What's Behind the Slowing Growth of Alcoholic Beverages?

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What's Behind the Slowing Growth of Alcoholic Beverages?

05/15/2018

NEW YORK — With today’s abundance of information and places to make purchases, and the availability of products, it is becoming increasingly challenging to stay ahead on the retail front — even in categories that have historically boasted clearly defined paths to purchase, like alcoholic beverages.

At a very high level, factors like shifting demographics, stagnant wages, health and wellness trends, fewer drink-led occasions and declining big brands are playing a part in decelerating alcoholic beverage growth, according to Nielsen.

Nielsen alcoholic bev sales growth

In the case of beer, an over-abundance of products is a factor as well, and the number of beers available continues to grow (1,398 at year-end 2017 vs. 1,336 in 2014). But the real factor affecting choice is how many places consumers can buy alcohol. In fact, the number of places (on- and off-premise) that sell alcoholic beverages in the U.S. grew by more than 100,000 between 2007 and 2017 (528,594 vs. 644,647).

This expansion isn’t specific to the alcoholic beverage sector, however. In fact, total retail across the U.S. is outpacing population and sales growth, predominantly in the cosmopolitan suburbs.

When looking specifically at retail involving alcoholic beverages, the number of newly opened and newly closed locations that sell alcohol provide clear insight into current consumer preferences. Notably, there are a number of closures among fine dining locations, while there is significant growth in casual dining locations.

The Millennial Effect

Some of the shifts in outlet preference can be connected to consumer demographics. For example, 67 percent of millennials say they’ve visited a brewery tasting room more than they did in the past year, and 63 percent say they’ve visited a Tiki bar more than a year ago. The popularity among 21-39-year-olds of new drinking establishments like these speaks to the importance of nontraditional outlets going forward, Nielsen noted.

Nielsen alcoholic bevs new channel options

New channel options like breweries aren’t just appealing to younger drinkers, however. According to Nielsen CGA’s latest on-premise consumer survey, 61 percent of all U.S. drinkers said they visited a brewery or brewery tasting room more than they did in the past year. A few factors are driving this: 30 percent say they want to try something new; 55 percent want a different selection of beer; and 38 percent want more specialty or limited run beer options.

The expansion of new drinking outlets could be good for the overall alcoholic beverage market, but it could also present new challenges for traditional establishments. To date, however, many consumers are not visiting new options instead of traditional ones. For example, 63 percent of millennials say that visiting a brewery did not replace a visit to another establishment that serves alcohol. In looking at the popularity and growth of options like dart clubs, movie theaters, social ping pong establishments and axe throwing bars that appeal to younger generations, traditional channels may see further declines if they don’t adapt to new consumer preferences.

Not All Millennials Are the Same

Millennials are not a homogenous group, given the different ages within the larger segment. When it comes to individual drink preferences, older millennials favor beer and wine, while younger millennials gravitate toward ciders and spirits, generally speaking.

Nielsen alcoholic bev options_millennials

There is also a difference where younger and older millennials purchase alcohol. Younger millennials are more likely to buy at nightclubs and bars, while older millennials are more likely to make their purchases at warehouse club stores.

Looking more closely at the millennial group, Nielsen found that millennials with kids:

  • Buy alcohol at tasting rooms and music/sporting events;
  • Often order wine by the bottle when they’re at a restaurant; and
  • Drink more wine than they did a few years ago.

Adapt & Conquer

The market researcher has some insights for success for retailers to overcome hurdles when it comes to alcoholic beverages. For example, in an environment where there is an increasing amount of food-led events, retailers can propose food pairings — both on menus and in stores where alcohol is sold. Traditional bars and taverns could also benefit from partnering with food trucks.

Retailers can also tap into the health and wellness movement. Running clubs are an easy, inexpensive way to engage customers, particularly on weekday evenings, Nielsen offers. Retailers can also learn from wineries and breweries that have started offering yoga and other exercise events directly on site.

When it comes to meeting consumer desires for convenience and a unique experience:

  1. Explore the shipping and delivery options;
  2. Consider wine or beer of the month clubs;
  3. Offer the right product mix, including small pack sizes, to give customers the opportunity to explore and try new products; and
  4. Think about creating an experience or activity where customers will also come to drink.