In 2023 spirits faced a slight downturn, non-alc continued its rise, and innovation continued to create growth for ready-to-drink cocktails. But what drivers are BevAlc experts watching in these categories for 2024? We checked in with a data analyst, consultant and major retailer buyer on their outlook, including what investors will be looking for, where there might be white space in hot categories, and how retailers are making buying decisions.
Where’s The Volume?
Data analysts are continuing to track the disparity between volume and value across BevAlc, with less brands posting volume progress over the last year. With RTDs extracted, volume in total beer is down -2.7%, spirits -1.9% and wine -4.4% in the last 52 weeks off-premise ending December 2, 2023 according to NIQ. Dollar sales are up for all segments except for wine, and RTDs are more even, with value up 0.1% and volume flat.
So why the disparity? Much of it has to do with moderation trends, including non-alc product proliferation and consumers choosing quality over quantity, according to Jon Berg, vice president of thought leadership BevAl at NIQ.
But there are other factors impacting consumer behavior. Excise tax rates have pushed some key segments and brands over meaningful price thresholds, and the traditional response to this is to consume less, he said. Since 2021, retailers have not needed to subsidize the retail purchase as deep as in the past in order to create profit, which means selling less volume for a higher price.
For publicly traded suppliers and retailers, creating volume in 2024 will be essential, said Berg.
“Wall Street demands will push decision makers to find ways to create volume now that pricing and cost of goods optimization is in place,” he said.
Investors will also be looking beyond margin-defending price increases, added Southern California marketing and sales consultant Arthur Gallego, who helped launch brands such as Vita Coco and SunDaze.
“Certainly the hard tenets now of even trying to raise capital involve having to show your books and explain the margin and the path to better margin, that’s No. 1 and was not the way it was up until the beginning of 2022,” he said.
Category Overexposure Pushes Higher Velocity Thresholds, Thought-Out Distribution
The volume dip is also a downside to the recent flurry of innovation and SKU saturation too, added Berg.
“Consumers of beverage alcohol continue to be inundated with options and for some this creates new product fatigue and product loyalty confusion,” he said.
That rapid overexposure of a category, which can lead to customer apathy, is common in CPG, said Gallego. Retail buyers may respond by doubling down on a higher velocities threshold per month and per store in hot categories like non-alc.
“Even if they want to offer interesting and new products, their commitment is still to a P&L,” he said.
For 2024 at Whole Foods Market across RTDs and non-alc the grocer is looking deeper into regenerative agriculture, woman-owned or woman-led brands, BIPOC-owned brands, and other need states, said Taylor Cathala, senior category merchant for Whole Foods Market.
“As all categories expand, it forces us to look past the primary growth trend and dig deeper into what customers are finding interesting, and what they are willing to try,” he said.
As the retailer strives to stay relevant for customers’ constantly changing preferences, Cathala earmarks unique pitch ideas or brands that come to the team (or that they find in the wild) and tries to support those suppliers, as they often can be new to the off-premise retail space, he said.
But suppliers particularly new to the BevAlc landscape need to be driven and focused on understanding the industry well in order to even make it on the shelf.
“We need to be confident the brand is ready for primetime and has distribution logistics well thought-out,” he said.
RTD, Non-Alc and Spirit Trends
Among the thousands of SKUs in RTDs, which styles might find growth? Non-carbonated RTDs is one segment, according to Gallego. Founders of rapidly growing brands like Stateside Vodka’s Surfside hard tea and lemonade have claimed offering an alternative to carbonation has been part of their success.
“I think that there’s going to be a pivot for the people willing to ride out and build this trend of non-carbonated RTDs,” Gallego said.
Cathala sees a move into more variety 6- or 8-packs, which has already proven to be a strong trend for RTD cocktails, and would be a “smart play to offer a broad assortment for occasion buying” for non-alc.
He also sees the innovation cycle slowing down for non-alc beer, wine and spirits. With how quickly flavors and brands are changing, he worries that customers are not getting enough time to properly decide if they prefer a brand or not, which can lead to poor performance on re-purchasing.
“Since the product is not alcoholic, consumption has no real barrier to keep customers from trying new flavors and brands, so you tend to move through a lot of innovation quickly,” he said. “I think that moving into 2024 we will see some innovation slow down and a slight pivot to perfecting distribution, supply, and brand building.”
As for spirits, Cathala is betting on more amaro or aperitivo, agave spirits, uniquely flavored and imported gins, and continuing growth of American whiskey.
“While not as prevalent as it was in 2020 and 2021, making elevated cocktails at home continues to be a trend, and fun innovation in the gin and amaro or aperitivo space really helps drive unique and often simple-to-make cocktails.”