Nielsen: Off vs. On Premise Quarterly Trends Report (Q3 2017)

December 15, 2017
According to Nielsen and Nielsen CGA data, the past 52 weeks (through 10-7-2017) have been characterized by:
Continued trade-up as premium segments have continued to grow faster than lower price tiers.

Spirits' continued position as the "growth" lead, faster than Wine, with Beer trailing. Those growth rates have pushed the overall 'value' (or dollar sales) of Spirits in On Premise channels to just ahead of Beer, making it the largest adult beverage category in dollar sales in that channel  

Growth rates have decelerated in the most recent quarter - in both On and Off Premise - with new forms of shopping and purchasing in part shifting some spending (e.g. e-commerce, tasting rooms, taprooms/brewpubs, festivals/events, etc.)
This report uniquely highlights some commonalities and differences between both channels in the past 52 weeks ending Oct. 7, 2017.
In 2017, overall adult beverage sales volume in On Premise channels (restaurants and bars) declined -1.6%, driven down by Beer which negated modest growth from  both Spirits and Wine categories.
According to Scott Elliott, SVP at Nielsen CGA: "In this modern, experience-driven On Premise environment, premiumization* is evident in all categories, however no category highlights this more than Spirits. 'High End' spirits now account for 55% of total Spirits volume and 62% of dollar sales. With dollar growth of +3.2%, 'High End' Spirits have brought an additional $807 million to the channel, while Ultra-Premium Spirits are growing at the fastest pace (+5% in dollar sales). Premium and Ultra-Premium Whisky and Tequila alone have contributed 65% (or $631 million) of total Spirits growth. In contrast, Mid & Value price tier Spirits combined grew only +0.8% in dollars.
Tequila and Cognac Show Bullish Growth in Spirits: With continued growth in Spirits (+1.4% volume and +2.3% value), the category has overtaken Beer for the first time as the most valuable On Premise category (Spirits dollar sales are $42.6 billion vs Beer dollar sales at $42.4 billion). Vodka is underperforming to the overall category at +0.3%, Whiskey is at +1.2% and both Tequila and Cognac have had bullish performance, with volume sales up +6.5% and +11%, respectively. Within Whiskey, Irish Whiskey, in particular, continues to post double digit growth (+10.2%).
Craft, Imports & Domestic Super Premiums Driving Growth in Beer: Beer volume (including Flavored Malt Beverages and Cider) has declined -2.1% over the year, driven primarily by declines in Domestic Premium (-6.2%). However, it's balanced by growth in import beers (+2.1%), a sub-category influenced heavily by standout performance of Mexican imports (+5.0%), as well as the relatively stable performance of Craft Beer (+0.5%). Craft Beer dollar share On Premise is nearly ? of the category, 20 points higher than its share in Off Premise channels. Domestic Super Premiums also chipped in with a robust gain of +5.6%.  
Sparkling Wine Preferred in Bars and Restaurants: Wine's Off Premise performance exhibits growth over the last 52 weeks, with volume up +1.3% and dollar sales up +1.9%. Sparkling Wine continues to be one of the best performing sub-categories with volumes up by +7.5% and dollar sales +11.5%. Of the major Table Wine import countries, France stands out (+8.0%) driven by explosive Rose' growth. Beyond that, Reds overall are outperforming Whites in bars and restaurants.
*Nielsen CGA measures sales performance by 'quality tier' which highlights consumers' interest in 'trading up' if premium options are available. As a result, this boosts the importance of assortment and category management strategies within On Premise channels. 
Off Premise growth rates are decelerating, though still outperforming On Premise overall. Like in the On Premise, the more premium, higher end price segments continue to generally outperform those price tiers at the mid to lower ends, meaning consumer choice is moving towards 'drinking better' and not necessarily drinking more." Additionally, channel shifting is being driven by changes in consumer and shopper behavior, and the retail environment that continues to evolve to meet those needs. 
According to Danny Brager, SVP of Beverage Alcohol at Nielsen: "It's important to recognize that some of these 'shifting' changes have both direct impacts (i.e., channel shifting of adult beverage purchases), as well as more subtle but just as meaningful indirect impacts that especially are relevant to discretionary categories. As more consumers shop and buy in different ways and in different places, discretionary categories like adult beverages have to work even harder to be as easily accessible and prominent in the newer channels and retailers where shoppers are shifting to, made more complex by regulatory environments and social responsibility hurdles.
Irish Whiskey, Cognac & Tequila Driving Off Premise Spirits: In Spirits, similar to On Premise, Irish Whiskey, Cognac and Tequila are top growing categories by volume (11.4%, +12.7% and +7.3%, respectively). In addition, Ultra-Premium American Whiskey and Single Malt Scotches are also making rapid gains. Cordials, a large and diverse segment, continues to struggle overall, as does Rum overall.
Super Premium Domestic, Mexican and Belgium Imports Driving Growth in Beer: In Off Premise channels, Beer dollar growth remained in positive territory while volume slipped. Segments driving volume growth are similar to On Premise but at higher rates (e.g. Domestic Super Premium (+9.2%) and Mexican Imports (+9.1%) in addition to Belgium Imports (+13.8%). Domestic Premiums are declining at half the rate in Off Premise compared to On Premise, while Craft Beer is down to lower single digit growth in Off Premise. From a brand performance perspective, some larger Craft brands continue to struggle, but at the same time many others continue to grow at very strong levels, along with a very large number of smaller and very local Craft beers. This unevenness is a sharp departure from the pervasive "all's good" story for Craft Beer in previous years.
Rose' Still on Fire, While Sparkling Remains a Top Performer in Wine: In Wine's Off Premise performance, value growth leads volume gains. Sparkling Wine continues to perform very well, led by Prosecco growth (+19.4% volume), in addition to the ongoing success and continued growth of Rose'. France, New Zealand and Italy are the leading Import countries (by order of growth in percentage terms), while Oregon is a top performer in Domestic Wine, growing +18.4% in volume in the last year. While several varietals are performing well and others not so well, Red Blends growth has started to slow after several years of rapid growth.