American consumers spent $89 billion on beer, wine and spirits at off-premise retailers last year, marking a $13.5 billion increase over 2019 beverage alcohol sales, according to market research firm Nielsen IQ.
This increase in spending represents a shift caused by the pandemic. As public health policies to stop the spread of the COVID-19 in March 2020 forced the closures of bars, restaurants, arenas, schools, gyms and offices, consumers shifted their purchasing to off-premise retailers.
The shift to off-premise spending hasn’t been enough to offset the beer category’s on-premise losses. In 2020, dollar sales of core beer (excluding flavored malt beverages, hard seltzer, hard tea, hard kombucha and hard coffee) increased 8.7%; volume sales increased 6.1%. To make up for the loss of sales at bars and restaurants, the category needed a 22% increase in volume sales, which it didn’t achieve, NielsenIQ reported.
The team from NielsenIQ and Nielsen CGA (the company’s on-premise arm) examined why, how and where those purchases took place during a webinar last week. Here are five takeaways from the presentation.
1. Drinkers Still Gravitate Toward Experiences, Convenience, and Health and Wellness
2020 may have upended the beverage alcohol industry, but three driving consumers insights have remained the same — experience, convenience, and health and wellness. Within beverage alcohol, products fulfill these needs in different ways, and some, such as hard seltzer, check all three boxes.
Drinkers have increasingly turned to cans as a more convenient and portable packaging format for several years, but their popularity ratcheted up in 2020 across all categories. Dollar sales of sleek cans, the taller and slimmer 12 oz. cans preferred by major hard seltzer makers, increased 92%, according to NielsenIQ. At 52%, cans became the majority of craft beer dollar sales; in ready-to-drink spirits, cans’ dollar share grew 84%. And dollar sales of canned wine increased 61%.
Amid a pandemic that forced them to stay home as much as possible, consumers embraced convenient shopping methods as well as convenient package formats. E-commerce sales skyrocketed, and the number of people purchasing alcohol online grew 167%, according to NielsenIQ.
To create experiences at home, consumers embraced high-end products and ready-to-drink alcoholic beverages to mimic the bar experience. Off-premise dollar sales of RTD products increased across the board:
- Spirits-based hard seltzers +466%
- Hard seltzers +157%
- Ready-to-drink spirits +142%
- Hard kombucha +128%
- Wine cocktails +97%
- Canned wine +62%
- Wine spritzers +37%
- Hard tea +35%
- Small-size wine +22%
- Flavored malt beverages +12%.
“We saw ready-to-drink products completely skyrocket in 2020,” Danelle Kosmal, NielsenIQ VP of beverage alcohol practice, said. “We saw them growing over the past couple of years, but really the biggest bump was last year when they reached $8.5 billion in off-premise sales, and again, that’s across ready-to-drink across beer, wine and spirits.”
Several segments within ready-to-drink beverages also tick off consumers’ desire for better-for-you beverages, such as hard seltzers and hard kombucha. They’re not only looking for lower-calorie or lower-carbohydrate offerings, but have a “continued need and interest in transparency — to know what they’re purchasing or what they’re consuming with their food and beverages,” Kosmal said.
The ready-to-drink space, particularly the hard seltzer segment, has accelerated the blurring of lines between producers and products, Kosmal said. In 2021, at least two hard seltzers will launch as joint ventures between beer companies and non-alcoholic beverage companies (Molson Coors and Coca-Cola’s Topo Chico Hard Seltzer, and Heineken and AriZona Iced Tea’s SunRise Hard Seltzer); Anheuser-Busch InBev’s Karbach Brewing will release a ranch water hard seltzer, and Molson Coors will also debut a slate of new non-alc products through its partnership with L.A. Libations.
2. Hard Seltzer Drinkers Doubled in 2020
The hard seltzer segment reached $4.1 billion in off-premise sales in 2020, far surpassing the $1.5 billion in sales in 2019. That growth came from new drinkers, Kosmal said.
“It doubled in 2019,” she said. “And then in 2020, the number of seltzer buyers doubled again, so coming off of a couple of really strong years.”
The number of people buying hard seltzers increased 98% in 2020, and about half of all seltzer buyers make repeat purchases. In NielsenIQ’s previous analysis of hard seltzer consumers, the segment had been drawing share equally from beer, wine and spirits, Kosmal said.
“In 2020, we have seen a bit of that shift, with seltzer drinkers spending more of their dollars in seltzers and in spirits, and less of their dollars in wine and or beer,” she said. “In 2020, spirits gained nearly a sharepoint among seltzer buyers last year.”
Hard seltzer still hasn’t hit its ceiling, Kosmal said.
“There’s still so much opportunity for local and regional players to come into play,” she said.
3. Non-Alcoholic Offerings Grew Across Categories
Off-premise dollar sales of non-alcoholic offerings across beer, wine and spirits increased 37% in 2020, NielsenIQ said.
“I personally think it might have been even higher if we wouldn’t have had the pandemic,” Kosmal said.
In the beer category, non-alcoholic offerings satisfy consumers’ interest in healthy lifestyles and convenience, as some suppliers, such as Stratford, Connecticut-based Athletic Brewing, can skirt the three-tier system and ship directly to consumers’ homes.
4. Beer Has Runway in E-Commerce
The popularity of online alcohol ordering, whether through dedicated marketplace platforms such as Drizly or click-and-collect ordering through brick-and-mortar retailers such as Total Wine and More, grew in 2020.
Dollar sales for online orders across total alcohol increased 232% in 2020, according to NielsenIQ. Online beer orders increased 233%, but spirits (+396%) and FMBs (+389%) far outpaced the industry. The wine industry, which has long sold its offerings in the e-commerce channel, lagged behind but still increased +198%.
Wine was the only channel to lose e-commerce dollar share (-7.7 sharepoints) in 2020, but the category still accounts for 68% of e-commerce dollar sales, followed by spirits (19%), beer (9%) and FMBs (4%).
Increases in the channel were driven by new users — online alcohol purchasers increased 167% in 2020. Most of those shoppers were buying for same-day consumption: spirits (66%), beer (64%) and wine (58%).
5. On-Premise Sales Still Depressed
Hampered by reduced capacities in 74% of states, the bar and restaurant industry has yet to recover from nationwide shutdowns that began in March 2020. However, the financial pain hasn’t been spread across the industry equally.
“The channels changed significantly,” Nielsen CGA client solutions director Matthew Crompton said. “The channels changed a lot; it’s forced change.”
Hardest hit in the on-premise sector were transportation-based outlets, such as bars and restaurants inside airports and bus and train stations; 21% fewer of these locations were open in January 2021 than in January 2020. Other segments with declining open rates include fine dining (-14%), catering (-13%), stadiums/arenas (-10%), casual dining (-9%) and bars (-7%).
Other channels were less affected; casinos saw no change in January 2021 compared to January 2020. Lodging-based restaurants’ open rate declined 1% and golf and country clubs and quick-service restaurants each posted 4% declines. Fast casual restaurants’ number of locations increased 11%, which was the only channel to increase between January 2020 and January 2021.
In total, independent restaurants have declined 8%, while chain restaurants have dipped 2%.
Other Tidbits:
- At the peak of the pandemic-induced pantry-loading phase in April 2020, consumers spent 22% more on alcohol per shopping trip.
- Dollar sales of grain alcohol increased 258% in the first three months of the pandemic, because consumers were making their own hand sanitizer, Kosmal said.
- Spirits experienced seasonality: Sales of gin and cordials spiked between March 2020 and May 2020, while cognac and French champagne sales received a boost between June 2020 and August 2020.