Alcohol an ‘Affordable Indulgence’ in Tough Times, Says Nielsen

In this fragile economy, consumers continue to see alcoholic beverages as an affordable indulgence that, as the holiday season approaches, they will consume increasingly at home, according to new research by The Nielsen Co. Smart retailers will take advantage of this trend, the market data firm said in a release today.

Some off-premise retailers, including operators of grocery, convenience, and mass merchandise stores, are exploiting current declines in on-premise spending for food and drink, and making the most of their offering of one-stop shopping, Nielsen said its research revealed.

For example, grocery stores are targeting restaurant-goers with well-priced easy meal solutions, and increasing their promotional efforts to encourage multiple purchases for shoppers who make fewer but larger trips. Nielsen said it also expects to see a continued increase in online alcoholic beverage shopping, especially for wine, where legal to do so.

“Many stores are adding alcoholic beverages to their assortment, providing more opportunities for consumers to purchase alcoholic beverages at competitive prices,” said Richard Hurst, s.v.p., beverage alcohol for Nielsen. “And as we’ve seen in the past, some states may experiment with extended hours for alcoholic beverage purchases, such as Sunday sales, for an additional boost.”

Still, Hurst recommended judicious expansion that fits the tenor of the times. “Given that fewer consumers are likely to be able to afford luxury wines and spirits in their holiday budgets -- and there is evidence of trading down -- stores would do well to ensure that they offer products across a variety of price segments,” he said.

Craft beers and U.S. wines from outside California have been gaining share, and there are now more than 200 “micro-distilleries” across the country, according to Nielsen. In contrast, exchange rates unfavorable to the dollar have forced imports to raise prices, making it more difficult for these products to compete with domestic alcoholic beverages.

“In tough economic times, consumers are often biased toward national or local products, further enhancing the prospects for domestic brand growth, whose prices have remained relatively stable through the year,” said Hurst. “At the same time, the weak dollar has helped tourism and despite the dollar’s recent recovery and the threat of a global economic meltdown, major cities should continue to expect to see the benefits during the holiday season.”

Given that wine and spirits are common gifts during the holidays, Nielsen expects a rise in the purchase of alcoholic beverage as gifts this year, helped by the usual selection of special “value-added” packs. “Alcoholic beverages as gifts, especially those with value-added packaging, can fit most holiday shopping budgets and represent a more economical alternative to bigger ticket items,” said Hurst. “Retailers should consider multiple store display locations to capitalize on impulse purchasing, as well as providing gift accessories nearby, such as bottle openers, gift bags, mixed drink party pack ingredients, and glassware.”

For additional insights into current market trends for beverage alcohol: Danny Brager, v.p. and group client director, beverage alcohol for Nielsen, covered this topic in depth in an exclusive column for PG. To see the story, go to click here
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