Alcohol not recession-resistant after all?
Alcohol may not be recession proof but it remains relatively resistant, save for a few sectors, according to new research from the US.
Results of an American consumer survey, presented at Nielsen’s recent Consumer 360 conference, show that, with around half of consumers cutting back on restaurant outings and one in three on bar/nightclub visits, the alcohol industry has some concerns.
“While alcohol beverages are sometimes thought to be ‘recession proof’, we’re seeing significant evidence of changes in consumers’ dining and buying habits,” said Danny Brager, Vice President, Group Client Director, Beverage Alcohol at The Nielsen Company. “Consumers are clearly focused on value and in many cases, altering their shopping behaviour in order to get the most for their money. It remains to be seen if these changes are temporary or exactly how long the ‘economic hangover’ will last once we come out of recession.”
In Australia, similar trends have been picked up, but at-home consumption appears to be countering declines in bar and restaurant consumption in light of the strong result from Australia’s second largest alcoholic beverage firm – Lion Nathan. Premium beer has continued to be one of the strongest performing categories in the industry, which has surprised some who though the downturn may ensure a halt on spiralling demand.
Large Sizes, Local and the Tried and True
According to the American-based research consumers are making some changes, with a greater tendency to buy larger package sizes one of the leading trends. Almost one in four are also more keen to purchase locally made goods, while a similar number are taking a less “experimental” approach by not risking their hard-earned on something new.
“Many of these general shopping behaviours translate to what we are seeing today with respect to alcoholic beverage purchases,” Mr Brager said.
Shopping for Deals, Trading Down
When it comes to stretching their alcoholic beverage dollar, beer, wine and spirits consumers report several bargain-hunting strategies. While about half report not changing the way they shop for alcoholic beverages, the other 50 per cent are actively seeking out the best deals. Across all alcoholic beverages, the most prevalent strategies include comparing shelf prices, waiting for a sale and taking advantage of other special offers.
“Value attracts consumer attention in this economy, and sales and special offers can be an effective way of getting people into the store or to try a new brand,” Mr Brager explained. “With consumers’ actively comparing shelf prices, alcohol beverage suppliers need to ensure that they have their products priced right compared to the competition.”
When out at a restaurant, bar or nightclub, a considerable number of consumers are altering their behaviour. Trading down is most prevalent among wine consumers, with 24 per cent choosing less expensive drinks while a fairly equal number (about one-third) of beer, wine and spirits consumers order fewer drinks.
“The on-premise or ‘going out to drink’ environment is a very, very difficult one right now,” Mr Brager advised. “Consumers are looking for ways to cut back their spending, including ordering draft beer instead of bottles, shifting from wine by the bottle to the glass and from calling for a specific brand name of liquor to letting the house decide.”
Consumers report a desire to continue to employ the same buying tactics they are using now beyond the recession, although they have indicated a likelihood to spend more on dining out when confidence returns.
“Similar to today’s alcoholic beverage weakness in the on-premise, or out-of-home, consumers’ future restraint is more pronounced in the on-premise as well,” Mr Brager said. “The biggest opportunity for alcohol beverage suppliers and retailers today is around ‘the home’ and based on what consumers are telling us, the home will remain the strongest venue when the economy recovers.”
The growth is likely to be led by the younger brigade, according to Nielsen.”Consumers in their 20s and 30s have never really known a true economic downturn so they are naturally more optimistic that things will only get better,” Mr Brager stated. “Alcoholic beverage manufacturers and retailers would be well served to focus on value, and provide products in a range of price categories, in order to appeal to the range of consumers, including many that are now financially-strapped.”