Americans are drinking their way through the novel coronavirus (COVID-19). Many are holding Zoom video “happy hours” with friends and colleagues, while others are content to imbibe by themselves or with a significant other with no social media necessary. There are also new Facebook groups popping up, such as National Quarantine Drinking Team, open to the public.
According to recent Nielsen data, sales of alcohol in the U.S. rose 55% in the week ending March 21. Among the biggest categories chosen were spirits — with tequila, gin and pre-mixed cocktails leading the way. Sales in those categories jumped 75% compared to the same period last year. Wine sales are up 66% and beer sales jumped 42%. Online alcohol sales are up 243%, meaning folks are still practicing social distancing while ordering at-home deliveries.
It is easy to do, as U.S. governors are terming alcohol sales an essential business and loosening restrictions to permit home delivery and carryout cocktails. Moreover, with toilet paper, hand sanitizer, wipes and certain groceries out of stock at many retailers nationwide, alcohol is still easy to find — and stockpile.
To get a clearer picture of the overall market in the U.S., we spoke with Steve Hauser, president and CEO of Paulaner USA, a leading Bavarian brewer and wholly owned subsidiary of Paulaner GmbH out of Munich, Germany. Here is what he had to say:
Off Premise vs. On Premise Sales
Currently, 55% of alcohol sales is off-premise, meaning “to-go” sales for home consumption including grocery stores, liquor stores, convenience stores and big box stores like Costco. That leaves 45% for on-premise sales in the likes of bars, restaurants and hotels.
“What is unique is that, particularly for the domestic producers, it skews more like 80% off- and 20% on-premise,” says Hauser.
The fastest growing segment has been off-premise sales over the last few years, growing from a 50/50 percentage split. Hauser explains that the market will settle into the 60%-65% off premise and 35%-40% on premise in the near future. Sales from restaurants, bars and hotels are suffering. Brands sell great in hotels, upscale restaurants, etc. and due to limitations on travel, it’s been slow.
“When you look across your audience, worrying about packaging and about consumer and retail, any store door delivery model (beer, soft drinks, snacks, dairy, etc.) has done quite well in the short term, since the outbreak of COVID,” Hauser explains. “What’s killing [the market] is bars, restaurants, hotels — it’s virtually zero.”
Consumers now pick up beer at restaurants along with their meal. However, it only amounts to one or two beers or one bottle of wine. Whereas pre-quarantine, friends would go out and get a few each, or a couple bottles of wine for a night out.
A New Normal: Quarantinis
Information Resources Inc. (IRI), a leading provider of big data, predictive analytics and CPG and retail insights, is tracking changes in consumer and shopping behavior across consumer packaged goods categories, brands and retailers due to COVID-19.
The firm revealed that beer has been essentially flat with craft beer as the major driver of growth, but at the expense of domestics and imports (other than Mexican imports). Yet for the last couple of years, beer has grown 1%-2% over the last few years, driven by the phenomenon of hard seltzer — White Claw, Truly and the like. In fact, seltzers took +75% of that growth.
Beer sales started out this January/February up 2%-3% overall, and seltzers are growing well. Hauser believes the market will have a good year.
During the week of March 22, IRI reported, beer sales were up 34% from the prior four-week period, wine was at +50% and sprit sales rose a whopping 70%. The following week, beer was up 17%, wine was at 24% and spirits, 20% — not as much as the first week’s surge.
Beer was up double digits, but not as high growth, the premium segment (such as Budweiser, Coors Light, Miller Lite). This segment is what consumers view as mainstream, and it increased about 5.5% during this period. Sub-premium beer — Natural Light, Keystone, etc. — gained about 7% over this period.
“Consumers decided, if they were going to be stuck inside, they were going to choose quality drinking experiences. This is what I think is the result of what’s been happening over the last 10 or 15 years,” says Hauser. In particular, the beer business. The premium industry, especially in beer and spirits, is an afforded luxury for consumers. They will indulge a little and spend a few bucks more on a higher quality beer or spirits brand.
During this pandemic, premiumization is front and center. People right now want to indulge and are willing to spend a little more for higher quality quarantinis. The term “Quarantinis” is a new term used on social media to mean drinks during the quarantine.
Hauser says the restaurant at the chain and local levels will be hit hard. Currently, chains are up 25.5% and local retailers, 11%. With staffs being furloughed, it’s a waiting game to see how the industry will come back.
Grocery retail is tough as well, since shelf sets are only done two times per year, in February/March and then September so this year, shelf sets were postponed due to COVID-19. Major liquor chains, like Total Wine, BevMo and Specs are critical.
September, when the market celebrates Oktoberfest, will be a great time to celebrate the reopening of the industry. And Hauser sure hopes so. “We were set to launch our redesigned packaging — label, bottle, cartons, etc. Unfortunately, it’s now going to be delayed and staggered, but we are still excited about it.
Off-premise sales are healthy, and while Hauser and Paulaner USA has been maintaining its full staff and expects to throughout the crisis, he has seen work furloughs in the market. The beer/wine/spirits market was declared “essential” and while businesses are selling through off-channel platforms, some brands are struggling. “The industry plays a valuable role in both the economy and people’s lives. When social situations are truly safe again, we’ll be there to add a little enjoyment to life.”
Paulaner USA is a wholly owned subsidiary of Paulaner GmbH&Co. KG Munich Germany. Paulaner was the fastest growing German imported beer in the U.S. in 2019 as measured by IRI. Its brands include Paulaner Hefe-Weizen, Paulaner Munchner Lager, Paulaner Oktoberfest Bier and Märzen and soon to be launched, Paulaner Grapefruit Radler.