Sales May Be Flat, But Adult Beverage Dollars Are Up

Cocktails As the year nears its end, there’s good news and there’s bad news.

The good news: Premium adult beverages are continuing to provide momentum in the on-premise channel despite consumer caution. This, according to research firm Technomic’s just released BarTAB report. According to the company, higher-priced spirits and beer categories in particular are growing in restaurants and bars, although growth there is slowing overall. On-premise grew in total volume (0.7%) and sales (3.5% to $97.3 billion) in 2012 as final numbers for last year are fine-tuned.

The mixed news: Overall beverage alcohol volume for 2013 is expected to be flat by year’s end, but value will again show an increase, according to Technomic. “Two seemingly opposing trends are at play," explains Eric Schmidt, director of research. ‘The slow economy and a level of uncertainty have some consumers reducing their visits to or spending in restaurants and bars, while at the same time their interest in more complex flavor experiences is prompting them to continue exploring more expensive products, such as single malt Scotch, imported vodka and craft beer. It's reminiscent of the 'drinking less but drinking better' trend of the early 1990s.”

The bad news: Beer remains the largest category in both volume and dollars but major domestic categories are continuing to decline in 2013. Spirits was the fastest-growing alcohol in restaurants and bars, expanding 1.9% in volume and 5.6% in dollars in 2012. Total spirits volume is expected to be flat by year-end 2013, although several higher-priced categories continue to grow. Wine's growth trajectory is slowing overall, but the largest segment, domestic table wine, is posting ongoing gains.

Competition between spirits and beer for Millennial consumer drink purchases has increased, the company says.

“Millennials seem to be making drink choices in restaurants and bars more on the basis of desiring a particular flavor experience or as the result of influencers such as the occasion, food being ordered or promotions than due to loyalty to a particular type of drink," observes Donna Hood Crecca, senior director at Technomic. “Their adult beverage portfolio is broad and varied – Millennials are driving many of the trends occurring in spirits, wine and beer, including the growth of premium and above-premium products.”

Total spirits, wine and beer sales are expected to finish 2013 with a 2.4% increase despite a -0.5% decrease in volume. Sales are projected to increase again by 2.4% in 2014 to exceed $210 billion, although it is anticipated that overall volume will be essentially flat (-0.3%) at 7.6 billion gallons.

Driving the increased dollar trend is ongoing premiumization across all categories, and Technomic predicts sales growth will be strongest in the on-premise channel in the year ahead. “The outlook calls for continued slow economic growth, and some consumers will be challenged next year, much as they have been in 2013,” says David Henkes, vice president and leader of Technomic’s adult beverage practice. “However, we see affluent consumers spending on-premise, and also expect many consumers to call for the affordable indulgence of a drink at a bar or restaurant in 2014.”

Technomic projects ongoing growth of more expensive categories such as single malt Scotch, imported vodka, Irish whiskey, straight American whiskey, craft beer and Champagne during the year ahead. “Higher-priced products are poised for growth in 2014, although brands at any price point that successfully deliver on unique flavors or forge strong connections with specific groups of consumers are likely to gain share,” observes Eric Schmidt, director of research at Technomic.


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