New Nielsen data suggests the drinks industry has a long road ahead to return to pre-COVID-19 growth levels following the pandemic's effect on alcohol sales.
Despite booming in-store and online sales, Nielsen estimates the US alcohol market needs to sustain 22% volume growth across all alcohol categories sold in the off premise in order to merely level off from the impact of closed bars and restaurants.
“We expect the total dollar spending on alcohol will decline," said Danny Brager, SVP of Nielsen’s Beverage Alcohol practice.
"Consumers are shifting the dollars they would have spent on alcohol in a restaurant, bar, or tasting room to alcoholic beverages they can buy at a lower mark-up from retailers, online merchants and even directly from the supplier.”
Another factor that is restricting growth is on-premise establishments offering alcohol for sale alongside takeaway food orders, at prices often far below what they would have charged pre-COVID-19.
Brager says that “alcohol is being heavily promoted by on-premise establishments trying to ignite their take-home food business. While this is helping encourage consumer adoption and sustaining on premise operator’s businesses, it’s also contributing to the lower overall consumer spending on alcohol right now.”
Wine and spirits are pacing above this 22% volume growth threshold, but beer has fallen short of that benchmark to date.
Nielsen has highlighted three ways the “COVID-19 effect” on alcohol is transforming sales.
1. Embracing omnichannel buying
During the seven-week COVID-impacted period ending April 18, brick-and-mortar alcohol dollar sales in the US were up 21% year on year, while online sales of alcohol skyrocketed 234%.
"In fact, alcohol is the fastest growing e-commerce department among consumer packaged goods," Nielsen notes.
A growing number of consumers are ordering alcohol with their takeaway from restaurants (14% of US consumers in the week ended April 25, up from 9% in the previous two weeks). And half of those consumers would consider ordering a cocktail kit or pre-made cocktail.
2. Trading up to larger pack sizes
Many consumers are trading up to larger pack sizes in their off-premise purchases. For wine and spirits in particular, there has been unprecedented demand for larger pack sizes far beyond the norm. Comparing the year ended February 29 to the seven-week COVID-19 impacted period ended April 18, sales growth in percentage points was nearly 10 times higher for boxed wine and 23 times higher for 1.75-litre spirits.
The beer category has also seen consumers trading up to larger pack sizes, with double-digit sales growth among 30-packs (+21%) and 24-packs (+20%) in the week ended April 18.
3. Focusing on favourites
Nielsen has found many consumers seem less willing to experiment with a product or brand they don’t have a strong affinity toward.
This has led to some retail outlets have paring down the number of items they carry, focusing on securing stock of a smaller set of key products.
Strategies for the future
Nielsen said the current state of play in alcohol offers opportunities for the future.
Alcohol companies need consider all channel strategies, from traditional routes to online or offline retail and direct-to-consumer models.
Brands should consider alternative ways of connecting with buyers, such as podcasts. Recent research from Nielsen Scarborough revealed that podcast listeners of legal drinking age are 101% more likely to purchase cider, 32% more likely to purchase spirits, 26% more likely to purchase beer and 24% more likely to purchase wine.
"When it comes to reaching the right buyers with the right messages during the COVID-19 pandemic, this may be a key audience for alcohol brands to tap into," Nielsen notes.
Sales of alcoholic seltzers sold in the off premise grew 288% during the week ended April 18, and contributed more than 50% of category dollar growth across beer, FMB and ciders. RTD cocktails were also key to the growth of the spirits category.
This appetite for pre-mixed cocktails could drive much-needed growth for on-premise establishments.
An April survey conducted by Nielsen CGA found that across all alcoholic beverages, consumers were the least price conscious when ordering cocktails with takeaway food orders. Additionally, 28% say they would choose a more premium cocktail and 58% would opt for the cocktail favorites they know and love.
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Nielsen is a Corporate Partner of the Drinks Association.