High-priced Adult Beverages Grow On-Premise

Premium adult beverages are providing momentum to the on-premise channel despite cautious consumers. Higher-priced spirits and beer categories in particular are growing in restaurants and bars, although the channel is slowing overall according to Technomic's just-released 2013 BarTAB Report. The on-premise channel grew in total volume (0.7 percent) to reach 1.9 billion gallons and sales rose 3.5 percent to $97.3 billion in 2012. Projections call for slight declines in volume in 2013 and 2014, but continued dollar growth.

"Two seemingly opposing trends are at play," explains Eric Schmidt, director of Research at Technomic. "The slow economy and a level of uncertainty have some consumers reducing their visits to or spending in restaurants and bars, while at the same time their interest in more complex flavor experiences is prompting them to continue exploring more expensive products, such as single malt Scotch, imported vodka and craft beer. It's reminiscent of the 'drinking less but drinking better' trend of the early 1990s."

One-quarter of total alcohol volume and half of sales occur in the on-premise channel, which includes restaurants, bars, nightclubs, hotels, casinos and other locations licensed to serve drinks. Beer remains the largest category in both volume and dollars. Following a decline in 2011, beer expanded in volume in 2012, but the major domestic categories are continuing to decline in 2013.

Spirits was the fastest-growing alcohol in restaurants and bars, expanding 1.9 percent in volume and 5.6 percent in dollars in 2012. Total spirits volume is expected to be flat by year-end 2013, although several higher-priced categories continue to grow. Wine's growth trajectory is slowing overall, but the largest segment, domestic table wine, is posting ongoing gains.

Spirits, wine and beer appear to be competing more directly for on-premise occasions; in particular, competition between spirits and beer for Millennial consumer drink purchases has increased.

"Millennials seem to be making drink choices in restaurants and bars more on the basis of desiring a particular flavor experience or as the result of influencers such as the occasion, food being ordered or promotions than due to loyalty to a particular type of drink," says Donna Hood Crecca, senior director at Technomic. "Their adult beverage portfolio is broad and varied – Millennials are driving many of the trends occurring in spirits, wine and beer, including the growth of premium and above-premium products." 

News and information presented in this release has not been corroborated by WTWH Media LLC.