Are consumers clamping down on spending or, is this related to new health recommendations?

There have been several stories of late indicating a decline in beverage alcohol sales. The beverage alcohol industry was recently successful in pressuring the Liberal government to reduce the ongoing proposed tax increases that are slated annually for the category. The main concern is that higher pricing, as a result of aggressive taxation, is continuing to damage the category and is leading to an erosion of sales.

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Foodbuy spoke to CGA by NIQ (Nielsen), who are the leaders in monitoring alcohol sales across the country. CGA by NIQ gathers data directly from several thousand point of sale outlets nationally. Meaning, they get transactional data directly from sales registers. They also work with beverage alcohol manufacturers and have digital data assets through menu and web scraping, allowing them to consolidate and analyze all these sources to identify sales trends in bars and restaurants. All while also doing extensive consumer research in bars and restaurants.

CGA publishes monthly reports on alcohol sales and trends and an annual report for the overall category. They will be hosting a webinar for operators, in early summer, to provide deeper insights into these issues. Foodbuy will forward this information when details are finalized.

Mitch Stefani, Canada’s Client Solutions Director at CGA by NIQ Americas, provided insight into the work CGA by NIQ does. “We look at who’s visiting on premise locations. Where do they go? What brands do they drink? Why do they drink them? How do they drink it? What occasions do they go for? Basically, we are looking at the path to purchase and behaviours. We have updated sales performance reports every two weeks in the channel that compares rate of sale, ticket counts, average check values, etc. with year over year comparisons.”

We asked Stefani what trends they see emerging. “If you think back to 2023, it was the first full year post-pandemic. Everyone wanted to rush back out to socialize again. Velocity levels were higher versus 2022, as well as the check values. Price certainly played a role here, but we saw increased spend on visits and ticket counts were up as well. All looked good.”

“Skip forward to today, we are starting to see some softening. Ticket counts are starting to come in a bit lower than 2023, and in some provinces, even back to 2022 levels. This is a concerning development however, despite those levels being down, pricing is keeping check values up. People may be going out less, but when they do go out, they’re spending a little bit more and compensating for less visits throughout the week.”

We asked Stefani what is currently driving these behaviors? Are the declines driven by health concerns, economic conditions, or price concerns? Stefani looked to help us peel back the onion. “There are different things at play right now. Our data across both consumer opinion and sales tracking suggest it is economically driven. Are health and moderation components a factor…sure. However, the top reason for the softening that consumers are expressing is the result of the rising cost of living. Consumers are just trying to navigate how to best part with their money. We know that consumers acknowledge that going out enjoying beverage alcohol continues to be a staple when socializing. It’s now the value for money and the value of going out that has dipped in the minds of consumers.”

We asked if service levels in the industry are impacting sales as staffing shortages have been a large issue. “We track that consistently, and satisfaction levels are good from a servicing and quality of service standpoint so, it’s not necessarily all on the operator side. Staff are getting products out. Our sources suggest operators are simply passing on costs as the industry works on such thin margins. We think consumers are just beginning to feel it now and they are simply starting to go out less frequently than before.”

We asked if CGA is seeing any shifts in behaviour around consumer dayparts? Stefani acknowledged, “Yes, we see visitations shifting… consumers were going out later at night to socialize… Now, we are seeing a shift to earlier visits. Consumers will go out during the day, or in the early evening but that late night visit has somewhat slowed down, where consumers can be inclined to continue their socialization over drinks at home.”

We also asked what shifts Stefani is seeing when it comes to categories. ”Looking to other markets, Canada is now showing similar trends within Spirits, as they had their moment coming out of the pandemic. Now, the premium spirit segment is starting to slow down as operators pass on costs. Spirit sales are down close to double digits in some markets globally.  It could be worrisome for a category that was really having huge success and may boil down to how long consumers will continue to trade up and drink premium. Within Beer, Imports are doing well with Domestics holding their own, while Craft Beer is struggling. Overall, the shift we are seeing is essentially quality over quantity.”

“We certainly see the non-alcoholic category growing as well. It’s not just about serving a pop or water anymore. This category is expanding and now has its own place on the menu. Almost 42% of consumers said they acknowledged and see more non-alcoholic options than they have before. It’s building awareness and operators need to have options on the menu.”

Foodbuy recently ran a story about the rise in demand of alcohol-free drinks. Read more here.

Stefani summed up by saying, “We do see some light at the end of the tunnel, but moving forward it will be interesting to see how much of a factor the economy continues to impact overall consumer behaviours.”

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