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Top Wholesalers Weigh In On Holiday Conditions

December 19, 2022

It’s been a tumultuous few years in the drinks market, with the pandemic and its aftermath forcing players across all three tiers to rapidly adapt to shifting conditions, from the closure of the on-premise and the surge in retail to supply chain challenges and changing consumer habits. SND caught up with some of the leading wholesalers in the U.S. to take the temperature of the market as the holiday selling season begins in earnest.

“Our premium wine and spirits business in the on-premise is up 20%, compared to 4% in the off-premise, so premium is still growing across channels,” says Jenn Engel, chief commercial sales officer at RNDC. “Consumers purchase differently during the holidays, traditionally spending more on wine and spirits than usual. We see share of $15-plus wine and $25-plus spirits grow one to two percentage points during the months of November and December.”

“Consumers continue to trade up in both wine and spirit purchases with dollars outperforming case sales growth,” says Chris Williams, EVP of national accounts at Southern Glazer’s. “However, YTD through November compared to YTD through October suggests consumers were still trading up, but pulled back some in November. Positive mix shift is still strong, but softening.” He adds that despite ongoing premiumization, “economically sensitive” categories like Cognac, Scotch, and Tequila have seen some slowing across leading brands, “especially in the $40-plus price segment.”

At Breakthru, incoming chief commercial officer Kevin Roberts says that overall, “luxury trends remain quite healthy,” even as premiumization has seen a “moderate deceleration over the back half of 2022.” Roberts sees the on-premise resurgence continuing apace. “Our industry surveys show that the majority of consumers plan to maintain or increase their on premise spending through the holidays, which is consistent with what we’re seeing in the market,” he says.

While the inflationary environment does appear to be impacting purchases, beverage alcohol remains more resilient than other consumer categories. “Thankfully, the beverage alcohol inflation we’re seeing for both in-home and out-of-home purchases is significantly lower than national inflation,” says Roberts. “An ongoing concern is that food is experiencing inflationary increases at or above national trends, which has the potential to negatively influence many on-premise locations.”

On the other hand, Williams sees “grocery pricing increases outpacing price increases in restaurants, making dining out at full-service restaurants in some cases more appealing and cost effective.” Some of the strongest on-premise growth lately has been in California and New York, two major markets that were hit hard by Covid and were slower to reopen the on-premise than states like Texas and Florida. “Trade-up in the on-premise has been stronger in California and New York as well,” Williams says, “suggesting that customers’ pent-up demand to enjoy the on-premise is leading to more splurging on higher-priced items.”

Still, better trends in value-oriented channels and brands point to inflation’s impact. “We are starting to see a slight improvement in some of our value brands, particularly on the wine side,” says Williams. “More value-sensitive channels are seeing an uptick in foot-traffic.”

“Inflation does seem to be influencing consumer spend,” Engel concludes. “While consumers remain loyal to premium brands, gas and food prices are an issue for lower-income consumers, resulting in purchases of value packs or lower-cost items. However, higher-end priced wine and spirits, while not growing at the same rate as a year ago, still outperform value brands.” We’ll have more on the outlook for 2023 in the second part of this feature.

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