Off-trade alcohol sales have become more valuable over the last year, with an increase of 4.6% compared to last year, now reaching over £16.6bn. Interestingly, the amount of alcohol bought has remained flat, which means that the growth is coming from shoppers paying more for their alcohol. Last year, we saw the trend towards shoppers buying more expensive products, and this is set to continue.
The biggest increase in price is coming from the ales and stouts category, and this comes as a result of the continued rise of “craft” beer, with Brewdog being the best-known. Craft beers command a large price premium compared with other beers – sometimes more than three times more expensive – but shoppers are willing to pay more and drink less.
Gin is another category where this trend towards drinking more expensive products is prevalent. There has been a huge amount of interest in gin over the last few years, and we’re seeing more new brands enter the market each month, with many of them coming from small distillers and commanding a high price. It’s not just smaller brands gaining in gin though, we’re also seeing strong growth from some of the biggest brands.
So what’s driving UK alcohol drinkers to trade up?
In 2017, we saw consumer confidence dip back down towards the levels that we saw in the immediate aftermath of the Brexit vote in 2016. The economy features highly as one of UK shoppers’ biggest concerns, and shoppers are increasingly making decisions about what and how they buy to better stay within their household budget. In light of new “lifestyle regulations” such as the sugar tax, minimum unit pricing in Scotland and proposals to levy charges on plastic bottles, this is likely to require householders to continue working hard to manage their spend.
When shoppers look to make savings on their total household shopping bills, it’s often the discretionary categories such as snacks, confectionery, soft drinks and alcohol that feel the brunt of it. In spite of this, we know that shoppers still want to treat themselves and we’re seeing some shoppers ringfence their spend in certain things, alcohol being one. So, while the trend is to cut back absolute levels of shopping spend, trading up into more expensive products is the consequence of shoppers wanting to treat themselves.
A great example of this is in beer, where volume sales are flat at best, but in craft beer, which can be up to more than twice as expensive, sales are flying, as volume sales have nearly doubled compared with last year. Similarly, this is happening in gin, where consumers are seeking out the most expensive products. Growth in niche, premium gins is far stronger than it is for more ubiquitous brands. This trend shows no sign of slowing and looks set to continue for the foreseeable future.
When it comes to where shoppers are buying their alcohol, there’s no surprise here: they’re still heading to the top four supermarkets (which may become the top three given the recent announcement of the Sainsbury’s/Asda merger) where sales have grown, although they continue to lose share to the discounters. When buying alcohol, shoppers still want to spend time perusing the alcohol shelves; they don’t just buy on auto-pilot. This is where the in-store experience and range become all the more important. While online shopping is disrupting the retail environment behind the scenes, it still makes up just 7% of overall grocery and we don’t anticipate that online will replace physical stores any time soon. On the contrary, stores will gain even greater importance for fresh and frozen food, “occasion-based” products, such as meal deals, as well as beers, wines and spirits. Successful shops will be those which can flex their ranges to meet the changing demands of the consumer.
Originally published in Independent Retail News, June 2018