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US off-trade must maintain 22% sales growth

The US alcohol market must sustain 22% volume growth across all drinks categories in the off-trade to offset losses from the closure of bars and restaurants during the pandemic, according to new research from Nielsen.

69% of surveyed consumers claim to buy alcohol brands they know and trust

Nielsen examined how the coronavirus pandemic has affected US alcohol sales in the on- and off-trade after nearly two months of lockdown.

In the on-trade, Nielsen said the declines have “stabilised” week to week, however average sales per outlet remain 68% below rates compared to a year ago in the week ended 25 April. For the rest of April, the rates were recorded at decreases of between 67% to 75%.

Nielsen estimates that wines and spirits in the off-trade are tracking above the 22% volume growth threshold, while beer (including flavoured malt beverages and cider) is struggling to hit the benchmark currently.

Looking forward, Nielsen said there is a need for an “optimised off-premise strategy and support of a responsible return to on-premise alcohol consumption”.

“Meeting that volume threshold would mean total alcohol sales growth gets back to levels prior to Covid-19,” said Danny Brager, senior vice president of Nielsen’s beverage alcohol practice.

“However, unquestionably, we expect the total dollar spending on alcohol will decline. 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 in the instances where it is legalised to do so.”

Brager added that on-trade businesses have “heavily promoted” alcohol through their takeaway operations.

However, he said: “While this is helping encourage consumer adoption and sustaining on-premise operators’ businesses, it’s also contributing to the lower overall consumer spending on alcohol right now.”

In terms of the off-trade, bricks-and-mortar alcohol sales were up 21% during the seven-week period ending 18 April, compared to the same time frame last year. Online alcohol sales have soared for the period, up 234%. Nielsen said alcohol is the fastest-growing e-commerce department among consumer packaged goods.

The Covid-19 crisis has also resulted in a “massive influx in the number of active omnichannel off-premise buyers we’re used to seeing”, Nielsen added.

For the week ending 11 April, the number of off-trade buyers purchasing alcohol was up 27%, compared with the same period a year ago. There were three times as many online buyers in the two-week period ending 18 April than in the two weeks ended 29 February.

A growing number of consumers said they were ordering alcohol with their takeaways from restaurants. For the week ending 25 April, 15% of drinkers include booze in their takeaways, up from 9% in the previous two weeks.

Consumers have also traded up to larger bottle formats, particularly for wines and spirits. Comparing the year ended 29 February to the seven-week Covid-19 impacted period ended 18 April, sales growth in percentage points was nearly 10 times higher for boxed wine and 23 times greater for 1.75-litre spirits. The beer category also saw double-digit sales growth for 30-pack and 24-pack formats in the week ended 18 April.

For spirits purchased in the on-trade through takeaway orders, 37% of Americans indicate a preference for 200ml bottles, while 36% prefer ready-to-drink (RTD) cans of spirits. For wine, 27% of drinkers consider the 375ml bottle to be their serving size of choice.

Brand loyalty 

When it comes to brand preference, Nielsen said many consumers “seem less willing to experiment with a product or brand they don’t have a strong affinity toward”.

Nielsen found that 69% of surveyed consumers claim to buy alcohol brands they know and trust.

In addition, Nielsen said that podcast listeners of legal drinking age are 101% more likely to purchase hard cider, 32% more likely to buy spirits, 26% more likely to purchase beer and 24% more likely to purchase wine. Nielsen said: “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 also noted “strong growth” for mixable products like tonic water, lemon juice and lime juice. Sales of hard seltzers in the off-trade grew 288% in the week ending 18 April.

An April survey conducted by Nielsen CGA found that across all alcoholic beverages, consumers were the least price-conscious when it came to ordering cocktails with takeaway food orders. Additionally, 28% say they would choose a more premium cocktail and 58% would opt for classic serves.

When the peak of Covid-19 passes, Nielsen said there were will be a “leaner” on-trade environment for alcohol with the channel moving into a new phase with continued restrictions.

Nielsen cites Spain as an example, where restaurants have begun to reopen in phases with restrictions on the dining space occupancy and a limit on dine-in service to terraces only.

In the face of incoming restrictions, Nielsen said the on-trade will need more support than ever before from their manufacturer and retail partners.

Nielsen said: “Operators will be turning to the brands that can prove they’ve been essential to the Covid-19 need states of consumers. In fact, 57% of surveyed on-premise operators would value evidence-based recommendations on the optimal drink range/assortment for their bars.”

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