Welcome to the next article in our series on 2023 trends. If you missed our other installments, go back and read predictions from Technomic, a look at the on-premise in 2023, af&co./Carbonate's Hospitality Trends Report, and a look at flavors trending next year.
In this installment, we dive into WSWA's SipSource's annual webinar on holiday trends and previews for next year. The webinar looked at a variety of factors, including spirit growth versus wine/beer, economic conditions, the state of premiumization, and the on-premise channel.
Spirits Continue to Dominate
Spirits continue to dominate market share with wine at the bottom and beer in the middle. According to SipSource, spirits currently have a 51.6% share of volume, with a gain of 740 basis points since 2017. The growth in spirits is being driven largely by tequila (up 2.4%) and spirits-based RTDs (up 9.3%), which are expected to continue to grow in 2023.
Vodka is experiencing the biggest losses at 4.8%. However, SipSource analysts speculate this is because the majority of RTD bases are vodka, which could be driving down mainstream vodka as consumers instead opt for the canned cocktails.
On the wine side, prosecco has had sustained growth, while sauvignon blanc is also growing. Overall, however, the wine category is a story of loss, with lower price tier wines driving those losses. However, higher-end wines are showing growth, in line with the premiumization trend among consumers.
Key Trend: SipSource expects the power of tequila and RTDs to combine next year for an explosion in tequila-based RTDs as many of the top companies are rolling out releases now and in the coming months.
What’s Ahead: “I think that spirits will continue to succeed and grow faster than wine,” said SipSource Analyst Danny Brager, citing the innovation, diversity, and broader consumer base in spirits. Non-alcohol companies are also making strides into the beverage alcohol category, which will lead to a blurring of categories but more opportunities.
SipSource Analyst Dale Stratton says not to count wine completely out, however, as holiday sales may boost the category and next year may see more stable trends for wine. “I really think we’re going to see marked improvements in the wine category trends over the next six months,” he says. “But spirits are still going to win consumers as we move forward.”
Inflation is the big concern when it comes to the economy, but SipSource analysts pointed to a silver lining—inflation in the beverage alcohol category is a lot lower. Alcohol prices are still rising in the category, but not as much as food and gas. Beer is currently leading the way in price hikes, but even those increases are less than the overall inflation rates.
On the food side of things, prices for food at home (grocery stores, etc.) are higher than for food away from home (restaurants, bars, etc.). This is good news for the on-premise, as it is cheaper in many cases for consumers to dine out. However, alcohol away from home has risen, which means the on-premise has been raising prices more than the off-premise.
Still, margins remain tight for bars/restaurants. According to inflation sales data from commerce platform Lightspeed’s nearly 6,000 U.S. hospitality merchants, inflation has increased on average .98% per month, and the average U.S. check size has grown 1.15% per month, pacing slightly ahead of inflation. Despite this, menu prices are not climbing at the same rate of inflation, while food costs are pacing ahead of inflation. When adjusting for inflation, this means the margins for restaurants are going down.
What’s Ahead: So will it be a happy holiday season for the industry? Stratton is bullish for a strong holiday given pent-up consumer demands caused by COVID. “The economy is challenged, but I do think a consumer base is ready for a strong holiday season and that they’re going to drive a very, very big strong return across channels.”
Brager is more cautious. “I think it’s going to be tough. I think the inflation is just pounding people every time you go to the gas pump,” he says. “Beverage alcohol tends to be recession resilient, so we’ll end up being better than a lot of other categories.”
The on-premise was devasted by COVID, but it was approaching pre-COVID levels earlier this year. The growth was also a boon to many spirits verticals with a larger share in the on-premise—namely, tequila, mezcal, and cordials/liqueurs. Unfortunately, inflation put the brakes on on-premise growth in May.
How inflation will fully affect the on-premise remains to be seen, but a few indications are already apparent with many on-premise locations reducing their hours (just over 58% have cut their hours by 6.4 hours fewer a week, according to Datassential). In addition, according to a survey by Wine Market Council, price increases are now the top concern.
Key Trend: The Northeast and Pacific markets are now driving on-premise growth.
What’s Ahead: Brager is once again cautious about the future of the on-premise. He believes there is a trend of consumers ordering alcohol and meals to be delivered as well as working from home and not traveling as much, which will translate into less visits to the on-premise.
Stratton believes the holidays will bring business to the on-premise in the form of parties or catering, but the big question is whether the establishments will have the staff to meet the demand. He does question, however, if January will be a total reset in terms of on-premise traffic.
Plan to Attend or Participate in Bar & Restaurant Expo, March 27-29, 2023
To learn about the latest trends, issues and hot topics, and to experience and taste the best products within the bar, restaurant and hospitality industry, plan to attend Bar & Restaurant Expo, March 27-29, 2023 in Las Vegas. Visit BarandRestaurantExpo.com.
To book your sponsorship or exhibit space at Bar & Restaurant Expo, contact:
Veronica Gonnello (for companies A to G) e: [email protected] p: 212-895-8244
Tim Schultz (for companies H to Q) e: [email protected] p: (917) 258-8589
Fadi Alsayegh (for companies R to Z) e: [email protected] p: 917-258-5174