Alcohol sales decline as households prioritise food staples

Alcohol sales are seeing a decline as households are forced to prioritise food staples and small indulgent treats amid the cost-of-living-crisis though zero or low alcohol drinks are bucking the downward trend while sales of champagne and prosecco remain resilient.  

According to new data from IRI, sales of beer, wines and spirits across European retailers (supermarkets, discounters, convenience stores and off-licenses) declined by €2.7bn to €66bn during 2022 as consumers reduced discretionary purchases to moderate the impact of inflation.

In 2020, alcohol sales (by value) increased by 12.6 per cent, driven by consumer demand during the first year of the pandemic as people drank more at home due to the restrictions in the hospitality sector. This added an extra €7.5bn to the off-trade alcohol sector, bringing total category sales to €67.3bn.

As the price of all groceries are predicted to remain high during 2023, IRI predicts that alcohol sales – both at home and at out-of-home venues – are unlikely to grow without investment in new products tailored to new consumer needs and consumption moments that make the category relevant again.

The research shows that zero or low alcohol drinks are bucking the downward trend in the UK. Sales of these products in the UK saw 3.7 per cent growth in volume sales. Value sales in 2022 grew 5.3 per cent to £16m. The segment is estimated to have a 1 per cent share of the total BWS category. IRI predicts that with a greater variety of options available to shoppers, and space growing at the major supermarket chains, sales will increase this year, particularly as promotional events such as Dry January gain momentum. The study notes that the challenge for brands is how to grow sales without cannibalising alcohol sales that deliver significantly greater profits.

Meanwhile, sales of champagne and prosecco remain resilient to the overall decline in alcohol sales. IRI noted that consumers are opting to ‘stay in’ on weekends to drink with friends, pushing up sales of ready-to-drink spirits (in lieu of cocktails at bars), as well as multi-pack servings of well-known beer brands.

“It is increasingly evident that underlying demand has changed in response to post-pandemic trends with new consumption patterns and choices impacting how the category grows over the next few years,” commented Ananda Roy, Global SVP, Strategic Growth Insights, IRI.

“Alcohol brands are caught in a perfect storm with no end in sight. Alcohol sales tend to peak during a recession as consumers eat in instead of out. However, this recession is fueled by a perfect storm of exceptionally high food and energy prices, record interest rate rises and anaemic wage growth.

“Households are having to make tradeoffs to moderate its impact on their available income, prioritising food staples and small indulgent treats over discretionary items like Alcohol. Alcohol sales are now lower than pre-pandemic levels.”

“Consumers may change the specific champagne, prosecco or sparkling wine brands they buy and where they buy them in order to achieve some cost savings,” said Roy. “But they still want a treat to mark special occasions even if this means purchasing champagne and prosecco at discounter chains rather than mainstream supermarkets. The switch to private labels brands in these specific segments is still in its infancy.”

Ready-to-drink spirits are also staying strong against the turning tide in alcohol. These drinks are particularly popular amongst younger generations as a pre-party or ‘pre-out out’ tipple that they can drink at home without needing to mix their own cocktails.

IRI highlighted that retailers, keen to protect volume sales and consumer footfall, have increased promotions on alcohol more than any other FMCG category. This is particularly notable in the UK where HFSS rules have taken hold and alcohol promotions have replaced confectionary and sugar snacks on end-of-aisle offers.