With the on-premise permanently altered following the COVID-19 pandemic, beer, wine and spirits producers are evaluating how to hold onto and gain shelf space.
To help suppliers gauge potential growth opportunities, Circana has released a State of the Beverage Alcohol Industry report, surveying “the top recent trends and most promising future opportunities for retail and on-premise beverage alcohol.”
Bev-Alc Companies Should Promote Price Stability and Value
Circana noted a slight shift in beer toward premium products, with premium and luxury products making up 50.4% of beer dollar sales in multi-outlet plus liquor and convenience channels in the last 26 weeks, ending November 27, a +2% increase versus the previous two years.
Wine recorded a similar increase in the period (+2%, to 24.6%), while premium and luxury products share of spirits sales declined -2%, to 23.4%, likely due to the growth in “premixed cocktails,” Circana wrote.
In terms of overall price and inflation, bev-alc has recorded one of the lowest price increases compared to other consumer goods. The total bev-alc category increased price an average of +6.3%, below the average dollar-weight price increase of +13.2% gross all consumer goods tracked by Circana POS data through November 27.
As a result, consumers are possibly spending a smaller percentage of their total spend on bev-alc, according to a Circana Consumer Network Panel, analyzing the 52 weeks ending November 6. In 2022, bev-alc – including premixed cocktails and coolers, wine, spirits, beer and cider – had a 38.9% “share of wallet” or dollars spent at all U.S. outlets, a -2.5% decline versus 2021 (41.4% share). Wine recorded the largest decline in the period (-1.2%, to 11.3%), followed by spirits (-1.1%, to 11.4%) and beer/cider (-0.9%, to 15.3%). Premixed cocktails/coolers remained flat versus 2021, with a 0.9% share of consumer spend.
“The economy is consumers’ dominant issue and beverage alcohol companies should promote their relative price stability and offer ways for consumers to save even more,” Circana wrote. “Recognize that ‘value’ doesn’t always equate to lowest price.”
On-Premise Near Recovery But Challenges Will Continue
On-premise bev-alc sales in 2022 (through December 4) averaged $374,000 per venue, a -3.7% decline year-over-year (YoY). On-premise sales increased in California (+1% to $451,000 per venue), the Southeast (+4% to $184,000) and the Mid Atlantic region (+11% to $360,000). The Northeast recorded the largest decline (-18% to 146,000), followed by Texas (-15% to 368,000).
On-premise bev-alc sales continue to fall below 2019 levels. Sales peaked in the quarter ending June 30, 2021 ($124,700 in dollar sales per venue in the quarter), following the Centers for Disease Control lifting mask mandates for vaccinated consumers, but declined over the next three quarters as COVID-19 variants spiked. Bev-alc sales have slightly increased over the last two quarters, averaging $120,500 per venue in the quarter ending September 30, 2022.
In the last quarter before the pandemic, Q4 2019 (ending December 31, 2019), total bev-alc dollar sales per venue averaged $153,000 a quarter.
Category sales are also slowly returning to previous norms, but are still below pre-COVID levels. Beer accounted for 4.5% of on-premise dollar sales at on-premise retailers as of November 27, 2022, a -1.3% decline versus January 2020, according to Circana, citing the National Restaurant Association (NRA). Wine accounted for 2.1% of dollar sales (-0.7% versus January 2020), while spirits and cocktails claimed a 12.3% share (-0.2% versus January 2020).
“While making gains, [the] on-premise will continue to face challenges, including inflation and the labor to support a positive experience,” Circana wrote.
More than half of restaurant operators surveyed by the NRA in 2022 said it would be “a year or more before business conditions return to normal,” citing elevated food, labor and occupancy costs that are expected to continue impacting profit margins. Nearly all respondents (96%) said they experienced supply delays or “shortages of key food or beverage items in 2021” and many projected similar challenges in 2022.
To help regain momentum at on-premise retailers, Circana said “operators can win by reminding consumers of the celebratory atmosphere” of the on-premise. The majority of adults surveyed by the NRA in 2022 (51%) said they “aren’t eating at restaurants as often as they would like,” a +6% increase compared to pre-pandemic surveys, according to Circana. However, there is still “high” “pent-up demand” for bars and restaurant services, which can be emboldened by promoting events and on-premise occasions, Circana said.
Growth Opportunity with RTDs and ‘Better-for-You’ If There’s ‘Point of Differentiation’
Four of the top 10 food and beverage innovations on Circana’s 2022 list of New Product Pacesetters – all products released in the last two years – were bev-alc brands. The four, which were also all beer brands, include: No. 3 Constellation Brands’ Corona Hard Seltzer (tried by 2% of households); No. 4 E. & J. Gallo’s High Noon Sun Sips (tried by 1.8% of households); No. 6 Boston Beer Company’s Truly Iced Tea (tried by 1.8% of households, but has since been discontinued); and No. 7 Anheuser-Busch InBev’s (A-B) Michelob Ultra Organic Seltzer (tried by 1.5% of households).
Of the four brands, High Noon had the highest repeat rate among households that tried the brand (63%), followed by Corona Hard Seltzer (53.2%), Truly Iced Tea (53%) and Michelob Ultra Organic Seltzer (51.7%). Corona Hard Seltzer had the highest media spend in the time – $113.8 million in the 52 weeks since its launch – followed by High Noon ($103.4 million); Truly Iced Tea ($90.5 million); and Michelob Ultra Organic Seltzer ($87.2 million).
It should be noted that three of the four brands have since recorded significant year-over-year declines in both dollar sales and volume, with the exception of High Noon Sun Sips, highlighting the short life cycle of many beyond-beer innovations. In fact, Boston Beer has discontinued Truly Iced Tea.
In multi-outlet plus convenience channels, dollar sales of the Corona Hard Seltzer brand family – the seventh largest “beer seltzer” by dollars sales – declined -48.2% in the last 52 weeks ending February 26, 2023, while volume (measured by case sales) declined 42.1%, according to Circana. Michelob Ultra Organic Seltzer, the sixth largest beer seltzer brand, recorded a -38% decline in dollar sales and -42.1% decline in volume in the period. Truly, the second largest beer seltzer brand, recorded a -20.2% decline in dollars sales and a -24.7% decline in volume.
Eight of the top 10 innovations on Circana’s beer, wine and spirits pacesetters list were beer brands, six of which were hard seltzers. Following the top four previously mentioned brands, the others include: No. 5 Molson Coors’ Vizzy Hard Seltzer (tried by 1.5% of households); No. 8 Molson Coors’ Blue Moon Light Sky (tried by 1.2% of households); No. 9 A-B’s Budweiser Zero (household data not available); and No. 10 A-B’s Bud Light Platinum Seltzer (household data not available).
Again, hard seltzer innovations struggled to keep momentum in 2022 and into 2023. Dollar sales for Vizzy, the fifth largest beer seltzer brand family, recorded a -19.3% decline in dollar sales and -23.3% decline in volume in Circana-tracked off-premise channels in the 52 weeks ending February 26, 2023. The overall beer seltzer segment recorded a -11.9% decline in dollar sales and -16.6% decline in volume in the period.
Better-for-you and non-alcoholic (NA) innovations have performed better, with the Bud NA brand family – which includes Budweiser Zero – increasing dollar sales +38% and volume +27.6% in the period. The brand family is the second largest NA brand family, with 16.65% of dollar sales in Circana-tracked off-premise channels, behind Heineken 0.0 (24.74%).
But again, innovation has no guarantee of sticking. Blue Moon Light Sky was launched in early 2020 as a better-for-you offering “without compromising on taste,” but recorded a -17.3% dollar sales decline in Circana-tracked channels in 2022 and a -20.6% decline in case sales.
Looking ahead, Circana suggested bev-alc producers “innovate like your life depends on it,” with a focus on trends such as better-for-you, premiumization and “new flavor experiences.” Ready-to-drink cocktails (RTDs) pose a “growth opportunity.” However, “brands need to have a point of differentiation,” Circana wrote.
In 2022, one-third of U.S. households bought an RTD (including hard seltzers) in the 52 weeks ending November 6, a -4% decline versus 2021. Consumers spent an average of $143.74 per household in the period, a +14.7% increase versus 2021. Nearly three-quarters of RTD buyers in the period (74.4%) were repeat buyers, a -0.4% decline versus 2021.
The top RTD SKUs in the 52-week period were variety packs – with $3.9 billion in dollar sales in multi-outlet plus liquor and convenience channels – followed by single-flavor SKUs Iced Tea ($469 million); Black Cherry ($389 million); Margarita ($288 million); Lemonade ($279 million); and Mango ($190 million).
The segment is most popular with Gen X consumers (36% of buyers) and Millennials (35%), as well as upper income (42%) and white households (80%).
Better-for-you (BFY) brands also pose a growth opportunity, with the segment increasing across beer, wine and spirits. From 2018 to 2022, BFY beer (excluding traditional light lager) increased dollar sales in multi-outlet plus convenience channels from $606 million, to $4.547 billion. BFY Spirits increased from $774 million to $1.933 billion, while BFY wine increased from $1.603 billion to $1.846 billion.
Low- and non-alcoholic beer, wine and spirits products have also increased dollar sales in Circana-tracked off-premise channels every year since 2019, including a +16% increase in 2022 versus 2021.
The non-alcoholic beer segment has continued its momentum into 2023, recording a +19.5% increase in multi-outlet plus convenience channels in the L52W ending February 26, 2023 – the largest dollar sales percentage increase of all beer segments in the period. The segment also recorded a +9.3% increase in volume, the second largest volume increase after flavored malt beverages (+10.4%).