Last week the drinks industry got together at their annual trade show in London, Imbibe Live. Bringing brands, buyers, restaurateurs, and on-trade personnel together, the two-day show saw attendance in the thousands with seminars on trends in the drinks industry coupled with unique tasting sessions.
Inflation, staff shortages & supply chain issues are hurting everyone
A common theme highlighted by brands and restaurateurs was how the cost-of-living crisis was harming them from both ends, with input costs rising and consumer spending decreasing. On-premise sales volume for the drinks category is down 5% compared to pre-Covid levels1, with c.40% of consumers highlighting they plan to go out less frequently and 1 in 5 consumers indicating they plan to order fewer drinks2. According to the Office for National Statistics, there were 164,000 hospitality vacancies between January and March 2022 (over 2x vs a year ago), reflecting additional operational challenges brands have to deal with.
Sustainability & flavour variety are driving consumer preferences
Increasingly, consumers want beverage options which utilize different flavour profiles and are made from locally sourced, sustainable ingredients like raw botanicals. On-premise sales for flavoured vodka are up 33% vs. 2019 while flavoured rum sales are 2x that of 20191.
Cocktails, craft beers & low/no alcohol beverages are emerging hotspots
Spirits is the only parent category to grow value share (+3.2pp3), stealing share from every other category (beer, wine, cider and soft drinks), with the cocktail sub-category sales being up 8%, on the back of people going out to pubs more, craving for experiences.
With the pandemic continuing to act as a tailwind to the health and wellness discussion, more and more consumers are considering drinking in moderation and/or consuming low / no alcohol beverages, with the category being considered a novelty by many until now with mainstream penetration still in very early stages. The market for such drinks in the on-premise channel is currently <£100M, with low/no beer beverages accounting for a bulk of that value. Kantar pegs the retail value of the category at c. £260M with wine being the biggest sub-category4.
However, it’s the low/no spirits segment which has seen growth explode from c.£1M pre-pandemic to £10M in 20223. Many small competitors are going direct-to-consumer and trying to capture the latent demand with unique flavours e.g., Caleño Drinks launched a no-alcohol gin influenced by Colombian flavours. Incumbents are losing share to these players with consumer willingness to try new products at an all-time high.
As brands continue to adapt to changing consumer preferences, we expect to see new and exciting product development in different drinks categories and formats (e.g. RTD, low/no alcohol wine and spirits) with more investments being made by business leaders to expand the selection on offer.
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1. CGA OPMS QTR to P03 2022 VS. 2YA – 24/03/2022; 2. CGA GB Reach 2022 (Sample size: 1,000); 3. CGA OPMS MAT to P05 2022 – 21/05/2022; 4. The Grocer/Kantar 52 w/e 20 February 2022