With Americans heading into the holiday season, the beer industry is preparing for a winter fraught with uncertainty. A resurgent virus and ongoing recession are colliding with traditional times of elevated beer sales in both on- and off-premise venues.
One thing is for certain: People are continuing to drink beer. The big questions are where are they buying it, and how?
As the coronavirus surges across the United States, many states have clamped down on gathering places like restaurants and bars, resulting in continued growth in the off-premise. Heading into what is traditionally the year’s biggest travel period, these off-premise beer sales are up 16%, according to the most recent 26-week data from Nielsen.
Suppliers like Molson Coors Beverage Company project that 2020’s holiday season will be defined by smaller gatherings held mostly in and around homes, which translates to a continued trend of elevated off-premise purchases.
“We definitely anticipate trends will continue to favor the off-premise and e-commerce,” says Russell Fowler, Molson Coors’ senior manager for category solutions. Convenience stores, the largest channel, have posted 16% growth in dollar sales, while grocery, the second-largest channel, logged 17% growth for the most recent 26 weeks, Nielsen data show. E-commerce, meanwhile, continues to boom, growing 300% over that time period, according to Nielsen.
Holiday shoppers often are on the lookout for a variety of alcohol beverages – including wine and spirits – but beer has been proven to lift all boats, Fowler says.
“Beer is more likely to add incremental dollars and trips versus wine or spirits,” he says.
More than 15% of shoppers who buy beer also include wine and spirits in their purchases, data show. That's compared to about 12% of wine and spirits shoppers who add beer to their carts – a difference worth an estimated $400 million, according to an analysis by Numerator, which tracks consumer shopping behavior.
“We’re telling retailers if you can win with beer, those shoppers will put wine and spirits in their baskets. If you concentrate on wine and spirits and think shoppers will put beer in their baskets, that’s not the case,” he says.
With competition stiff between beer, wine and spirits brands, beer suppliers and distributors need to tell a persuasive story, says Michael Uhrich, founder of data consultancy Seventh Point Analytic and former chief economist of the Beer Institute.
“The suppliers and distributors who are going to win in chain (stores) in the next year are the ones who are going to make a compelling case that they need the space they’re asking for and why the retailer should give it to them instead of the other guy,” he says.
For Molson Coors, that translates simply to stock what’s selling, Fowler says.
“One of our strategic category pillars is the core matters. Two percent of SKUs make up 80% of volume,” he says. “That means the base, core business must be balanced across all segments if retailers and distributors want to win at retail.”
Finding on-premise opportunities
As sales in off-premise accounts continue to boom, the story for the on-premise isn't quite so rosy. Many bars and restaurants are struggling to remain afloat amid a patchwork of state and local restrictions that’s forced many to vastly reduce capacity or close altogether.
The timing for many of them couldn’t be worse. With the fourth quarter typically filled with larger group gatherings like company holiday parties or the night before Thanksgiving, a big piece of revenue for 2020 is expected to evaporate.
“The day before Thanksgiving is usually a huge on-premise day. We just don’t expect that to be as much of an opportunity this year,” says Mike Schouten, Molson Coors’ shopping insights manager for the on-premise.
As restaurants and bars grapple with a shrinking customer base, Molson Coors is working with them to find ways to “overcome, adapt and be successful,” Schouten says.
That includes helping operators understand the right product mix of fast-moving tap handles and core cans and bottles, as well as an increased focus on to-go sales, which have grown substantially this year after many governments lifted or eased restrictions due to the pandemic.
“The to-go strategy is getting more prominent,” Schouten says. “About a third of consumers have ordered some kind of alcoholic beverage to-go, either through delivery or take out. That number is growing almost every week.”
With rocky seas ahead and the surging popularity of e-commerce beer sales, providing a reason for consumers to purchase beer from their local restaurants and bars is evermore important.
Schouten says restaurants and bars can appeal to three types of consumers who might buy beer as part of a to-go order: those looking for convenience, those looking for something unique and those looking to support a local business.
"Consumers have so many options, so we're working with our retailers to make a compelling case that to-go orders are a convenient way to buy beer, while supporting a local business,” he says.
The overall economic picture in the United States with the pandemic as a backdrop provides another wrinkle for the industry, says Lester Jones, chief economist for the National Beer Wholesalers Association. With the unemployment rate at 6.5% and job growth slowing, a slew of COVID-related relief programs is set to expire at the end of the year, muddying the economic prospects for millions of Americans.
“We’re going to see a deepening recession and a contraction in consumers’ ability to spend money on alcohol,” he says.
Still, data from past recessions show, the beer industry tends to hold up relatively well during economic downturns. So while many consumers may have less to spend, they figure to continue buying beer. How much they’ll spend — and on which brands — remains an open question.
The opportunity for beverage makers, retailers and distributors is to find the right balance of products to appeal to consumers who statistically are not loyal to just one segment.
Building a balanced assortment is crucial, Fowler says. To wit: By and large the only retailers growing market share today are those posting gains in all segments.
Simply put, he says, “Every segment plays a role.”