April 20/Business Monitor International (BMI) -- The super-premium drinks sector has been particularly hard hit by the global economic downturn, having been impacted by trading down and a shift in sales from the on-trade to the off-trade. However, the market is showing signs of recovery, with premium focused producer LVMH reporting strong results for its fiscal first quarter and the world's largest drinks firm Diageo reporting "green shoots" at the top of the spirits market. While BMI recognizes the long-term potential of the sector, it remains cautious about the strength of the current recovery, with a core view being that many consumers in developed markets have yet to feel the full effects of the global financial crisis.
LVMH has reported revenue growth of 20% at its wine and spirits division for the three months to the end of March. Sales were boosted by an increase in demand for Champagne and Cognac. However, the division was boosted by restocking and weak comparable figures, with the first quarter of 2009 marred by the recent onset of the financial crisis, meaning that it is probably unwise to read too much into a single quarters figures. This view is supported by the fact sales at the division in Q110 remained below the level recorded in the same period of 2008.