Category: general

General posts

The Increasing Fragmentation of Seltzers

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With the rapid growth of the seltzer category, it was inevitable that more participants will chase that growth. Using our newest tool, Label Inquiry, we thought we’d take this opportunity to understand how many and what new entrants are making a play at the seltzer space (for this analysis, we included any labels containing Seltzer or Spritzer on the label).

Through October 2020, the TTB approved 349 labels containing either Seltzer or Spritzer, compared to 198 in the entirety of 2019 (+76.3% and with two months to go).

Interestingly, Spirits-based products have seen the largest increase in product approvals, with 150 labels approved YTD October 2020 (vs. 55 in CY2019). Beer-based products received 128 approvals YTD October 2020 (vs. 102 in CY2020) Wine-based products have seen a slight uptick to 71 product approvals (vs. 41 in CY2020). Note: bw166’s Label Inquiry tool is based only on products requiring TTB COLAs so is not fully comprehensive of malt beverages.

Using the color feature from Label Inquiry, we also took a look at the dominant color used on labels. While neutral colors (Black, White, Beige) are generally dominant, the next three most prevalent palettes are Pink, Red, and Lavender. The commonality in color may represent an opportunity for new entrants to distinguish themselves on the shelf further and stand out in consumers’ eyes.

Lastly, we were curious about the breakdown by source alcohol as well as flavor. Malt and Vodka make up the two largest occurrences (followed by Wine, generically). The more interesting finding is the reasonably large share of labels specifying either Tequila or Agave on the label. When looking at flavors, Lime and Fruit are dominant, followed by Grape and Lemon. Intuitively, fruit flavors represent the predominant options. However, there are some more interesting results. For example, Grapefruit and Mango occurring more frequently than Strawberry and Watermelon. This data may ultimately point to a triangulating consumer demand around core flavors or, perhaps more interestingly, represent an opportunity to differentiate one’s product from competitors.

While we can’t predict the exact results of what these increasing product launches will mean; the scale of the category and the diversity of entrants seems reminiscent of the rise in FMB products in the early 2000s following the success of Smirnoff Ice (Would anyone care to admit trying the likes of Captain Morgan Gold, Skyy Blue, or Sauza Diablo?). Only time will tell if any of these new products can unseat White Claw and Truly.

For more details regarding our Label Inquiry application, please visit our Introducing Label Inquiry page.

Pandemic Pantry Loading: A Half Bottle of Wine and a Half Bottle of Spirits

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  • The Beverage Alcohol market has been relatively resilient through the pandemic, although the impact on individual industry members varies broadly.
  • Some data, such as Nielsen trends, highlight the remarkably strong growth of the industry. However, at times, these trends are misconstrued to suggest that alcohol consumption is up significantly – this perception may pose a risk to excise tax increases or pushback against the industry.
  • Instead, for the twelve months ending September, the bw166 Total Beverage Alcohol Index stands at 125.3, a +1.9% increase over a year ago.
  • Official data from states representing 30% of the U.S. Legal Drinking Age (LDA) population has been released through August and for the six months ended August 2020 reflect:
    • Beer shipments are flat.
    • Spirits shipments are +7.6%.
    • Wine shipments are +6.3%.
  • While the Legal Drinking Age (LDA) population is up +1.0%, the increased growth of beverage alcohol translates to an incremental half bottle of wine and a half bottle of spirits per LDA adult. This small increase is more likely the result of incremental pantry loading than an indicator of increased consumption.
  • On-Premise trends are more difficult to monitor; however, several states (representing 12.5% of the LDA population) have released official tax data through August.
    • In April, On-Premise spending for Beverage Alcohol was down -84.4%. 
    • In August, On-Premise spending for Beverage Alcohol partially recovered and is only down -38.6%. 
    • Note that these states generally re-opened On-Premise earlier than other markets, so National trends are likely weaker.
  • Ultimately, the current forecast model developed by bw166 indicates that overall beverage alcohol consumption will grow slightly faster than the LDA population in the calendar year 2020 – likely a result of minimal pantry loading, as noted above. 
  • More detailed information on these trends is available in the bw166 Total Beverage Alcohol Overview.

Beverage Alcohol and the Pandemic

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On September 24th, 2020, bw166 published its Total Beverage Alcohol Overview through August 2020. August marks almost six months of the impacts of the pandemic. The industry has seen a dramatic shift in consumer purchasing patterns by channel. The change has significantly benefited markets tracked by syndicated data companies such as Nielsen and IRI.

  • The bw166 Total Beverage Alcohol Index sits at 124.8 at the end of August 2020. The Index is up 1.9% from August 2019, measuring the growth in overall beverage alcohol servings.
  • Significant speculation exists to suggest that consumption has increased significantly due to the pandemic. Given that the bw166 Servings Index has grown slightly faster than the LDA population (which has increased by 1.0% over the past 12 months), per capita consumption has increased slightly. The data translates to less than one serving per LDA every 60 days.
  • The trends for six months ending August are:
    • Beer volume entering distribution: -2.2%. The decline is a result of declines in imports, primarily driven by Mexican Beer imports.
    • Wine volume entering distribution: +4.0%. 70% of the growth is driven by imports of Sangria, Coolers, and other flavored wine products.
    • Spirits volume entering distribution: +3.4%. The growth has been driven by +7.0% growth of domestically bottled products offset by a -4.8% decline in imported products.
  • Consumer spending on Beverage alcohol is up in the Off-Premise but not enough to make up for losses in the On-Premise.
    • Consumer spending for six months ending August totals $121.3 Billion, down -$23.9 Billion (-16.5%) versus the same period last year.
    • Syndicated data indicates continual trading up in the Off-Premise. Consumers are likely willing to spend more, given their savings in the On-Premise.
  • The On-Premise is challenging to track, given the fragmentation of On-Premise channels and across Beer, Wine, and Spirits products. Some states impose a Mixed beverage tax for Beverage Alcohol sales in the On-Premise. A few states and their trends on a value basis include:
    • Kansas: 12 months ending February 2020 +5.4%, six months ending August 2020 -45.0%, one month ending August 2020 -27.7%.
    • Tennessee: 12 months ending February 2020 +16.2%, six months ending August 2020 -59.6%, one month ending August 2020 -16.1%.
    • Texas data is only available through July, but the data includes a breakdown for Beer, Wine, and Spirits. The July data was negatively impacted by a second shut-down of bars in the state.
      • Beer: 12 months ending February 2020 +2.8%, five months ending July 2020 -65.5%, one month ending August 2020 -60.6%.
      • Wine: 12 months ending February 2020 +4.1%, five months ending July 2020 -66.5%, one month ending August 2020 -56.9%.
      • Spirits: 12 months ending February 2020 +8.9%, five months ending July 2020 -57.1%, one month ending August 2020 -49.4%.
  • The slight growth in servings entering distribution could be attributable to a small amount of pantry loading given channel shifts from Off-Premise to On-Premise. The market has seen some recovery in the On-Premise, but there is a long way to go. The one definitive forecast we can make is that beginning in March 2021, the channels tracked by Nielsen and IRI will show declines as the market comes up on the one-year anniversary of the pandemic.

Stable Per Capita Beverage Alcohol Consumption Over Past 30 Years

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  • Currently, there is a proposal to modify the U.S. Dietary Guidelines which includes reducing the definition of moderate drinking for men from the current recommendation of up to two drinks per day to no more than one.
  • The committee cited evidence that alcohol consumption in the United States has increased during the past 20 years.
  • However, servings of beverage alcohol per legal drinking age adult (LDA, 21+) have been relatively stable since 1990 and are comparable to the levels of 1960. (The NIAAA data that the Committee cites uses a 14+ Population base for their computations)
  • Despite this stability, the Committee is recommending a 50% reduction in recommended alcohol consumption. If the purpose of using a comparison of the NIAAA data with the population 14+ was to either address underage drinking or binge drinking, the dietary guidelines do not seem the appropriate way to address these challenges.
  • bw166 projects servings across all channels grow between 1% and 2% in 2020. Comparatively, the LDA population will increase by 1.1%. Again, showing stability in overall servings per capita.
  • bw166 sources this information from tax paid shipments into the market on an annual basis since 1960. The volumetric data was converted to standard servings and compared to the LDA population sourced from the U.S. Census Bureau.
  • For an electronic copy of this information and additional details please click here.

Support for the Hospitality Industry

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Last week bw166 posted about Covid-19 and the Beverage Alcohol Industry – which stated: “The Beverage Alcohol Industry will see a reduction in expenses with a decrease in dining out.  Rather than banking these savings, the industry might consider identifying existing charities for donations that can immediately assist hospitality employees impacted by this event.”

At bw166, we believe in the adage, “practice what you preach.”  As such, we have taken the following steps:

  • Our primary office is in Colorado and we reached out to the Colorado Restaurant Foundation.
  • They advised that the Angel Relief Fund exists to support hospitality workers during this time.
  • They also advised that 100% of funds donated goes to industry employees in need.
  • We immediately made our first donation and set a reminder to make another next month.
  • For those in Colorado, the link for The Angel Relief Fund is: https://corestaurant.org/foundation/angel-relief-fund

We strongly encourage all members of the industry that are not severely impacted by this crisis to support hospitality workers.  Find the appropriate method or charity in your local area or state and do what you can. Stay safe and stay healthy.