During the peak pandemic months of 2020, off-premise sales of alcohol beverages saw a significant surge. According to Chicago-based research firm IRI, total beverage alcohol sales in U.S. food outlets increased $4.75 billion (18.8%) in the 52 weeks ending Dec. 27, 2020, vs. the previous year.
Scott Scanlon, executive of beverage alcohol for IRI, attributes the jump to bar and restaurant closures, and consumers’ desire to limit shopping trips. “People were hesitant to go out, so when they did, they tried to get everything they needed at that one point in time,” he says. “When people bought their food, they also bought beverage alcohol.”
After spending nearly a year imbibing at home, Scanlon predicts consumers will retain many of the new buying behaviors they developed during the pandemic—such as enjoying cocktails at home and trading up to higher-end beverages—even after bars reopen.
The challenge for grocery retailers in the coming year, he says, will be to give adult beverage shoppers good reasons to keep filling up their carts. “This provides them with an opportunity to retain those consumers, perhaps with a store reset,” Scanlon says. “I know some of the larger chains have been looking at focusing more on premium alcohol or looking at some of the seltzers and new products that are drawing attention.”
Adapting to Shifting Demand
In response to the at-home cocktail trend, many grocery retailers expanded their selection of spirits, mixers and ready-to-drink (RTD) products in 2020.
“We have seen big increases in cordials and premixed cocktails as consumers try to recreate the bar experience at home,” says Curtis Mann, group VP of alcohol for Boise, Idaho-based Albertsons Cos.
With imbibers seeking lower-calorie drinks, Mann also saw more interest last year in hard seltzers, along with sweet wines, boxed wines and imports. “French and Spanish wines continue to do very well as customers look to travel the world from their living rooms,” he says.
To replace in-store tastings—a big draw pre-pandemic—Albertsons pivoted to virtual events, which, “have opened up new possibilities for customer education that we look forward to exploring even after the pandemic,” Mann says.
Stores also increased online offerings for pickup and delivery and focused on clean, clutter-free merchandising in the adult beverages department to make it easier for shoppers to locate products.
Photograph courtesy of Albertsons
For Santa, Rosa, Calif.-based Oliver’s Markets, the pandemic brought a spike in beverage alcohol sales—up 27% from prior years. This brought challenges as well as opportunities, from product availability issues to head-spinning shifts in consumer buying behaviors.
“The RTD category of canned and bottled cocktails and hard seltzers has exploded, with us buying hundreds of cases at a time for some brands,” says Richard Williams, Oliver’s wine, spirits and beer buyer.
As pandemic restrictions ease in 2021, he hopes to keep the sales momentum going through competitive pricing and a thoughtfully curated product selection highlighting local producers.
Revving Up RTD Sales
While RTD sales were ramping up before the pandemic, 2020 was a “big discovery year” for the products, says Tracy Frisbie, VP of marketing for BuzzBallz in Carrollton, Texas. “For off-premise, demand just surged,” she says. “We continue to grow by double digits year over year.”
BuzzBallz makes more than a dozen premixed cocktails, available in a range of sizes and flavors. Wine-based BuzzBallz Chillers are doing particularly well, Frisbie says, because the provide a cocktail solution for grocery stores that are unable to sell hard liquor. The premium Uptown Wine Cocktails line, headed for national distribution this year, is also turning heads.
For retailers looking to increase sales, Frisbie recommends keeping electronic shelves updated with the latest offerings, working with suppliers to make sure they have all the necessary digital assets for store websites, and creating fun in-store displays for RTD products.
“For us it’s the dump bins that seem to get consumers excited about our products,” she says. “Our packaging is round and plastic and colorful, so people just like to dig through the bins to find their flavors.”
Seltzer and Beer Buzz
Consumers’ focus on health and wellness also had an impact on adult beverage sales in 2020.
Greg Merlo, senior category director, large format, for Anheuser-Busch InBev, says low-calorie products such as Bud Light Hard Seltzer, Bud Light and Michelob Ultra have been among the company’s top sellers.
“The hard seltzer category is seeing massive success because seltzers deliver on consumers’ desire for flavored, sessionable beverage choices,” says Merlo, adding that he expects the surge to continue through 2021. “Combined with the low-sugar, low-carb and under-100-calorie attributes that most brands have, seltzers are a force to be reckoned with.”
"Seltzers are a force to be reckoned with."
In the beer category, many consumers have been trading up to higher price points. “With the closures and reductions in on-premise, shoppers are shifting [drinking] occasions to their homes,” Merlo says. “They have shown a willingness to pay for small indulgences while saving overall compared to a meal and drink outside the home.”
Winning With Wine and Spirits
Last year also saw strong off-premise wine sales. Modesto, Calif.-based E. & J. Gallo witnessed a big spike in March, followed by steady volume sales in the months to follow. Proven brands such as Barefoot and Apothic remain among Gallo’s top sellers, along with La Marca Prosecco, premium 3-liter box wines, and sweeter wines such as Barefoot Fruitscato.
“We continue to see steady growth across all price points and subcategories,” says Herb Smith, VP of off-premise customer development and category management for Gallo. Premium wines priced at more than $8 per bottle are seeing double-digit sales growth, he says, in addition to high single-digit growth for those under $8.
As 2021 progresses, Smith sees a chance for retailers to reevaluate the assortment mix and number of SKUs they are carrying. “There continues to be a lot of unproductive inventory that is not moving,” he says. “This leads to tied-up capital as well as out-of-stocks on key items that are selling.” To maximize profits, he suggests discontinuing 15%-20% of those unproductive SKUs and expanding those that are seeing the most growth and velocity.
Since wine is often an impulse buy, he adds, displaying items around the store and cross merchandising can drive incremental sales.
For Miami, Fla.-based wine and spirits distributor Southern Glazer’s, wines priced over $10 were big sellers in 2020. “Stella Rosa, Bota Box, and Josh were phenomenal successes,” says Scott Moore, SVP of national off-premise accounts.
Among the adult beverage trends that emerged last year, he says home mixology has had the greatest sales impact—both for RTD products and individual cocktail ingredients. Sales of premium and ultra-premium tequila increased by 50%, kicked off by at-home Cinco de Mayo celebrations, and they show no sign of tapering off.
Big brands were also winners in the spirits category as more consumers turned to online shopping and sought out familiar names.
During the early months of the pandemic, Moore says many shoppers turned to 1.75-liter formats—though according to Frank Polley, VP of trade marketing for Tito’s Handmade Vodka in Austin, Texas, the trend is starting to wane.
“In the vodka category, as in most categories, consumers shifted their buying habits to larger-sized packages as they made fewer trips to the store,” Polley says. “We are now starting to see all Tito’s sizes come back to typical purchasing levels.”
When pandemic on-premise restrictions lift, Moore predicts consumers will continue enjoying cocktails at home—though perhaps not to the same extent as in 2020. Rather than mixing their own drinks, however, they may turn to their local grocers for RTD options. “Our grocery retailers have become much more sophisticated,” he says, “not just in trying to do SKU rationalization or SKU expansion, but really trying to meet the needs of the shopper at the point-of-purchase.”
He’s also seen grocery retailers such as Albertsons and The Kroger Co. use technology to connect with suppliers and customers on a deeper level. For example, some have hosted Zoom calls with high-profile winemakers and distillers to showcase particular brands. “It's changing the way people think about what they want when they go in the store,” Moore says, adding that it’s also beneficial for retailer-supplier relationships. “We’ve gotten closer and more aligned with them.”
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