Consumer trends of premiumization, convenience, flavor, and health and wellness continue to drive shopping behavior in both the on- and off-premise channels, experts from NielsenIQ reported during a webinar this week.
Total beverage-alcohol dollar sales in both channels have increased +14%, to $198 billion, in the 52-week period ending October 8, compared to the prior year, NielsenIQ VP of thought leadership Jon Berg said.
“Right now, it’s things like experience, having that authenticity and that exploration and discovery for consumers,” he said. “It’s having flavors – flavors are so important in the U.S.
“And it’s so dynamic as you go across the categories: Convenience, that whole notion around friction-free shopping, whether it’s e-commerce or bricks and mortar, or the on-trade trade,” Berg continued. “Making sure that it’s the right product for the right social setting is so critical.”
Dollar sales are skewed toward the on-premise, where 55% of all spending on alcohol takes place; the other 45% of alcohol spending happens at off-premise retailers.
Both channels have added outlets in recent years.
The number of off-premise outlets selling beer, wine or spirits has increased +1.4%, to 240,463 between October 2021 and October 2022. Convenience stores, which increased their locations by +0.9%, account for the majority of those (50.9%), followed by liquor stores (19.4%, +2.9% YoY), grocery stores (15.1%, -0.1% YoY) and all other outlets (14%, +2.4% YoY), which include wholesale club stores, drug stores, mass merchandisers and cigarette outlets.
There are +2.4% more on-premise establishments operating in 2022 than in 2021, according to TDLinx data shared by the NielsenIQ team. Of the 291,501 outlets open this year, 211,460 of them are primarily restaurants, and 80,041 are primarily bars. Dining-centric establishments increased +2.2% compared to 2021, while drinking-centric establishments increased +3%.
“The market’s definitely in recovery,” Drew Hummel, client solutions director – North America for CGA Strategy by NielsenIQ, said. “But for context, this is still below the 2019 benchmark of just over 300,000 outlets.”
The casual dining segment accounts for 74.7% of restaurants and increased +2.3% YoY. Only fine dining restaurants (4.7% of all restaurants) recorded outlet declines (-4.1% YoY). Polished casual restaurants (3.1%) posted the steepest YoY increase (+4.9%), followed by fast casual (16.7% of all dining establishments, +3.5% YoY). Quick service restaurants, which account for 3.1% of dining establishments, increased +1.1% YoY.
Neighborhood bars (74.7%) make up the vast majority of drinking establishments and outpaced the overall channel with +3.5% growth YoY. Sports bars (12.8% of all drinking establishments) recorded the highest YoY growth at +4.5%. Premium bars (5.7% of all drinking establishments) increased +3.2% YoY.
Premium nightclubs, which account for just 0.24% of drinking establishments, record the steepest YoY declines (-2%), followed by casual nightclubs (6%, -1.5% YoY).
“We see growth in polished casual and premium bars, which definitely speak to premiumization trends that we’ll be touching on throughout the presentation, but fine dining and nightclubs really lag the rest of the market in terms of recovery,” Hummel said. “These are both segments that are likely to be independent and also located in city centers that had more restrictions throughout COVID, So the recovery has been slower in those channels. It’s also worth pointing out that sports bars have benefited from consumers seeking experiences and the legalization of mobile sports betting.”
Hummel pointed out that consumers behave differently between on- and off-premise establishments. Half of on-premise guests agreed or strongly agreed with the statement that they prefer to drink something different while out than while at home.
“One-in-two consumers drink a different category or brand in the on-premise bars and restaurants than they would otherwise typically drink at their home or someone else’s home,” Hummel said. “I’m definitely representative of this. I have a fridge full of beer, usually. But when I go out for a dinner, I enjoy a good cocktail or a pinot noir. So it’s really important to understand the on-premise consumer and segment them differently from the off-premise consumer.”
In the off-premise, consumers tend to vary their behavior according to the category they’re shopping for, Berg said. Beer purchases are planned in advance (81%) more than any other category, followed by spirits (80%), wine (73%) and ready-to-drink canned cocktails (63%). For 14% of both wine and RTD purchases, consumers need to be reminded, higher than both beer (11%) and spirits (10%). RTDs lead the industry in impulse purchases (23%), followed by wine (13%), spirits (10%) and beer (8%).
Beer Category Dollar Sales +15%
Across both on- and off-premise establishments, dollar sales of beer, cider and flavored malt beverages (FMBs) have increased +15%, to $89 billion for the 52 weeks ending October 8, compared to the previous year.
The category skews slightly more toward the on-premise, where 47% of dollars are spent, compared to 42% spent in food and convenience stores, according to NielsenIQ.
In the on-premise, domestic premiums captured the most dollar share (30%, +0.3% in share), followed by craft (28.9%, -1.5% in share), imports (22.5%, +2.7% in share), domestic super premiums (6.4%, -0.2% in share), hard seltzer (3.23%, -0.1% in share), below premiums (2.5%, -0.1% in share), cider (1.4%, -0.1% in share) and FMBs (0.9%, no share change).
Hummel called out Mexican lagers as driving the imports segment’s gains, and noted that hard seltzer’s flatness in share indicates the segment has “reached somewhat of an equilibrium.”
All beer category segments have posted double-digit dollar sales growth in the on-premise this year, led by imports (+48%), FMBs (+42.9%), domestic premiums (+38%), below premiums (+33.8%), domestic super premiums (+32.8%), hard seltzer (+31.2%), craft (+29%), and cider (28.3%).
CGA, the on-premise data firm NielsenIQ acquired in June, breaks on-premise consumers into the following segments:
- Family friendly loyalists (18%), less frequent visitors who go out primarily to eat and tend to stick to familiar brands;
- Habituals (16%), occasional visitors who prefer well-known brands and are loyal to them;
- Curious on a budget (30%), moderate visitors who “enjoy trying different drinks out, but look for value and discounted drinks,”
- Chameleons (25%), very frequent visitors who drink across categories and like both new and familiar brands;
- And Pioneers (11%), weekly visitors with higher incomes who typically trade up.
Of these, chameleons (29% vs. 25%) and pioneers (15% vs. 11%) over-index in beer compared to average consumers, Hummel said.
“Chameleons and pioneers both stand out as key consumer groups that are over-index toward beer,” he said. “Seasonal brands that are extensions of established brand families are a great way to keep these high-frequency visitors engaged and drinking your portfolio.”
In the off-premise, dollar sales have increased +1.9% compared to last year, but case equivalent volumes have declined -3.4%. Berg said he is “really interested to see what this final month will provide in terms of both value and volume.”
“Price increase has really played into this and there’s a give and take to the way frontline price increase has affected dollar sales, but also retailers’ subsidization in terms of consumer promotions,” he continued. “Maybe some of those promotions haven’t been as deep as they were in the past and that’s playing into the dollar sales vs. the volume sales. Right now, volume sales are off from last year, for sure.”
Since the July 4 holiday, beer category off-premise sales have outpaced both 2021 and 2019, then gained enough steam after Labor Day to top 2020’s elevated off-premise spending as well.
“It really sets the tone for a potential positive year-end finish, retail dollar sales-wise,” Berg said.
Most off-premise dollar sales growth is coming from imports (+$861.3 million) and FMBs (+$481.8 million), which is slightly offset by declines in hard seltzer (-$413.1 million) and craft (-$306.6 million).
However, Berg cautioned against drawing conclusions about any interactions between hard seltzers and FMBs or spirits-based RTDs.
“There’s been a lot written about hard seltzer’s decline,” he said. “It’s still a large part of the category as we talked about, but I also would not jump to an assumption that all the losses from hard seltzer are going to either FMBs or to spirit-based cocktails, and actually, [there is] a lot of trade off going on from hard seltzer to craft and to domestic premium.”
In the broader RTD segment – in which NielsenIQ includes malt-based hard seltzer, FMBs and wine- and spirits-based RTDs – hard seltzer leads declines (-10%), followed by wine-based RTDs (-1%). Both FMBs (+15%) and spirits-based RTDs (+57%) posted growth. All four sub-segments’ sales peaked in the summer months.
Spirits-based RTDs’ growth comes off a small base that is “continuing to build” and that is going to have “a lot of new entries coming to the shelf,” Berg said.
“It’s going to be a lot of SKU rationalization that’s going to have to happen in this particular space,” he added.