Data Watch: Premiumization Trend Going Strong, For Now
Off-premise trends continued to accelerate for the week ended March 21, with total beverage alcohol sales up 55% compared to the same period a year ago, according to recent Nielsen data. From week to week, sales were up 28% compared to the week ended March 14.
There were huge sales increases across all categories, with spirits showing the largest at a whopping 75%, followed by wine at 66% and beer/FMB/cider at just over 41% sales growth for the week compared to a year ago.
1.75L SPIRITS GROWING DOUBLE THE RATE OF 750ML. Sales of grain alcohol were “off the charts” again for the week through March 21, which is likely still linked to consumers buying more to make their own hand sanitizer.
All spirits segments were way up, with ready-to-drink cocktails, tequila and gin still leading the pack for the week.
Consumers are clearly looking for package sizes that’ll last longer with 1.75L sizes growing at double the rate of the 750ml segment. Nielsen attributes that to a few non-exclusive possibilities: 1) consumers stocking up; 2) consumers seeking the best price on a per ml basis; and 3) consumers seeking more trusted and familiar brands which tend to be available in larger pack sizes, according to Nielsen’s Danny Brager.
So far, mid-price and premium price tiers are growing at the highest levels, but it’s something to watch, Danny notes.
BOXED WINE HITS TRIPLE DIGIT GROWTH. Consumers were still pantry loading the week ended March 21. Boxed wines led growth, with 3L box wine reaching triple digit increases compared to the same time a year ago, and 5L boxes up 66%. Cans are also in triple-digit growth.
As with spirits, consumers haven’t gravitated toward value brands yet, sticking to the $11-$25 price range.
Danny notes that in Nielsen-tracked channels, gains are led by the Liquor channel, but in some states it may be the only channel option due to state laws. Food stores also displayed very strong gains.
ONLINE SALES UP 243%. Online, bev alc growth rates were “out of the ballpark.” Total bev alc sales were up 243% online, according to Nielsen E-commerce measurement powered by Rakuten Intelligence.
The number of online buyers for the week through March 21 was more than twice the average number of online alcohol buyers over the last 52 weeks.
Wine still accounts for the lion’s share of online sales, but spirits is gaining share.
Similar to off-premise, consumers are favoring larger pack sizes more online.
Moving forward, “we’ll not only be watching growth rates carefully (unlikely that these sort of growth rates will be maintained), but also closely watching price tier growth – and whether the past years of premiumization might be in jeopardy,” says Danny.
A HANDY CHART. Our friends at Nielsen also sent over this handy chart, which compares weekly alcohol sales from the week ended March 7 to the week ended March 21 compared to the same time period a year ago.
3% OF RESTAURANTS ALREADY PERMANENTLY CLOSED
Bars and restaurants are among the hardest hit by COVID-19 containment measures. Restaurant sales were down 47% between March 1 and March 22, according to a survey of 4,000 restaurant operators conducted by the National Restaurant Association.
More than half of respondents (54%) have switched to off-premise service only. 3% have already permanently closed, 44% have temporarily closed and 11% say they expect to permanently close within the next month, per survey.
Seven in ten respondents said they’ve had to lay off employees and reduce the number of hours worked. Half of respondents expect more layoffs and hourly reductions over the next month.
“This is uncharted territory,” says the association’s svp of research Hudson Riehle. “The industry has never experienced anything like this before.”
WSJ: BEER CAN WEATHER A RECESSION BETTER THAN SPIRITS
Investors may be more favorable towards spirits stocks than beer right now, but “a drawn-out recession might change [investor’s] tastes,” reports The Wall Street Journal.
Indeed, if you look at some of the top dogs in spirits — like Diageo, Pernod Ricard, Remy Cointreau and Davide Campari – they have on average “lost 15% of their stock-market value this year,” per report. While big beer companies – like ABI, Heineken, Carlsberg and Constellation Brands – “are down 30% by comparison.”
WHY SPIRITS ARE SAFER, FOR NOW. The report states that “liquor stocks look safer in the short term,” as brewers “are slightly more exposed to lockdowns that are closing bars and restaurants globally.” Citi data from the report shows ABI and Heineken “make 34% and 38% of sales” through the on-premise respectively, while the channel accounts for 29% of Diageo and Campari’s sales.
Plus, “brewers have a higher percentage of fixed costs than distillers,” so “the drop in sales has an outsize impact on profit margins.”
BUT SPIRITS MAY RUN INTO TROUBLE LATER IN THE YEAR. “Liquor companies may face pain later in the year,” the report says, as spirits are more seasonal with sales picking up around year-end holidays, and “wholesalers must clear unsold stock before they can place new orders, which may delay brands’ recovery.”
Brewers on the other hand “should rebound more quickly, as beer’s shorter shelf life means bars carry less inventory.”
All in, “liquor stocks tend to do well when economic growth is strong and consumers are trading up to premium brands. Beer consumption is usually more defensive during downturns.”
DRIZLY AND BEVMO EXPAND PARTNERSHIP IN CA. Drizly has expanded its partnership with BevMo, adding 90 stores to the network (for a total of 145) in Bakersfield, Fresno, Stockton, Modesto, Napa Valley and Palm Springs as well as increasing the number of stores in Los Angeles, San Francisco and San Diego. “We are glad to be growing our partnership with Drizly at a time when online shopping and home delivery have become invaluable to our shoppers throughout California,” says BevMo ceo Matt Champion. “While we planned to expand our partnership with Drizly, recent developments accelerated the need for convenient home delivery options statewide.”
SGWS LAUNCHES ONLINE COVID-19 RESOURCE HUB. Southern Glazer’s Wine & Spirits has launched an online hub for trade customers to provide updates and resources to help businesses in the hospitality industry navigate the impact of COVID-19, per a release. Check it out here.
CAMPARI AMERICA DONATES $1 MILLION TO ANOTHER ROUND, ANOTHER RALLY, a non-profit that raises emergency funds for hospitality workers. Campari is encouraging others to donate as well with the #AnotherRoundChallenge. “The impact bartenders have on our industry is immeasurable. With this unprecedented crisis upon us, now more than ever, we need to band together to support hospitality workers in their time of need,” says Campari America managing director Ugo Fiorenzo.
“O, wind, if winter comes, can spring be far behind?” – Percy Bysshe Shelley
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