A Comparative Look at the On Premise (Eating and Drinking) and Off Premise

 

Source: Nielsen

August 14, 2017

 

According to Nielsen and Nielsen CGA data, the past 52 weeks (ending June 17, 2017) were characterized by:

 

.           Continued trading up as premium segments continued to grow faster than the lower price tiers

.           Spirits again in the “growth” lead, slightly faster than Wine, with Beer trailing. Those growth rates have pushed the overall ‘value’ of Spirits in the On Premise to about the same dollar size as Beer.

.           Growth rates have decelerated in the most current quarter – both On Premise and Off Premise – with new forms of shopping and purchasing in part shifting spending (e.g., e-commerce, tasting rooms, festivals/events, etc.)

 

THE STATE OF ON PREMISE

On Premise growth rates have remained relatively stable throughout the start of 2017 but competition remains fierce. This is an expanding market where supply continues to increase, particularly in the “Eating” channel; however this growth has crossed into “Drinking” channel as well. With overall demand flat, and consumer drinking repertoires continuing to increase, this market is a share battle for most (and especially the more established) suppliers.

 

Scott Elliott, SVP of Nielsen CGA, explains: “Looking for something that cannot be replicated at home, On Premise visitors are seeking out new experiences and outlet styles, with brewpubs, tasting rooms and tiki bars especially popular among younger millennials. Given that On Premise visits continue to be rooted in ‘experience’ rather than a ‘habit,’ it has never been more important for suppliers and retailers to understand, and activate against, specific consumer needs, occasions and repertoires.”

 

Helping the consumer navigate an ever-growing number of choices is vital to ensuring a great experience, to encourage trade-up and to maximize spend per visit. This is where the good suppliers and distributors are beginning to step in. Food-led retailers (in particular, large chains) need help in developing more compelling beverage alcohol programs. Independent outlets, on the other hand, need support in driving traffic and in targeting specific consumer occasions.

 

Elliott continued, “Now that the insights and tools are finally available, suppliers hoping to win in the On Premise must be able to act with a similar level of sophistication around category management, assortment and pricing strategy that has been common in Off Premise channels for so long. In a market where everyone is fighting for share, we believe that better data-driven strategies are the only way to grow in a consistent and controlled manner.”

 

THE STATE OF OFF PREMISE

Off Premise growth rates, while still outperforming On Premise, are decelerating, with economic factors and channel shifting impacting consumer and shopper behavior. E-commerce in general might be exerting its influence in two ways.

 

According to Danny Brager, SVP of Beverage Alcohol at Nielsen, “E-commerce may be impacting Beverage Alcohol in the traditional Off Premise channel in a couple of different ways. One is online purchasing of alcohol increasingly taking the place of traditional store purchasing. The other is the indirect impact of less store trips impacting more discretionary categories, like adult beverages, where a significant percentage of purchasing has traditionally been impulse driven (i.e not planned).”

 

What happens to those impulse purchases if consumers are in stores less often to do their shopping? In addition, some mainstream retailers that sell alcohol in their stores are still not at the point of offering those products via their online platforms – further negatively impacting category sales.

 

Brager continued, “E-commerce in beverage alcohol, while still relatively small in comparison to many other categories, will continue to expand. Off Premise retailers will need to deal with a growing segment of consumers who may wish to ‘buy,’ but who may not need or see the need to visit the store to do so.”

 

CATEGORY INSIGHTS

*52 weeks ending 6-17-2017

 

BEER

 

Domestic vs. Import: While overall category sales are challenged in both channels, growth rates are under even more pressure in traditional On Premise (restaurant and bars). For instance, Mexican and Belgium imports are growing at double digit growth rates Off Premise, but only up single digits On Premise, while moderate declines of Domestic Premium Beers Off Premise are much further exacerbated On Premise.

 

Craft: While Craft growth rates have decelerated sharply in both channels over the past year, Craft is still about 2.5x better developed (dollar share) in On Premise than in the aggregate of the various Nielsen-measured Off Premise channels.

 

Ciders: Ciders have reached almost a 2.0% share of the Beer plus Flavored Malt Beverage plus Cider category On Premise, vs its 1.3% share Off Premise.

 

WINE

 

Sparkling: Wine growth rates in the last quarter lessened in both Off and On Premise channels. While that is true for the overall category, an exception is Sparkling Wine, whose impressive growth in On Premise channels in the latest quarter held quite firm.

 

Rosé: Rosé continues to be a big growth story within the wine category – and while it’s growing well On Premise, it’s the Off Premise where the growth rates have been ‘out of this world.’ This is unusual in that while On Premise usually sets the new trends and then Off Premise stores follow, it seems to be the other way around for this dynamic product segment.

 

Imports: Imports overall are better developed On Premise. Some countries, namely Spain, South Africa and Portugal, are performing better in On Premise channels, while others like Italy and New Zealand are trending better in Off Premise.

 

SPIRITS

 

Growth Categories: There are considerable similarities between growth leaders in both channels; Cognac is by far out in front of all other segments, followed by Irish Whiskey, and Tequila. Of those three categories, Tequila and Irish Whiskey are better developed Spirit segments in the On Premise, while Cognac is better developed in the Off Premise.

 

Flavors: On the other hand, while Whiskey flavors in aggregate are equally well developed as a share of Whiskey in both channels, their growth rates in On Premise lag Off Premise by a considerable margin.

 

A couple of other Spirit segments:: Rums and Cordials overall continue to struggle in both channels, while Gin is performing better in the On Premise than Off Premise both in overall share and growth.