Why Beverage Sales Lag

Danny

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If your beverage sales are not growing as fast as your overall sales, Danny Brager has an idea why.

Brager, senior vice president of Nielsen’s Beverage Alcohol Practice Area, pointed out at a recent presentation that while total food and beverage sales on-premise were up more than 6 percent in 2015, beverage sales lagged, up only 3.3 percent. Why? Brager, known for his detailed reports about wine sales in the US for Nielsen, shared his opinions at the annual Wine Market Council presentation in New York this January.

Key reasons, he suggests, include the fact that prices for beer, wine, spirits, and cocktails are under scrutiny. Millennials in particular are finding it hard to build their disposable income and are aware of what things cost off-premise. Therefore, they’re keeping a close watch on what they spend. In addition, Brager says pre-gaming, in which groups gather at someone’s home in order to have a couple of drinks before spending the night out, is gaining traction. He also thinks the proliferation of off-premise-based locations (Whole Foods, for example) where lots of local craft beers are often available on tap in on-site eateries, and wine and spirits shops that serve food as well, have muddied things for consumers and stolen drinking occasions from more traditional bars and restaurants.

Then there’s the boom among so-called fast casual restaurants, like Shake Shack and Noodles & Company. These establishments, which may have a tightly limited number of alcoholic beverages on the menu, are not primarily known for high levels of alcohol consumption. These types of restaurants could be keeping average growth down. And Starbucks growing more into serving wine and beer may also be cutting down on visits or at least purchases of adult beverages at more traditional on-premise locations, according to Brager.

Furthermore, Brager opines that the take-out and delivery boom (fueled by mobile apps including Grubhub and Seamless) have made dining without cooking more convenient. This trend probably cuts down on overall spending, as consumers drink retail-priced beverages with their delivered meals. Finally, and this is important mainly to major tourist destinations, the unfavorable exchange rate (predominantly for European travelers) has brought sticker shock to beverage menus, particularly those with European wines and beers.

Of course, on-premise operations alone are still growing and there are lots of silver linings in the on-premise sector. But sometimes, the reasons that slow your alcohol sales have nothing to do with you, but instead speak to more general consumer trends beyond any single operations control.