By Boris Oglesby, EVP and Practice Leader, IRI
The beverage category had a banner year in 2020. Whether it was Stanley Tucci mixing a Negroni cocktail, whipped coffees in every flavor, or Ocean Spray's Cran-Raspberry's® viral moment, both alcoholic and non-alcoholic beverages kept consumers entertained throughout the COVID-19 pandemic and offered a sense of luxury, comfort and joy (10 of the top 25 latest food and beverage New Product Pacesetters are beverage brands). Below are some beverage alcohol insights that we can learn from as we look toward what the rest of this year and 2022 will bring.
Growth on Overdrive
With fewer people going to social events and gatherings, 2020 was a knockout year for off-premise beverage alcohol. Sales rose by 10.4% as consumers turned to more premium wine, beer and liquor in an attempt to bring the outside world into their homes, whether they were joining Zoom happy hours or trying to replicate fine dining restaurant experiences in their kitchens. Hard seltzers led sales growth in 2020, with rapid expansion in distribution and more than 93 new brands entering the marketplace.
Source: IRI POS Data, Syndicated TSV, data ending Dec. 27, 2020, Total U.S. MULC
Non-alcoholic drinks like carbonated soft drinks and specialty coffee products also saw growth last year as they played an elevated role in consumers' daily lives. Pantry stocking increased to accommodate both higher in-home consumption and to cut down on trips to avoid exposure to the virus.
COVID-19 shook up the channel landscape as well. Stock-ups drove growth in the grocery channel, and food and beverage e-commerce essentially catapulted three years into the future.
1Retail universe defined as IRI MULO+C and IRI E-Market Insights + ePOS
Source: IRI Growth Consulting E-Commerce Forecasts, IRI E-Market Insights, IRI Growth Consulting Analysis
State of Beverage Alcohol
Beer, wine and spirits continue to grow, mostly from increased consumption, even as beer saw some consumers switching over to wine and spirits. The craft beer segment was actually losing buyers prior to 2020 but was able to add new buyers during the pandemic, which contributed to its growth.
Source: IRI National Consumer Panel, U.S. MULO, 52 weeks ending Dec. 27, 2020 vs. year ago (NBD Vol.)
Hard seltzers have continued their upward climb. The segment's growth was accelerated by an increased number of new buyers while also increasing dollars per trip. As the new hard seltzer brands flooded into the market, White Claw and Truly continued their strong growth. 2021 will continue to see the proliferation and differentiation of seltzer products, which will challenge manufacturers and retailers on where exactly to fit these new entries and what should come off the shelf to make room for them.
Consumers' ongoing interest in health and wellness bodes well for the long-term growth of better-for-you (BFY) products like hard seltzers. Natural and GMO claims are among the fastest-growing claims in food and beverage overall, but other emerging claims may provide a glimpse of the next large BFY trend, such as "perfected by nature."
What's Next for Beverage Alcohol?
The shifts we've seen in consumer lifestyles, even as the country and world begin to open back up, will have a lasting impact on the market, and trends like flavor, premiumization and convenience packaging will continue to accelerate.
Consumer Preferences
Source: IRI Hendry (Behavior-Based) Market Structure, BevAlc, 2020
Flavor – Consumer preferences for flavored and high-end beverages have seen strong momentum, and new products will continue to emerge in this sector, especially those offering functional health and wellness benefits and ingredients. Consumers have a continued interest in health and wellness post-pandemic, which bodes well for these types of beverages. Across 71% of IRI's health and wellness attributes, non-alcoholic beverage products with better-for-you health and wellness claims are growing at a faster rate than those without them.
Premiumization – This will continue throughout 2021 as at-home experiences remain elevated and consumers spend more money on homebound indulgences, such as craft beer and premium spirits. Premiumization dramatically impacts the types of products shoppers seek out, and many consumers are opting for high-quality products over purchasing a high quantity of them. Premium products typically feature more high-end ingredients, aesthetically pleasing packaging and an emphasis on flavor.
Boosted by stimulus and improved SNAP benefits, low-income consumers are becoming increasingly important in this sector. They are critical drivers of premiumization, as are high-income households and other growing cohorts like Generation Z and millennials.
Convenience Packaging – In today's marketplace, consumers are more mobile than ever and convenience packaging has become increasingly important. Technology has allowed people to stay connected wherever they are, and convenience packaging has driven the success of ready-to-drink cocktails, hard seltzers and canned wine. On the non-alcoholic side, cold-pressed juices and cold-brew coffee have become staples in consumers' busy lifestyles. Lightweight and portable, drinks packaged in simple, convenient containers are easy to take on the go.
The rest of this year and into 2022 will still be a time of transition for beverage alcohol manufacturers and retailers. Although at-home consumption remains elevated, this will erode as mobility continues to improve, but it will still be higher than pre-COVID-19 at-home consumption levels. Increased consumer mobility is poised to impact several grocery categories but especially alcohol as people head back to bars and restaurants. Beverage alcohol manufacturers and retailers need to be ready for this next shift in consumer buying behavior.
I shared the above and more, including specific beer, hard seltzer and CPG trends in a recent Brewbound webinar. Watch the session (access is available to Brewbound subscribers), or reach out to your IRI representative or me at Boris.Oglesby@IRIworldwide.com for a copy of the presentation.