Beverage alcohol has proven itself to be one of the most bulletproof consumer goods categories at a time of significant disruption. Despite shifts between on- and off-premise sales, total consumption by volume is on the rise. Overall, $25.5 billion worth of alcoholic beverages were sold in the fiscal year ending March 31, 2021, up 4.2 per cent from the previous year. This was the largest sales increase in more than a decade, according to Statistics Canada. Most of the growth has been attributed to the pandemic and its impact on purchase and consumption habits.
While the shift to online purchases won’t disappear, consumers are increasingly comfortable returning to on-premise consumption, especially the millennial and Gen X cohorts. Behind the scenes, container shortages, inflationary pressures, staffing shortages and other supply-chain concerns continue to challenge the market. However, given consumers’ thirst for social experiences and intent to spend more after many months of deep isolation, the market is becoming more proactive and starting to regain its footing.
At the Restaurants Canada Show in May, insights consultancy CGA’s Matthew Crompton, regional director of North America, and Mitch Stefani, Client Solutions manager, presented insights into the latest consumer behaviours and some of the on-premise trends.
Crompton said the premiumization trend continues across all beverage-alcohol categories, with most of the value within the broader spirits and wine categories, as consumers increasingly favour quality in the on premise after two and a half years of premium at-home experiences, such as DIY cocktail kits. As a result, consumers will be conscious of higher prices and more easily deterred by low-quality products or experiences in bars and restaurants.
Additionally, the low- and no-alcohol space continues to surge with movements such as “mindful drinking” and “sober curious” gaining popularity. From sparkling water to kombucha to non-alcoholic spirits and wines, this growing category ensures there’s something for all tastebuds. Overall, 24 per cent of consumers have now tried non-alcoholic drinks on premise, up three per cent in three years, according to CGA’s data. One of the newest brands in this space is Silver Swallow, the first non-alcoholic champagne-inspired kombucha on the market in Canada, co-founded by Genna Woolston and Andrew Roberts. Currently, Silver Swallow’s blanc and rosé beverages are available at the Fairmont Chateau Laurier, the Ritz-Carlton Montreal and June Motel in its Prince Edward County and Sauble Beach locations.
“We’re making room for high-end non-alcoholic alternatives at the table. We want to innovate rather than imitate, but we needed to be more than just kombucha in a champagne bottle. With Andrew’s background in tea blending, we were able to introduce Silver Swallow tea to elevate the kombucha and make it something that’s a bit more palatable,” says Woolston. “We picked up on the void within the market and recognized an opportunity to give consumers an equally celebratory experience with a non-alcoholic beverage. With the way society and the market is moving, you can offer this product to different generations.”
With regard to on-premise channels, Stefani said experiential bars, such as Selva and Track & Field Bar in Toronto, are seeing increased engagement as consumers seek out immersive experiences that emphasize more than just food and drink. Furthermore, the support-local movement has continued to stay front of mind for 66 per cent of consumers, according to CGA’s data. With the return of travel, other emerging channels seeing increased engagement are airport bars, casinos and hotel bars and restaurants.
The trend toward spirits and away from beer and wine has accelerated during the pandemic. Overall, spirit sales rose eight per cent to $6.5 billion in the fiscal year ending March 31, 2021, according to Statistics Canada. This was the largest increase in spirit sales since 1983.
Demand for premium tequila has soared, followed by premium gins, bourbons and whiskies. The market for tequila in North America is expected to grow at a CAGR of 4.76 per cent over the period 2021-2028, according to Triton’s North America Tequila Market 2021-2028 report.
In terms of cocktails, CGA’s data identified the Caesar, margarita and sangria as the top offerings consumers choose. In particular, the number of consumers drinking Caesars grew from 27 per cent in 2020 to 35 per cent in 2022. Espresso martinis are also making a comeback. The rise of the “bottomless brunch” or “boozy brunch” is partially responsible for perceived appropriateness of consuming spirits for this social occasion.
In this category, Toronto-based Laneway Distillers, founded by Reagan Soucie and Jessica Chester, creates award-winning gin and vodka using Canada’s natural botanicals.
“Reagan and I wanted to make something we both enjoyed drinking. We couldn’t find a gin we gravitated towards in the market. The gins available seemed to be an imitation of classic London dry gins and we wanted to bring something new to the table that aligned with the flavour profile of Canada,” says Chester. “We’re proud of where Laneway started and where it’s going. Our humble beginning started in a garage on a laneway in Toronto. From there, we continued to push ourselves and are driven by quality.”
The hard seltzer and RTD segment saw meteoric growth in off-premise consumption over the course of the pandemic, but on premise lacks popularity. To drive on-premise growth, Beam Suntory has partnered with QuickTap to offer cocktails on tap using its premium spirit brands at bars and restaurants. So far, a couple dozen operators have taken this method on as a new convenient way to give consumers the premium-spirit experience.
Additionally, the return of festivals and events presents significant headwinds for growth of the hard seltzer and RTD category. In response to the rise of the RTD segment, Corona Canada launched Corona Tropical, the brand’s first sparkling water and alcohol beverage. In fact, the IWSR highlights Canada as a rapid growth market, with a 50-per-cent increased CAGR between 2020 and 2025.
According to CGA’s data, 51 per cent of consumers typically drink beer in the on premise, 48 per cent of consumers drink domestic beer, followed by craft beer and imports at 42 per cent. Mexican imported beer continues to show impressive growth.
In 2020, national can sales increased by 12.3 per cent, while bottle sales declined by 15.1 per cent and keg sales fell by a staggering 54.8 per cent as a result of bar and restaurant closures across Canada and a shift in packaging throughout 2020, according to Beer Canada’s 2021 Industry Trends. That said, cans accounted for 74 per cent of national beer sales, followed by bottles at 21 per cent and kegs with five per cent.
Some beer companies are focusing on sustainability efforts and mitigating environmental impacts. Corona launched stackable eco-friendly beer packaging that removes the need for plastic six-pack rings. Coors Light will follow suit and begin the transition to fully recyclable, cardboard wrap carriers later this year.
In 2021, Molson Coors showed positive growth for its two top-selling brands, Miller Lite and Coors Light. In Canada, Coors Light reported revenue growth in the fourth quarter while Miller Lite accelerated its growth in the fourth quarter to finish 2021 up with double digits.
Full-year net sales revenue rose 6.5 per cent to USD $10.28 billion, up from USD $9.65 billion in 2020. The company reported 2021 net income of USD $1.01 billion, or USD $4.62 per diluted share, compared to a net loss of USD $949 million, or USD $4.38 per diluted share, in 2020.
To help the category grow, now- and low-alcohol beer will be crucial to provide extensive options and attract consumers who aren’t typically engaged with the category.
Wine sales took a dip as fine-dining restaurants will likely lag in the COVID-19 recovery and older consumers who typically drink more wine haven’t returned to the on-premise channel as quickly as their younger counterparts.
According to Statistics Canada, wine sales rose 2.1 per cent to $8 billion in 2020/2021 compared to the 5.2 increase in the previous year. Wine accounted for 31.4 per cent of total sales, but also lost 0.6 per cent of its market share, which was gained by spirits, ciders and coolers. However, wine claimed the top spot in Quebec (43.5 per cent of total sales) and British Columbia (33.4 per cent of total sales).
Consumers in the Northwest Territories were least likely to buy wine (14.5 per cent of total sales). Furthermore, red wine was the top choice for just over half of Canadians who bought wine (53.3 per cent), followed by white wine (33.2 per cent), sparkling wine (6.5 per cent) and rosé, fortified and other wines (seven per cent).
In recent months, Crompton said consumers are increasingly reaching specifically for champagne and sparkling wine, supported by ongoing premiumization. Whether it’s Dom Pérignon, Prosecco or Moët & Chandon, this segment is poised for growth as more consumers enjoy the perfect pairing for food and daily lifestyle, not just special occasions.
By Nicole Di Tomasso