doesn't matter what price you put on it, they're not going to come back."

Another sector to hold up has been recreational goods retailing, which includes sports equipment, toys, books and stationery.

Rob Smith, chief executive of Paper Plus, said his group was also benefiting from what he termed the "nesting culture", where people would take a book or a DVD home rather than go out.

Pharmacy retailing saw a slight increase in the quarter.

Paul O'Brien, the chief executive of health supplement company Good Health, said sales of dietary supplements through pharmacies rose 12 per cent last year.

He said the industry was benefiting from ageing baby boomers keen to stay well for their retirement.