As we approach the holiday season, consumers may be pulling back on their alcohol spending.
That forecast comes from Wine & Spirits Wholesalers of America (WSWA)’s SipSource Holiday Trends and 2024 Preview, during which analysts Danny Brager and Dale Stratton broke down wholesaler depletion data across categories.
Here are five key takeaways including where spirits are finding surprising growth, how de-premiumization may impact RTDs and luxury spirits, and what to expect from consumers this holiday season.
Unexpected Channels
Based on analyzing sales year-to-date through August, expect to see more growth in unexpected channels for spirits. On-premise recreation channels such as golf clubs, entertainment venues and private clubs are faring better (+7.6%) as well as transportation channels (+24%).
Off-premise those channels include mass merchandisers such as Walmart (-0.7%) and the c-store chain, up 7%, compared to a 6% decline for spirits off-premise overall.
RTD Growth Strong, Creates High Churn
As ready-to-drink cocktails find new outlets, the channel shifting is boosting on-premise — now approaching 15% of RTD volume. Overall, sales are driven by cans in the 355 ml size (+19.4%), with growth in the 200 ml (+23%) and 375 ml (+19.4%) sizes as well. Vodka still dominates as a base, but tequila as a base is now growing faster.
The churn within the category points to its continued growth and the opportunity for brands to move up in the ranks.
“Five of the top 15 weren’t in the top 15 last year,” Brager said.
The analyst expects that rate of change to continue, predicting we’ll soon see new RTDs in the top 15: Brager highlighted brands that are growing at least at a 50% rate and making sales over $500,000 in the last 13 weeks off-premise, including names like Stateside, Fresca Mixed, Vita Coco, Topo Chico and June Shine, the latter of which is rumored to be exploring a potential sale.
But Brager warned that as spirits volume grows faster than value, de-premiumization trends may have an impact on RTDs too. Jose Cuervo, Crown Royal, Bacardi, and Fisher’s Island cocktails were all down double digits in the last 13 weeks off premise ending September 9 compared to last year.
Luxury Down 14%
Looking at spirit volumes, the analysts highlighted a dip in luxury spirits priced above $100, echoing other reports of those segments taking hits after major growth during the pandemic. Spirits priced above three figures were down in volume by 14% in the 12 months up to August 2023, compared to 10.9% increas during the same period ending August 2022.
“I think there’s a lot of pressure against that luxury segment as consumers are reevaluating their spending— and keep in mind that a couple years ago they might not have been able to travel or they might not have been able to go out and go to sporting events or entertainment events because of COVID-related lockdowns,” said Brager. “But now all those things are lifted and they can spend money in a lot of different places.”
Mid-Tier Is Up
Meanwhile, trends in spirits priced in the $17-to-$24.99 and $25-to-$49 ranges are down just -0.6% and -2.9% respectively, faring much better than the under $16 segment and over $100.
“We anticipate that we’re going to continue to see that the middle actually may perform better here in the short term,” Stratton said.
The three categories where under $25 has been performing better versus above $25 segments year-to-date through August are: cognac (-9.8% versus -24%), vodka (-3.8% vs -7.3%) and tequila (+3.7% versus +2.6%).
But what does that mean for the holiday season?
Temper Holiday Expectations
“There’s always going to be a consumer group out there that is premiumizing and trading up, it’s just a matter of to what degree are they doing that,” Stratton said.
For the winter holidays analysts are expecting a little improvement for premium spirits, with the above $25 segment typically showing a 3% boost in share.
“That three month share is always bigger during the holidays,” Stratton said.
Still, the analysts said to temper expectations based on last year’s pullback of high end spirits beginning in the holiday season which accelerated into the first quarter of 2024.
The temperature check on consumers reads similarly: 42% of consumers are planning to spend less on alcohol this holiday season, and almost half say they’ll spend the same amount, with only 12% of respondents planning to spend more, according to survey results shared from Morning Consult.