With wholesaler inventories at historic highs and consumers pulling back on spending, the BevAlc industry faces challenges ahead, according to SipSource analysts in a recap of the industry in 2023.
The data firm unpacked its latest findings during a breakfast session at the annual Wine and Spirits Wholesalers of America (WSWA) conference this week, Access LIVE. Analysts Danny Brager and Dale Stratton reviewed key trends for wine and spirits sales from year-end 2023 and moving into 2024. Here are the highlights.
Year End Data for All Tiers Converges in Negative
The picture isn’t pretty across multiple data points when looking at beer, wine and spirits volume percent change versus one year ago. End of year data puts spirits at -3.6% in depletions (-5.6% when excluding RTDs), though off-premise NIQ data is more positive, up 5% for spirits but down -2.3% when excluding RTDs. At restaurants and bars, spirits were down -5.3% according to NIQ CGA data.
Analysts pointed to inflation, interest rates and consumer debt as pressures on shoppers, as well as generational changes impacting moderation trends.
Wholesaler Inventories at Historic Highs
Another change since the pandemic? Wholesaler inventories are larger than ever amid a widening gap between sales and inventory.
“The consumer has pulled back, we have seen that in our data, but also retailers are pulling back on inventory. As we have seen inflation hit and we’ve seen interest rates go up, retailers are really watching their inventory dollars,” said Stratton.
With decreased demand and as interest rates stay high, retailers are “more than likely going to be bringing in less new items and managing that space much closer,” he added. With a constrained market, retailers will be focused on bringing in the right items versus more (the number of UPCs since 2019 has gone up 34% for beer, 38% for spirits and 26% for wine).
Mid-Tier To Grow
After luxury spirit sales took off during the pandemic, as reported previously, the top-end of spirits has slowed. Volumes through December were down -12.9% among the +$100 tier, -6.3% in the $50-$99. But the mid-tier fared better with volume -4.5% for the $25-$49 tier and -1.2% for the $17-$25 bracket.
“The real growth area is going to be in that middle area where we see $17-$25, those seem to have done better and maintained,” said Stratton.
Spirits Resilient On-Premise, Lead by Transportation, Recreation Channels
Spirits overall maintained growth on-premise, with volume up 2.8% compared to beer (-2.8%) and wine (-3.5%) in 12-month rolling data since last year. Growth was led by the transportation channel up 13.6%, other channels (including concessions) up 9.9%, and recreation up 5.8%.
But RTDs were more important to growth than traditional spirits in those recreational, other, and bar and nightclub channels, showing how canned cocktails have found traction in airlines, hotels and other alternative venues.