Breaking Down the Latest Nielsen Insights

Here’s a sobering statistic: One in six neighborhood bars have closed since 2004, according to a new Nielsen CGA report.

“That’s a huge figure,” Matthew Crompton, Nielsen CGA associate client director, said during the latest Power Hour presentation, hosted by the Brewers Association.

Crompton and Nielsen CGA senior vice president Scott Elliott broke down the latest on-premise data, which showed that a staggering 12,766 neighborhood bars have closed over the last 12 years (as of December 2016, Nielsen CGA counted 58,678 neighborhood bars).

Crompton called it a “long term decline of key drinking channels” and “a hard one to bear” for the beer industry.

Meanwhile, 60,906 new restaurants have opened in the same time frame, and those outlets aren’t necessarily making up for the lost drinking opportunities. Crompton said 52 percent of restaurant-goers reported drinking a beer while out. Conversely, 70 percent of consumers who visited a neighborhood bar had a beer.

Crompton dug even deeper, noting that the average drinking establishment sells 91 percent more beer than the average restaurant. According to Nielsen, outlets that the research group classifies as “drinking” establishments sell 827 pints per week. “Eating” establishments, however, sell just 434 pints per week.

Restaurant-goers also appear to be giving up on domestic premium beers, where the biggest disparity between bars (461 pints per week) and restaurants (175 pints per week) is evident. The “high end” beer segment ($25 per case and above) fares much better, however, maintaining velocity of 211 pints per week in bars compared to 179 pints per week in restaurants.

Imports are driving the on-premise growth of the “high end,” despite craft beer accounting for the most volume. High end beer volume performance grew by 2.3 percent during the 52-week period ending February 25. Meanwhile, non-high end beer volumes declined 6.3 percent, driven by poor domestic premium sales.

Not surprisingly, the largest and most established brands were the hardest hit. Beer’s top 10 brand volumes declined 3.3 percent. Similarly, volume sales for the top 10 craft brands declined 3.4 percent on-premise. Meanwhile, the “long tail” of craft brands grew 2.5 percent, Elliott said.

“This presents a great opportunity for craft brands to come in and get a part of it,” he added. “But where the real challenge is, is sustaining that growth and making sure people stick with you.”

Want further proof that brands near the end of the long tail are performing well on-premise? Dollar sales for the newest breweries grew 5.9 percent, according to Nielsen, while sales of maturing brands grew 1.3 percent over the last 52 weeks. However, established brands struggled, as dollar sales declined 2.1 percent.

“When you are small and when you are new, the growth is there,” Elliott said. “The real challenge comes when you want to mature and you want to establish.”

Additionally, sales of draft craft beer is driving category growth, accounting for 84 percent of all craft sales, Elliott said. On-premise sales of packaged craft beer declined 8.8 percent during the same period, however.

Elliott credited the experience of getting a draft beer, which most people cannot replicate at home, along with quality and price for driving the growth. Nevertheless, he stressed the importance of providing a quality draft beer experience.

“It’s all about getting the right distribution for your draft brands, not just getting distribution,” Elliott said.

Other key takeaways included:

Craft beer consumers are willing to pay more: A Nielsen CGA survey found that craft beer drinkers are willing to pay more than they are being charged for 12 oz. bottles ($5.73 vs. $4.60/bottle) and 16 oz. draft beer ($6.35 vs. $5.30).

“Especially in the larger markets, the more mainstream accounts, there is perhaps an area there where the craft prices could be increased,” Elliott said.

Millennials are finding different places to drink beer: 23 percent of millennials surveyed said they visited a brewpub or taproom; 13 percent said they visited a “grocer-aunt”; 12 percent took a brewery tour; and 25 percent visited a “premium bar.”

Millennials are also making more purchases in so called “third space channels,” which include sporting events, music festivals and tasting rooms. Millennials made 23 percent of the craft beer purchases and 23 percent of the import buys outside of the off-premise and on-premise channels, according to Crompton.

Nielsen CGA asked consumers what is and isn’t craft: Consumers polled said beer with “unique flavor” and “high quality ingredients” that isn’t mass produced is what they considered to be craft beer. What isn’t craft? A beer that is “mass-manufactured” by a “large company” and lacks taste and flavor.

Consumers are “sophisticated, promiscuous and have an unprecedented demand for choice”: High end beer drinkers have about 26 go-to brands. On a night out, 27 percent of consumers drink two or more categories; 39 percent of consumers drink two or more beers; and 8 percent of millennials only drink beer. In contrast, 31 percent of 55-year-old drinkers only drink beer.

The days of being a beer guy, like my father was and many other people’s fathers were, where they just drink beer, those days are long gone,” Elliott said. “Keeping people within your category, let alone your brand portfolio, has never been harder, and it will only get more difficult.”

Women still don’t drink as much as men: Nearly 25 percent of 21 to 25-year-old women haven’t been out for a drink in the last three months. Forty-four percent of women surveyed said they drink beer in on-premise situations, compared to 63 percent of men. Additionally, 40 percent of women surveyed said they drink cocktails in on-premise environments, versus 19 percent of men.

Danny Brager, the senior vice president of Nielsen’s beverage alcohol practice, also shared a variety of recent trends during last week’s Beer Marketer’s Insights seminar in Chicago.

The presentation highlighted a number of big picture takeaways, including the following insights:

Overall per capita drinking volume is flat, but beer is losing share to wine and spirits: According to Brager — who cited data from the Beer Institute, National Beer Wholesalers Association, the Distilled Spirits Council and BIG – beer accounted for 58 percent of “share of servings” in 2003, a figure that has dwindled to just 50 percent as of last year. During that same period, wine’s share of servings grew from 14 percent to 18 percent while spirits’ share of servings grew from 28 percent to 32 percent.

Beer Volumes are in decline: According to Nielsen data through April 22, 2017, off-premise volume sales of beer are down 0.2 percent while sales of wine are up 1.5 percent and spirits are up 2 percent. On-premise, it’s a similar story. Volume sales of beer are down 1.9 percent while volume sales of wine are up 1.2 percent and sales of spirits are up 1.4 percent.

Consumers spend $234 billion on alcohol: Beer is competing for attention both on- and off-premise. According to a 2016 Nielsen Homescan, 74 percent of spirits buyers also buy beer while shopping off-premise. Meanwhile, 63 percent of beer buyers also buy wine — compared to just 47 percent that purchase spirits. Also, during a typical night out, half of millennial drinkers (ages 21-34) drink across two or more beverage alcohol categories.

Consumers are confused: According to a 2016 Nielsen study, 24 percent of shoppers do not know what drink category they’ll buy from before entering off-premise retail stores. Meanwhile, 29 percent of consumers do not know what drink they’ll purchase before entering on-premise establishments. At a company level, 72 percent of shoppers don’t know what brand of beer they’ll purchase before entering off-premise retail shops while 75 percent don’t know what brand they’ll buy on-premise.

High End growth opportunities still abound: On average, beer that sells for less than $25 per case still accounts for 54 percent of category dollars and two-thirds of volume. In convenience stores, where as much as $18 billion of beer sales occur, 64 percent of the dollars are from non-high end brands. In contrast, non-high end brands account for just 43 percent of dollar sales in food stores, according to 52-week Nielsen all channel data through April 22, 2017.

Not all millennial consumers are created equal: More than 30 percent of the alcohol consumed by those ages 21-34 is beer, more than wine and spirits, according to Nielsen. In contrast, about 45 percent of alcohol consumed by those ages 55 and above is wine. Brager argued that the younger generation is “critical” to beer, but their incomes could also dictate what types of alcohol they are able to afford. 54.4 percent of millennial drinkers make less than $50,000 annually, according to Nielsen statistics from 2015. Just 15.4 percent, however, earn more than $100,000 annually and Brager contends that these two groups will consume alcohol differently.

According to Nielsen Scarborough data collected between 2015 and 2016, millennial consumers making less than $50,000 per year indexed significantly lower (61) than those earning over $100,000 (160) when asked if they drank craft beer during a prior 30 day period. In other words, older millennials are “more inclined to trade up,” Brager shared. 56 percent of “older” millennials said they were “extremely likely” to purchase a premium craft brand, compared to just 49 percent of younger millennials.

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