First it was Covid, now inflation; two factors that have and will affect purchasing within a number of supermarket categories including beer, wines and spirits. Alcohol was one of the FMCG categories most positively impacted by the pandemic, with an upturn in sales as people drank more at home.
Now, the category is on the radar of retailers and manufacturers who are trying to understand what impact inflation will have on the category.
Unfortunately, there is no straightforward answer. But, unlike 20 years ago when the UK last registered such high inflation levels, we have something to base our calculations on – data. A lot of data.
In January, our Homescan Survey found the number one concern for 46% of UK consumers is inflation and the rising cost of living, with 44% stating they were actively watching their grocery spend.
They were not wrong. The UK’s current Consumer Price Index rose to 7% in March, while FMCG prices grew by 4% in the first three months of 2022 compared to the previous quarter (Nielsen’s Global Price Tracker).
Now, what does this mean for alcohol in the off-trade?
Average off-promotion prices in BWS were 5.9% higher in the first three months of 2022 than the corresponding period in 2019. Champagne/sparkling wine and still wine have seen the biggest increases, with prices growing an average of 6.2% and 3.3% respectively.
Spirits prices went up 1.5%. This is concerning if we consider that a 1% growth in price in BWS generally leads to an average loss in volume of 2.8%. This compares with an average loss of just 1.7% for FMCG as a whole.
So what changes to shopper behaviour can producers and retailers expect as a result of these price rises?
With the on-trade still recovering volumes lost to the off-trade during the pandemic, it could be some months before the full impact of rising prices becomes clear.
As overall FMCG price inflation builds, discounters are poised to continue gaining share and shopper visits. What we can expect is a gain in shopper visits and market share for discounters, and it’s reasonable to think that a proportion of their new customers will be attracted to the alcohol aisles.
According to our Homescan figures, this channel has increased its share of alcohol from 17% to 18% in the past year. It over-trades in wine with 23.4% of the market.
However, not everything is lost for traditional retailers. As mentioned in our last Total Till report, consumers are looking for mainstream retailers that offer good value for money.
Loyalty card discounts, reward vouchers, and other promotional strategies these traditional retailers offer will also be well received.