That’s according to SipSource, which says depletions for wine and spirits increased in June, driven by off-premise outlets continuing to supply at-home consumption.
“Some depletion growth in the latest reporting period could be due to retailer inventory build prior to the July 4th, holiday. Using February ending data as a base for pre-COVID, total wine and spirits depletion trends are up 130-basis points ending June. Spirits continue to gain momentum, growing +3.0% with June ending data, which is a 40-basis point improvement over February figures,” says SipSource Analyst and industry veteran, Dale Stratton.
While spirits continue to lead the way, wine is down -1.3% in depletions, but has achieved a 180-basis point improvement over the last four months. The possibility of tariffs being placed on some EU wines could further impact the category as it struggles to find stability in 2020, a year that has all but removed the on-premise environment that wine enjoyed for decades with little interruption.
Local, Licensed Retailers Gaining Through Delivery
The biggest winners off-premise are Liquor and Club/Wholesale outlets. Liquor channel share has grown +6.7% off a significant base while Club/Wholesale has gained +6.6%. Gains in the Liquor channel are driven more by wine than spirits and could be assisted by App based delivery services like Drizly which rely on independent Liquor stores for fulfillment.
Independent accounts are performing better in the off-premise than National Chain accounts in both Wine and Spirits. Wine depletions are up +5.6% and spirits are up +10.1% in Independent accounts compared to +2.3% and +8.8% respectively in off-premise National Accounts.
“Regional and Small Chain accounts are performing slightly below National Chain account in both wine and spirits. The results are consistent in the on-premise as Independent accounts are down less than National accounts for both wine and spirits. It is important to note all trends are down over -20% in the off-premise so it is difficult to declare any numbers as being encouraging. When comparing these trends to February, Independent accounts are gaining momentum compared to National Chains overall,” Stratton summarized.
Ready-To-Drink (RTD) Convenience Continues to Trend Positively
“Consumers want both quality and convenience, so as RTD products continue to innovate, pre-mixed cocktails growth through June is up +28.4% which is almost triple the +10.2% growth in February,” said Stratton. “We expect to see this momentum continue as consumers look to replace their cocktail experience at home.”
Tequila Overtakes Rum
“The other big news in June is Tequila passed Rum and is now the third largest spirits category in depletions. Tequila has continued to gain share despite its heavy dependence in on-premise sales,” said Stratton. “Unlike Tequila, other segments heavily leveraged against the on-premise, Irish Whisky and Cordials, continue to lose share. Cordials are growing +1.0% while Irish Whisky is now down -6.5%. It’s worth keeping an eye on the Vodka category as it has been losing momentum over the last three months and is now only up +0.7%. Cognac is performing very well, up double digits +10.8% while U.S. Straight Whiskey is growing +9.0%,” he concluded.
Wine Trends Sweeten
The growth of sweeter profile wines continues during shelter in place as Prosecco, Pink Moscato, Red Blends, and Sangria are among the fastest growing segments. Many of these segments have done a complete turnaround over the last 120 days with Pink Moscato trends up 760-basis points, Red Blends up 620-basis points, and Sangria up 480-basis points since February.
“Prosecco seems to have settled in around its current +7.9% growth rate while we see other Sparkling wines remaining in negative territory. It should be noted trends in the off-premise for Sparkling wines are gaining momentum but are not able to overcome the losses in the on-premise. Sauvignon Blanc continues to set the pace for Table Wine growth up +6.6% and is growing in all price segments,” said Stratton.
Premiumization
In almost every Table Wine varietal, the Value and Popular segments are gaining momentum and, in some cases, significantly, such as Value Cabernet which has moved from +0.2% in February to +6.9% in June.
“Prior to the pandemic, the movement of premiumization — consumers moving from value brands to premium labels — was both real and sustained according to both Nielsen and SipSource data,” commented Stratton.
For Spirits, data suggests premiumization continues. While the most significant momentum gains are coming from the two middle price tiers, there are examples of growth and momentum gains at the Ultra-Premium level.
Unlike Wine, there are several Spirits categories that continue to show significant growth at the Ultra-Premium level, just less than they were in February. Those include Tequila +14.7%, US Straight Whiskey +12.3%, and Gin +5.6%. The negative trends in the Popular price tier are certainly impacted by the loss of well business on-premise that is not moving off-premise. As Spirits are growing overall, the losses in the Popular price segment would indicate consumers trading up in the category.
At-home Mixology
“Consumers have been influenced by the mixology movement that predates the pandemic and seem to be experimenting with home mixology projects that are driving Vermouth up +4.5%, with on average gains of +1.5% points in trend every month since February,” Stratton suggests.