Nielsen CGA: 2016 On-Premise Review

According to Nielsen CGA, 2016 was a year of heightened competition & battle for share.

March 15, 2017
On premise is a complex, fragmented yet valuable market for the beverage alcohol industry.  Dominated by independently owned and operated restaurants and bars, the on premise is fast moving, challenging but highly profitable.  It remains the home of trial and experimentation with a strong correlation between frequency of on premise visits and willingness to trial new brands.
Within on premise, Wine's recovery at the back end of 2016 pushed its 52-week sales trend into positive territory for the first time in a year. 
Beer is hindering on Total BevAl performance. In 2016, main category growth came through Imported beer brands and smaller Craft.  Accordingly, Beer lost 0.7pp dollar share of on premise beverage alcohol sales to Spirits in 2016. If this trend continues through 2017, Spirits will replace Beer as the most valuable on premise mega category by the end of this year.
This highly competitive market brings a need for operational excellence.  On Premise Chains make 20-25% of (highly profitable) revenue from BevAl - However, most focus heavily on the food element of their offer - leaving On Premise Chains at risk of losing sales due to factors such as: non-optimal assortment, less than compelling pricing strategies or an overcrowded bar or back bar leading to confusion and difficult 'navigation'.
Scott Elliott, SVP Nielsen CGA commented, "2016 showed that while the on premise has its challenges, it remains a highly profitable channel where people are most open to trial and experimentation.  We remain convinced that there is a big opportunity for suppliers and wholesalers to better advise retailers in addressing the challenges of customer confusion, poor assortment planning and missed sales opportunities due to less than compelling pricing strategies.  The very first step to this is for suppliers to actually understand the profile, preferences and behaviors of a retailer's customers.  Without this retailer-specific insight it is virtually impossible to offer BevAl solutions that are exciting, encourage repeat visit and result in greater spend per visit."
2016 Beer Performance:
It's been a mixed year for Beer.  Top-line sales deteriorated over the duration of 2016, ending the year with volumes down -1.9% and dollar sales down -0.7% versus 2015.  Some segments performed well in 2016, though.  Import's 2016 volume sales were 4.8% higher than in 2015, driven primarily by the runaway success of Mexican beer (+9.5%).  Domestic Super Premium was the fastest growing subsegment last year, experiencing volume gains of 8.6% against the previous year.
Craft, which until recently had been the main source of Beer sales growth, performed less spectacularly in 2016.  On premise volumes were up 1.0% - a significant overperformance relative to Total Beer, but far from the stellar growth of recent years.  Craft is maturing, and its larger brands have a challenge to reconcile a large market share with the spirit of the craft movement.
Per the very large Nielsen CGA On Premise Consumer Survey, a third of craft beer drinkers feel that being too widely available prevents beer from being classified as craft.  Indeed, dollar sales of mature craft brands (> 1% share) are down -1.9% since Jan 2015, while maturing (> 0.1%) and newbie (< 0.1%) craft brands are up 6.8% and 11.8% respectively.
2016 Wine Performance:
Wine's recovery at the back end of 2016 pushed its 52-week sales trend into positive territory for the first time in a year - FY 2016 volumes were up 0.1% vs 2015, while dollar sales increased by 0.9%.  Although Sparkling Wine had been the main growth engine throughout much of 2016 it was a resurgent Table Wine segment that helped drag Wine over the line.
Sparkling Wine's best months came in H1 2016, softer performance in H2 saw the full-year volume trend rest at 5.4%, down from 6.4% in 2015.  Conversely, Table Wine's quarterly volume trends remained negative for H1 but  remained positive throughout H2, growth that culminated in 2016 volumes reaching near-parity with 2015 (-0.3%).
2016 Spirits Performance:
Spirits has been the top-performing mega category in the on premise throughout 2016, with FY volume sales up 1.3% versus 2015 (dollar sales up 3.1%). Of course, these gains were not experienced equally across all the Spirits categories.
Vodka and Whiskey, which together constitute more than half of on premise Spirits sales, had volume increase by 1.6% and 1.7% respectively in 2016.  Drilling down a level further still, it was Unflavored driving growth in Vodka (+2.3%) as Flavored Vodka continues to suffer from a proliferation of extensions in recent years.  Irish Whiskey is the main driver for category growth within Whiskey - volumes were up 12.6% in 2016.
Tequila and Cognac were the big winners of 2016.  Tequila, which last year added 240,000 9L case sales to its 2015 volumes, has been buoyed by the performance of high-end, 100% agave tequilas in 2016.  Cognac, which has been in double-digit growth through the year, increased sales by an extra 120,000 9L cases in 2016, largely due to gains in the VS segment.
At the other end of the spectrum Cordials has struggled throughout 2016 - full-year volumes down -3.4% versus 2015, making it the worst-performing category by some margin.  Its long-term momentum is more promising though, since 2015 volumes were down -4.4% on the previous year.
Data reflecting 52 weeks ending 12.3.16