'my' Premise: The Changing Us Consumption Landscape

Posted: Apr 21, 2018

Consumer desire for authentic experiences is changing all the rules when it comes to beverage alcohol, says Brandy Rand

The playbook for launching a beverage alcohol brand in the US is traditionally focused on two key channels: on-premise (bars and restaurants) and off-premise (retail stores). It's a simple rule - build a brand on-premise through menu placements, sampling and bartender advocacy to generate consumer pull in the off-premise, where strategic displays, shelf placement and bottle price measure success. The industry has operated under these tried-and- true methods for decades.

But over the past five years increased consumer reliance on a digital lifestyle has opened up a new channel, the e-premise. At the same time the number of brewery, winery and distillery openings have accelerated, with subsequent on-site sales bypassing the US three-tier system altogether. This approach benefits the producers through higher profit margins since the products do not enter the distribution channel. And with consumer attention moving as fast as their Instagram feed, demand for innovation has led to a blurring of occasions. Here's the new reality: consumption is now occasion-based, and people are drinking when and where they want, and the channels are changing to adapt to experience and convenience. It's all about 'my' premise.

The ability to buy almost anything online has drastically altered the way people experience products. For alcohol, the impulse purchases made while browsing the aisles or chatting with a store employee are less relevant. Instead, product reviews, price and placement (first vodka image out of 126 to scroll through) take precedence online. Consumer behavior is just different. Alcohol marketers are scrambling to adjust to this changing dynamic by partnering with e-retailers to break through the e-commerce clutter. Both Moët Hennessy and MillerCoors are just some of the growing examples of brands that have created programs with Amazon to allow for voice-activated or simple press-of-a-button ordering.

Based on work the IWSR is conducting as part of the Craft Spirits Data Project, on-site sales at craft spirit distilleries are expected to make up 25% of sales in 2017 (up from 18% in 2016), equalling over 1m cases. The Brewers Association estimated that craft beer on-premise sales have increased to 2.3m barrels for 2016, or approximately 9.4% of the production volume of small and independent brewers (9.5% of domestic sales volumes). Those numbers are not only cutting into on-premise sales, but retail sales as well. This craft boom shows no signs of slowing down either: the IWSR forecasts the number of permits to reach 25,854 by the end of 2021, which means every US consumer will likely live within miles of a local brewery, distillery or winery. On-premise operators and retail store owners will have to constantly innovate to attract customers through unique on-site experiences and other promotional activity in order to compete.

Part of the allure of these non-traditional venues is the element of surprise. This has led to a 'new' premise - concerts, pop-up restaurants, food truck fairs and other event-based occasions where beverage alcohol is curated to be part of the overall experience. These types of events fall outside traditional menu and back bar product marketing. The integration of brands is tightly woven into the activity. These types of events highlight the trend of cross-category convergence where assumptions on what a consumer should be drinking based on the type of occasion is not longer predictable. Instead, cocktails take center stage at a sporting event and wine is enjoyed at a music festival. This creates enormous opportunity for brands that don't stick to traditional 'beer is for football' marketing activity and create new occasions for consumer to enjoy their products in new settings.

The future of how and where people drink beverage alcohol has changed rapidly and continues to evolve based on consumer appetite for experience and convenience. While traditional on- and off-premise establishments comprise the majority of sales, the rise of e-premise will shift a customer's first point of product consideration from shelf to screen. With delivery services expanding outside major metros, at-home consumption will become even easier. Today's consumer has clearly demanded products that fit their lifestyle, as evidenced by the rise of boxed and canned wine and cocktails. Their desire for authentic experiences means that predictable drinking occasions are no longer relevant. Instead, marketers must focus on a more personal approach and manage the new 'my' premise.

Source: IWSR Magazine
April 19, 2018

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