For consumers in the US, bars and restaurants are deeply ingrained in their social fabric. One in three users claim that they would feel lost without the on-premise. For beverage alcohol brands, hospitality venues play a crucial role in reaching people and capturing market share.
Despite current inflationary pressures, there appears to be little impact on people’s visitation rates to bars and restaurants, or their spending habits. More than one in three US drinkers plan to go out more often in 2024 compared with last year, and 42% aim to maintain the same frequency of outings as they did in 2023.
People seem to be reluctant to forego the opportunity to socialise over drinks and view drinking out as an affordable luxury worth preserving. Intentions to go out specifically for drinks have increased by 2 percentage points (pp), with 48% of consumers planning to enjoy drinks outside the home in the next month.
Consumers are certainly aware of rising prices. In the coming months, 53% and 41% expect this to be the main reason for spending more on food and drinks, respectively. Yet many also anticipate increased spending as a form of treat. Just under a third (31%) of US consumers admit to indulging themselves more frequently, while roughly a quarter opt for higher-quality food and premium drinks brands or celebrating special occasions more often.
Interestingly, about one in five attribute their increased spending to having more disposable income or enjoying more drinks during outings.
Premiumisation tendencies
Recent research by CGA provides promising prospects for suppliers and operators not only among the larger segment of consumers who are increasing their on-premise visits, but also among those who may be reducing their outings or consuming fewer drinks.
This means it’s important for brands and businesses to remain mindful of all segments of the population. For example, a significant 16% of US on-premise users acknowledge that, although they are going out less often, they are treating themselves when they do. Additionally, more than one in four choose to consume fewer drinks during their outings, which might suggest a preference for quality over quantity. This trend has significantly favoured premium bars.
Contrasting with the channel’s overall slight decline of 0.6%, the on-premise has experienced remarkable growth of 17.3% over the past four years. Conversely, nightclubs and fine dining restaurants have both suffered notable declines (-19.6% and -25.8%, respectively) in the same period. When focusing on channel performance over the past year alone, however, the landscape changes significantly.
The overall US on-premise sector demonstrates robust signs of recovery, with year-on-year growth of 2.9% evenly distributed across both food- and drink-led venues. Indeed, while there are fewer opportunities in fine dining and casual nightclubs, all other segments of the country’s on-premise are displaying signs of growth, especially venues offering lodging and recreation.
High spirits
Across all types of on-premise channels, spirits remains the dominant alcohol category, accounting for 46% value share, although it has experienced a slight decline in volume (-7.9%) year on year. This has been primarily due to the increasing popularity of RTDs, which have grown by nearly 30% in value and over 33% in volume.
By delving into more nuanced data, however, opportunities for brands and operators within spirits can still be clearly identified. The downward trajectory of the broader spirits category has been largely driven by brandy and cognac, but vodka, tequila and whiskey/whisky have experienced much slower declines. In fact, vodka has maintained stability with a marginal increase of 0.03pp year on year while tequila has performed even better, surpassing vodka with slight volume growth of 0.69pp.
Within vodka, some degree of volume decline is noticeable across all price tiers, but the premium and super-premium segments have demonstrated greater resilience compared with last year, with more modest drops of 3% and 8.25%, respectively. This resilience is particularly evident when compared to the mid-priced tier, which has experienced the most significant volume decline of 14.47%. As more than half (56%) of vodka drinkers enjoy the spirit as part of a cocktail, operators can tap into the appeal of premium expressions by encouraging consumers to trade up with more upscale vodka-based mixed drinks.
Meanwhile, despite gaining distribution points in venues, tequila has faced declines in return on sales across all price tiers, especially in the value (-38.2%) and mid-priced (-17.0%) tiers. The fact that nearly one in three tequila drinkers are notably price sensitive when choosing which brand to consume might partly explain this trend. Indeed, nearly a third of them opt for the category when it is promoted during happy hour.
Fine vodka, casual tequila
To leverage the potential of spirits’ positive performance, brands and suppliers should prioritise investing in the channels where each spirits category — and subcategory — is experiencing the highest demand.
Fine dining outlets, for instance, account for a significant share of spirits volume (7.2%) and value (7.6%). Visitors to the channel are doing so more often compared with the previous year (29.4%). At dining’s higher-end, volume sales of tequila declined, while vodka maintained its significance, representing the highest sales share (29.2%) of all spirits while also showing signs of growth (+0.83pp year on year).
This positive trend has been driven by the strong performance of ultra-premium and super-premium expressions, which collectively account for 78% of all vodka sold in fine dining venues. Compared with last year, the premium segment has gained 1.17pp of vodka category share, while super-premium labels also made progress (+0.6pp).
Meanwhile, the value, mid-priced and ultra-premium segments have all experienced share declines in this channel. Yet, given that these three price tiers combined only represent approximately 22% of the vodka sold in fine dining venues, their negative performances should be of less concern to operators.
Consumer insights further confirm the significant role of the category in this channel, as more than 41% of vodka drinkers are increasingly frequenting fine dining venues. This proportion is notably higher compared with the less than 30% of average consumers who are doing the same.
Tequila drinkers, meanwhile, are similarly attractive to brands – about 41% of them are increasing their visits to fine dining establishments.
Vodka also remains essential in casual dining venues. In this channel, the category has seen a slight decrease in share (-0.13pp), with other spirits segments benefiting from this shift. The total volume of spirits sold in casual dining far exceeds that in fine dining, so such a marginal decrease should not significantly divert the attention of vodka brands from this channel. Somehow reiterating the trends seen in fine dining, premium vodka expressions were the primary gainers in casual eateries too, having grown by 1.9pp, while mid-priced vodka lost 1.44pp.
Tequila has seen a divergent trajectory, losing 0.5pp of volume share in fine dining outlets, but gaining the same share in casual dining venues. Considering that spirits sales in casual eateries exceed those in fine dining tenfold, the latter appears as an increasingly profitable channel for the category. Over the past year, tequila has also made gains in bars (+0.9pp), outpacing vodka which only grew by a mere 0.2pp.
Even in nightclubs, a channel that has faced significant challenges in the past 12 months, tequila has proven to be the most resilient spirit, securing a remarkable 2.26pp of total spirits volume share. Particularly noteworthy is the positive volume growth seen in the premium (+5.27%) and ultra-premium (+11.81%) tiers, gains that have propelled it to match vodka’s overall share of total spirits sales in this channel (26.1%).
Overall, then, there’s an encouragingly positive outlook for the US on-premise, albeit one characterised by complexity and nuance. Opportunities abound, especially within spirits.
Brands, suppliers and operators simply need to ensure they are investing wisely in the right categories – and subcategories – within the appropriate channels.
