NIELSEN CGA REPORT: A Comparative Look At The On Premise (Eating and Drinking) And Off Premise Marketplace

According to Nielsen and Nielsen CGA data, 2016 was a year of growth and 2017 is shaping up to be a year of continued competition.

March 28, 2017
Nielsen CGA
For On Premise, competition continues to increase in 2017, innovation is pushing the boundaries of experience and expectation and consumers are continuing to see the On Premise as an experiential channel rather than a habitual one. 
In short, the On Premise channel remains a tough market for many and successes continues to be hard earned.  Serious rewards do exist of course but channel-specific strategies are required to unlock them. So, What is essential to win in On Premise 2017?  According to Scott Elliott, SVP, Nielsen CGA, "Firstly, a clear channel strategy which is delivered via effective partnerships with distributors and national accounts. 
Secondly, suppliers must be able to use retailer-focused, on premise insights to gain and protect space and visibility in bars and restaurants - for example, insights around optimal assortment, benefits of menu listings, effective pricing ladders, impact of specific outlet activation investment etc.  The best insights in this space are the ones founded on an understanding of the retailer's own customers' needs and preferences.  The tools are now available to enable this level of consultation and I believe that 2017 will be the year when the game changes for the best suppliers out there...and gets tougher for the rest"
The Off Premise marketplace is showing some signs of challenge in 2017 - with economic factors, political factors, and channel shifting impacting consumer and shopper behavior, and reducing growth rates. Given that Alcohol is for the most part a discretionary purchase in general, along with a hefty percentage of "unplanned category purchases" within a store environment where multiple categories are sold (approximately 26% based on Nielsen's recent Category Shopping Fundamentals study), this is concerning.  
Danny Brager, SVP of Nielsen's Beverage Alcohol practice commented, "as growth slows, competition for the consumer dollar will be even more intense with each adult beverage category seeking to be the drink of choice on each drinking occasion - whether those end up as in home or out of home occasions.   Additionally, all three tiers - suppliers, distributors, and retailers will continue to be challenged by assortment." That said, how will Off Premise players be matching and managing the continuously growing range of beer, wine, and spirit products with the diverse preferences and needs of a growing consumer base?
Brager continues, "those who are recognizing the importance of getting the 'right' products  in the 'right' stores to meet the needs of shoppers in that store, will be the winners.   Moreover, e-commerce in beverage alcohol manifested in different forms, while still relatively small in comparison to many other categories, will continue to expand, and Off Premise retailers will need to deal with a growing segment of consumers who may wish to "buy", but who may not need or see the need to visit the store to do so."
In December 2016, Nielsen issued a preview look at the state of the On Premise and Off Premise marketplace.  Below are full year insights based on 52 weeks of data ending 12.31.16.  According to Nielsen and Nielsen CGA, generally, growth rates across both premises softened towards year end, with the ONE exception of wine in the on premise, due to a strong, end of year close.   That allowed wine to grab the growth lead from spirits in the on premise.
Off premise, spirits continued to lead, while in both channels, beer growth rates trail.  While premiumization (value growth>volume growth) continues to be a common theme across channels, that trend is less pronounced within the On Premise, a channel that is obviously higher priced to start with for the consumer.
This report uniquely highlights the commonalities and differences between both channels in the past year. 
.         Within On Premise, segment growth at mid to high single digit levels is being led by Mexican Beers as well as the Domestic Super Premium segment
.         Craft is significantly more mature in the On Premise, close to a third of the category dollars,  significantly more than in Off Premise - Craft growth in both channels is now down in the low single digit range
.         Imports share overall is larger On Premise compared to Off Premise - Irish and Belgium beers are contributing to this while Mexican imports are less developed On Premise, suggesting an area of opportunity since the Mexican beer segment is the growth leader in both channels 
.         Domestic Premiums have suffered significant losses On premise, much more so than Off premise
.         Ciders have reached a 2.0% share in On Premise and are contributing to growth within this channel.  This is different than the Off Premise where declines from several large Cider brands sold and marketed by larger Beer companies have resulted in overall category declines.
.         Wine trends by channel diverted in opposite directions towards the end of the year - growth levels tapered down in Off Premise, but strengthened in On Premise.  Although Sparkling Wine had been the main growth engine throughout much of 2016 it was a resurgent Table Wine segment that helped move total Wine into positive territory
.         Off Premise the slowing growth rates were broad - most price points, varietals, and origins contributed.   Within On Premise, the strengthening was led by several red wine varieties, while both the U.S. and most Import countries contributed to the turnaround.  
.         Of note, is that Imports are better developed On Premise with almost 1/3 of dollars, vs just less than 30% Off Premise
.         Spirits had been the top performing category in both Off and On Premise throughout 2016, but category growth tailed off a bit in the last quarter in both channels
.         Across both channels, growth is being led by Irish Whiskey, Cognac and Tequila sub-categories, while at the other end of the spectrum, Rum and Cordials/Liqueurs are struggling in both
.         Canadian Whiskey growth is holding up better in the Off Premise, but struggling more On Premise
.         While flavors in each of Vodka and Whiskey is more important in the On Premise, their growth On Premise lags Off Premise - unflavored segments are trending much better in the On Premise.