On April 3, 2020 the Wine Market Council presented a webinar in two parts. The first part featured Christian Miller of Full Glass Research, who revisited previous research about online shopping and provided new context for shifting habits given the closure of tasting rooms and restaurants. The recap of this presentation with considerations for DTC-focused wineries can be found here.
During the second part, Danny Brager of Nielsen’s Beverage Alcohol practice shared recent retail sales trends for beer, wine and spirits since the outbreak of the pandemic in the U.S., and what to watch going forward. Insights shared during the webinar along with more recently-released Nielsen data is below.
The Impact of the Pandemic on Retail Sales of Alcohol
The COVID-19 pandemic’s impact on alcohol purchase at retail in March was extraordinary. All data discussed below is courtesy of Nielsen.
Beverage Alcohol Overview
The chart below shows growth by beverage category at retail outlets nationwide. The week ending 2/29/20 was representative of the year so far, and growth started picking up slightly as we moved into March. The week ending March 21, when many cities and states began issuing Stay at Home orders, was the second biggest alcohol sales week in the past 52 weeks, behind Christmas week. Sales were equal to Thanksgiving week.
A few other points to note:
- Beer, Wine and Spirits:
- Growth in wine and spirits has been outpacing the beer category. However the lower growth rate of beer is attributable to the fact that the beer category is much larger than wine or spirits, and 30% growth of its large baseline volume is formidable.
- Pantry loading:
- As Danny hypothesized on the webinar (when data were only available through 3/21), there was a softening of the extreme growth rates in the latest reporting period of w/e 3/28/20. This seems to indicate that the week ending 3/21 was a week of “pantry loading.”
- This trend appears true beyond beverage alcohol, as can be seen in the red bar indicating fast-moving consumer goods (e.g. packaged food, household products, personal care items, etc.)
- A question that remains to be seen is whether baseline consumption increases as well, or if growth rates will fall back to their previous levels once the pandemic is over.
- Loss of on-premise channel:
- When considering the loss of sales volume through the on-premise channel, the alcohol category would need to grow steadily nearly 20% at retail to keep category volume whole.
- Total consumer spending on alcohol will nearly certainly decrease given lower average prices (more lower-priced offerings and lower mark-ups) seen at retail compared to restaurants.
What’s winning in wine?
For the week ending 3/21 when the wine category was up 67% vs the prior year:
- Origin: All key states and import countries were up at least 20% (see below for Oregon specifics)
- Variety: All varieties were up large double digits, except for high-end Champagne (yes, even Merlot and White Zinfandel were up 10-20%)
- Geography: All tracked markets were growing by at least 40% – even those without stay at home orders
- Format: Cans and 3L boxes were growing fastest, but 750mL and 1.5 mL glass were also growing >60%
- Price: Wines priced between $11 and $25 were driving growth
- Brands: People seem less inclined to experiment or may be stocking up on tried and true brands. The top 10 wine brands’ share grew 1.3 points over the three weeks ending 3/21. (Note: one share point represents $171 million annually)
Oregon performance at retail
In 2019, Oregon wine’s growth at retail far outpaced that of the total wine category (+12.4% vs. +0.5%). See OWB’s 2019 report on Oregon wine at retail.
Prior to the effects of the pandemic affecting shopper behavior, those trends continued, with Oregon’s growth rate softening at just over +8%, and the total category remaining roughly flat at -0.6%
In the last three weeks of March, when alcohol sales at retail began to spike, Oregon’s growth rate remained above the category, peaking at 77% growth vs. the same week in the prior year during the week ending 3/21/20.
The average bottle price of Oregon wine during the last three-week period shown on the chart above was $16.53, compared to the average bottle price of $7.65. These figures have not shifted notably from full year 2019 average prices.
Shopper behavior changes and the shift to online buying
The number of e-commerce alcohol buyers during the week ending 3/21/20 was two times that of the average weekly number in the prior 52 weeks. Danny offered that we have seen arguably the greatest, fastest change in shopper behavior ever.
Generally speaking (i.e. not specific to alcohol), there was a 72% increase in new online shoppers, with a large increase in seniors shopping online. This is likely to cause a permanent change in shopper behavior, as once people begin shopping online, they tend to be repeat shoppers in that channel.
These trends give further credence to the recommendations to evaluate and maximize your online store, digital marketing and involvement in other online retail outlets, as discussed in the WMC webinar recap on online purchasing.