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On-/Off-Balance Shifting?

Posted on  | December 22, 2015   Bookmark and Share
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Retailers Gain Share Over On-Premise in U.S Wine, Spirits and Beer Market.

After years of losing share to on-premise bars, restaurants and clubs, off-premise merchants are collectively making a remarkable sales and market share comeback that shows no signs of slowing, according to recent data.

Here are some numbers: From 2008-2014, on-premise spirits sales plummeted 6.1 share points from 56.1% to 50% of total U.S. spirits volume sold, while the share of wine sold on-premise fell from 47.8% to 42.2%. In the same seven-year period, on-premise beer sales fell from a 50% share to 44.7% of total U.S. beer sales, reports Beverage Information Group (BIG), Norwalk, CT.

And taking a look at the trend as currently as possible, Technomic, Inc., a Chicago-based research and data provider for theU.S.and global food, food service and beverage industries, has just released their projections for 2015. They have pegged the total on- vs. off-premise share of total adult beverage sales for 2015 to have tipped 51.6% off-premise, to 48.4% on-premise.

Brick & Mortar = Still Building

What exactly is behind these strong off-premise market share gains in selling spirits, wine and beer? Surprisingly, even in the depths of the recent U.S. recession—marked by massive lay-offs and rising unemployment, declining income for the middle class and many banks leery of making small business loans—the total number of off-premise outlets where spirits, wine and beer is sold increased by a robust 2.3% to 183,570 businesses from December 2010 through December 2014, according to Nielsen.

With the exception of what Nielsen categorizes as “mass chain – conventional,” an off-premise sales channel whose number of outlets shrank 1.7% in this period, every other off-premise sales channel experienced some quite stunning numerical and percentage gains. During this four-year time frame, traditional liquor store numbers grew 1.2% in number to a total 43,673 licensees, while notably grocery stores focused on gourmet and natural products (but also featured either beer, wine and/or spirits, think Whole Foods, among others) blossomed by 7.2% to 1,615 licensed locations. Though impacting a smaller base, this growth spurt no doubt reflects American consumers’ growing interest in organic and other farm-to-table food and drink.

“Post-recession, we find that the share of on-premise occasions that include a call for alcohol have not rebounded to pre-recession levels, due to consumers’ interest in controlling their spending, as well as the growth of at-home entertaining and ‘pre-gaming’ and also their interest in being responsible while out in restaurants and bars,” says Donna Hood Crecco, Associate Principal at Technomic.

While the U.S. financial crisis beginning in 2008, with its attendant and severe economic downturn, explains in part slowing beverage alcohol sales at restaurants, bars and club as consumers pulled in discretionary spending outside of the home, it does not explain the full picture, according to John Beaudette, President and CEO of MHW, Ltd., a nationally licensed importer, distributor and service provider for the wine, spirits and beer industries.

Bounce Back Hindered?

Beaudette says, “Traditionally, anytime disposable income goes down, dining out drops. And since the last recession, the middle class has not rebounded as strongly. At the same time, you had off-premise chains and independents continuing to expand. Now, you see groups like Starbucks and Burger King beginning to sell beer and wine, so the traditional 50/50 historical on/off split in spirits, wine and beer sales should return in time. Overall, I am very bullish on the next five years.”

But if forthcoming on-premise gains are going to be driven by chains, what will that mean for the classic dynamic of on-premise tastes leading off-premise trends? Perhaps a clearer delineation between cocktail-savvy bars and restaurants and more cut-and-dried chains will imbue mixologists with even more influence. Or, perhaps the consumers who are increasingly turning to brick-and-mortar retailers will continue to count on these merchants for advice—turning them into America’s leading taste-makers for the foreseeable future.

Of course, the balance of influence will depend in part on the off-premise market share continuing apace. With the U.S. economic upturn now in its seventh year, employment on the rise and gas prices still relatively low, one might justifiably predict that on-premise share of spirits, wine and beer has bottomed out and is primed to rebound. Then again, with some financial gurus predicting another recession is on the horizon, there could be renewed pressure to stay home. So it’s anybody’s guess what the future holds, and the short answer is simply: Stay tuned. 


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