On-premise premiumization of Spirits continues, with most spirits categories seeing accelerated price/mix in 1Q13 relative to 2012 trends

May 27, 2013
According to GuestMetrics, the overall average price for spirits in full service restaurants and bars accelerated during the first quarter of 2013, the result of consumers trading up to more expensive brands in the Bourbon, Scotch, Tequila, and Vodka categories, as well as incremental pricing being taken in the majority of the spirits categories.

"While spirits' price/mix was up +2.5% during 2012 compared to the prior year, that accelerated to +3.2% during 1Q13," said Bill Pecoriello, CEO of GuestMetrics LLC.  "As we wrote about several months ago, there has been a "hollowing out" taking place in the spirits category, with consumers migrating away from the Premium tier in favor of High End & Super Premium brands, as well as Value brands.  This is likely a reflection of the impact of creative marketing for top tier brands causing trade-up, and simultaneously, a consumer base that continues to be under economic pressure causing trade-down to less expensive brands," continued Pecoriello.  Based on data from GuestMetrics, Super Premium's share of spirits sales increased from 32.1% in 2011 to 32.6% in 2012 and has accelerated to 33.8% in 1Q13; High End Premium's share increased from 52.3% in 2011 to 53.0% in 2012 to 53.8% in 1Q13; and at the other end of the pricing spectrum, the Value segment increased from 21.9% in 2011 to 22.3% in 2012 to 22.5% in 1Q13.  Those gains came at the expense of the Premium segment, which contracted from 25.7% in 2011 to 24.7% in 2012 to 23.7% in 1Q13.

"In terms of changes in price/mix across the various spirits categories, eight of the 10 main spirits categories saw an acceleration in their year-over-year price/mix from 2012 to 1Q13, and only Bourbons and Brandy/Cognac saw any deceleration," said Peter Reidhead, VP of Strategy and Insights at GuestMetrics.  Based on data from GuestMetrics, year-over-year growth in price/mix for Vodka accelerated from +2.0% in 2012 to +3.8% in 1Q13; Tequila accelerated from +2.0% to +3.1%; Scotch accelerated from +4.6% to +5.5%; Rum accelerated from +2.4% to +3.1%; Irish accelerated from +1.2% to +2.6%; Gin accelerated from +3.4% to +3.6%; Cordials accelerated from +3.1% to +3.9%; and Canadian accelerated from +3.2% to +3.5%.  Price/mix for Bourbons and Brandy/Cognac remained in positive year-over-year territory, but both decelerated slightly: Bourbons from +2.1% to +1.5%, and Brandy/Cognac from +1.5% to +0.7%.

"Looking at the spirits categories that saw the largest shifts in price segments, Bourbons has seen the most dramatic hollowing out effect.  Super Premium's share of Bourbon sales increased from 14% in 2011 to 15% in 2012 and reached 16% in 1Q13, while Value's share increased from 9% in 2011 to 12% in 2012, and is now almost 16% in 1Q13," said Brian Barrett, President of GuestMetrics. "Super Premium in Scotch saw its sales share increase from about 58.5% in 2011 to 60.5% in 1Q13, and in Tequila, increased from about 14% of sales in 2011 to about 16% in 1Q13.  The largest spirits category, Vodka, has also seen some premiumization take place, with Super Premium and High End brands together gaining about 1.5 points of share from 2011 to 1Q13."