Retail alcohol sales are helping the industry balance out lost bar and restaurant revenue
Although some businesses in North America are beginning to resume normal operations, COVID-19 has changed consumer shopping, eating and drinking habits, possibly long-term. People have adopted a homebody mindset and are seeking comfort from indulgent and nostalgic food and beverages, including alcohol.
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This is a marked change from just before the pandemic, when many consumers were shying away from traditional alcohol consumption and focusing on mocktails and low-proof drinks such as hard seltzers. Now, consumers are returning to the alcoholic beverages and brands they ventured away from pre-COVID-19.
With bars still mostly closed, consumers are buying alcohol for at-home consumption. According to Nielsen, retail sales of spirits, wine and beer have all experienced growth during the pandemic with gains of 73%, 61% and 53%, respectively. Sales have actually increased in declining categories like beer and wine, and companies may see even more growth as the effects of the coronavirus drag on.
However, overall alcohol sales have declined, due in part to the lack of on-premise alcohol sales in foodservice. Nielsen estimates that the U.S. market needs to sustain 22% volume growth across retail alcohol categories in order to level off from the loss of sales from bars and restaurants. To keep the industry on sure footing, retail alcohol sales must continue to increase even as consumers return to buying alcohol at bars and restaurants.
Some new ideas are helping buoy sales. COVID-19 regulation changes are allowing some restaurants and bars to offer alcoholic beverage options to complement takeout menus, such as mobile margaritas and wines from the wine list. And brands are finding that convenience is increasingly important, such as via ready to drink (RTD) cocktails and larger formats. To inspire your next moves, here are a few ways foodservice operators and retail brands have pivoted during the pandemic to create innovative retail alcohol offerings.
Spirit sales trends and innovations
Consumers are stocking home bars as they continue to shelter-in-place, creating a spike of online alcohol sales. During the week ending March 21, online alcohol sales were up 243% compared to the same week in 2019, and they’ve remained high in the weeks since.
According to Mintel research, mid-tier spirits and RTD cocktails have the greatest potential to continue growing during the pandemic. Consumers are interested in high-end and premium spirits, but are prioritizing price when purchasing alcohol. Because many people may not have the ingredients or know-how required to make favorite cocktails, quality RTD cocktails have appeal as a convenient way to satisfy craving without shelling out money for hard-to-get ingredients or taking the time to craft a cocktail.
To satisfy the same need for convenience and ease, restaurants and bars are catering to aspiring at-home mixologists by selling cocktails and cocktail kits to go, including alcohol and premade mixers. Even as dine-in restrictions are lifted and more people become comfortable with eating in restaurants, foodservice operators can continue offering to-go beverages until regulations are revised.
Wine sales are increasing on the web
According to Food Dive, online sales of wine continues to dominate the market, contributing to 71% of the total beverage alcohol sales online. Liquor stores across the country actually have reported shortages of box wine as consumers turn to larger pack sizes for value and convenience. The value-add of bulk containers has proven to be popular across alcohol categories, and brands can still benefit from both the online sales and boxed wine trend as consumers continue to ring in wine time at home.
Although winery tasting rooms, too, are at various stages of reopening to the public, many have found ways to virtually connect with their guests. Some wineries are hosting virtual wine tastings in which consumers pre-purchase a tasting kit then join virtual tasting events. Many restaurants with wine lists are including bottles of wine on their to-go menu, with some locations even offering discounts on premium bottles.
One category taking a big hit due to the pandemic is beer’s craft brew industry. Beer sales were already in decline before COVID-19, and strapped-for-cash consumers are choosing budget beer brands at stores, putting smaller breweries in an unfortunate situation. What’s more, a majority of craft breweries have had to close their taprooms, eliminating the opportunity for the on-premise sales so many rely on for popularizing new brews and flavors. An April survey by the Brewers Association found that 13% of breweries thought a month-long shut-down would drive them out of business, and nearly half said they couldn’t last three months. Judging by the current state of events, some establishments may already have had to close.
Those that remain open have likely begun to pivot their business model. According to the Brewers Association, offering delivery has been the biggest change for breweries, with a 30.5% increase compared to pre-COVID-19 rates, and many locations are offering curbside pickup of bottles, cans and growlers.
As breweries begin to reopen their taprooms, some may be able to accommodate more socially distanced guests by utilizing extra outdoor space. For example, we’re seeing some breweries plan to create outdoor beer gardens, host outdoor events and partner with food trucks and caterers to encourage social distancing while increasing on-premise sales.