As we move through the winter holidays and into 2023, beverage alcohol analysts have been weighing in on spirit trends and categories poised to lead in the new year. They’re also tackling questions about where consumers are imbibing and shopping: will economic conditions damper on-premise business? As ready-to-drink cocktails grow, where will brands find successful channels? And how will e-commerce change?
While on-premise has seen some recovery, spirits sales at restaurants and bars have yet to reach pre-pandemic levels, indicating that consumers are increasingly turning to at-home consumption and looking to on-premise for special experiences.
“Around May of this year we were almost to where the wine and spirits share was at pre-COVID levels and then we hit this, I’ll call it a speed bump, and we haven’t been able to recover back to where things looked like they were going,” said analyst Danny Brager during a SipSource webinar in early November.
But that doesn’t mean there hasn’t been growth in certain channels, particularly for RTDs.
RTDs Picking Up Steam in On-Premise, Continue to Grow in Grocery and Convenience
The total global? U.S.beverage alcohol market for 2022 through August is valued at $198 billion, split 55% to 45% between on-premise and off-premise, as reported in new insights from NielsenIQ and Ten CGA. For wine and spirits, on-premise recreational channels have gained the most shares compared to last year (up 0.5%) according to SipSource data. That includes venues like casinos, theaters, stadiums and arenas, theme parks and golf clubs. Travel channels such as lodging and transportation outlets have also picked up share. But a closer look reveals that RTDs are leveraging those channels to creep into on-premise, where more growth is expected in the future.
“We’re in this interesting time where RTDs are going to grow more on-premise, because they’ve been so heavily weighted to the retail side,” said Brandy Rand, chief strategy officer of IWSR, at BevNet Live Winter 2022 in December.
The on-premise share of total spirits-based RTDs increased from 3.5% in 2019 to 10.7% in 2022 and is forecasted to reach 16.5% by 2026, according to IWSR. In the recreational channel, on-premise importance for RTDs was 21.7% compared to overall spirits at 11.5% as reported by SipSource.
While liquor stores represent the bulk of off-premise spirit shares, grocery and convenience stores are gaining with spirits, up 0.7% and 2.1% respectively compared to 2019. That aligns with RTDs being best developed and growing the fastest at those channels, according to Brager.
The IWSR has also been tracking points of purchase for RTDs by spirit base. Consumers that prefer whiskey or brandy as their RTD base are more likely to report enjoying their drink at parties, while those that prefer gin tend to drink RTDs on-premise or on a date. Tequila or gin RTD consumers also may have more affinity with convenience stores. Nightclubs are more popular among tequila, whiskey and brandy RTD drinkers.
In regards to spirits, as the on-premise sector goes through a patchy recovery some segments are being impacted more than others. On-premise channels contributed to more than 40% of the mezcal category’s volume in 2022, and 20-25% of tequila and Irish whiskey’s volume, as reported by SipSource.
“As things have improved in the on-premise but then started to kind of stagnate a little bit, those segments have been benefiting or not benefiting from those headwinds and tailwinds in the on-premise,” said Brager.
Regardless of beverage type, when consumers do drink out, they’re looking for authentic experiences. Half of U.S. on premise consumers seek drinks in bars and restaurants that are different to what they consume at home, according to CGA’s REACH survey.
The Home Premise Continues
Beverage alcohol e-commerce has made leaps since pre-pandemic, fueled by new infrastructure and lockdowns.
“I just think there’s been a bit of a shift from more things that were out of home pre-COVID to more things that are at home, whether it be streaming movies or getting meals and even alcohol delivered,” said Brager.
Now, the rising cost of living may drive drinking occasions back home.
The value of alcohol e-commerce is projected to grow by one-third over the next five years, and the spirits category is expected to account for nearly half of all online sales by 2026. The channel is expected to contribute an additional $10 billion to the beverage alcohol sector between 2021 and 2026, to reach nearly $40 billion by 2026, across focus markets, according to IWSR.
Still, e-commerce growth is expected to moderate as the market enters a period of post-pandemic normalization, despite that the overall trajectory remains upward. While beer will see the largest volume shift to e-commerce by 2026, spirits will contribute the most value, according to IWSR. Beer, cider, and RTDs are projected to gain the quickest growth over the next five years. While the demand for RTDs have often been linked to on-the-go convenience, that may be a misconception.
“What’s really fascinating year over year is when we ask consumers, how do you drink RTDs, because most people consume them at home, most people say they open them up and pour them over ice,” said Rand.
That points to consumers elevating their drinking experience at home, she added.