“The situation in the on-premise is nothing short of catastrophic and continues to get worse every day. We anticipate on-premise share of total depletions to be around 9.5% for spirits and 7.5% for wine by the end of 2020 – nearly halving pre-COVID numbers,” says Dale Stratton, an analyst for SipSource.
In February, on-premise accounted for 18.6% of total spirits depletions and 14% for wine. By the end of September, on-premise share was down 12.1% and 9.2%, respectively, according to SipSource data.
Twelve-month rolling trends for wine and spirits combined on-premise dropped from -0.4% in February to -23.4% at the end of June. The continued losses in on-premise have softened over the last four months, ending down at -33.5% in September, but new cases of COVID-19 are rising significantly across the country, which could lead to further restrictions and greater losses.
In sharp contrast to on-premise, off-premise sales have been the lifeline of the industry this year. Overall, total trends for both on- and off-premise depletions for both wine and spirits have improved 300-basis points since February, moving from down -0.6% to up +2.4% at the end of September. Off-premise spirits sales continue to be the growth driver and are up an incredible +5.3 percent. For the first time since September 2018, wine has moved into positive territory, up +0.1 percent.
“It is clear the consumer is comfortable moving their on-premise cocktail experience into their home,” said Stratton. “On the spirits side, consumers generally continue to drink the same products as they did prior to the pandemic. However, the price tier data shows all but one of the product segments in the Popular price tier in decline, revealing that consumers are seeking out higher-end brands within those segments. Further evidence of a trade up in spirits is that the four fastest price tiers are Super and Ultra-Premium priced U.S. Straight Whiskey and Tequila, growing between +11.8% and +22.7%.”
Early in the pandemic, the premiumization trend diverged significantly for wine as consumers rushed towards large value-oriented packaging in March and April. However, consumer patterns seem to be returning to normal, pre-pandemic varietal choices. Champagne, which is a large-dollar contributor, is starting to rebound after hitting a low of down -5.2 percent in May is gaining momentum every month heading into the important holiday season and is down only -1.5 percent at the end of September.
Spirits Highlight – Consumers Continue to Reach for Top Shelf Tequila
“Tequila continues to be a powerhouse and solidified itself as the third largest volume category in spirits. We were nervous about Tequila trends due to its strength in the on-premise but shouldn’t have been surprised when consumers transitioned to home use with ease. Premiumization continues as reflected in the Super and Ultra-Premium segments up +13% and +22.7% respectively,” said Stratton
Wine Highlight – Vermouth is the Modifier of Choice for At-Home Mixologist
“Let the Martinis, Manhattan and Old Fashioned cocktails flow! The growth of Vermouth supports the trend of home mixology. Vermouth is up +6.0 percent and has gained 790-basis points in growth since February. It is possible there may never have been more households with a bottle of Vermouth in them than today,” said Stratton.
Spirits Highlights — Cognac Sees Uncharacteristic Seasonal Growth
“Clearly the perception of Cognac as a winter-oriented drink did not hold true this year as growth rates moved from up +10.8 percent in June to up +27.4 percent in September. The growth rates are strong in all regions but especially so in the South, which is up +34.8 percent,” said Stratton.