Alternative selections

14 July, 2016

Young people are driving the demand for craft beer and spirits and spending less on mainstream brands, and this is one of the main drivers behind the value growth in these two categories.

There is no rigid definition of what constitutes a “craft” product, so at Nielsen we have created our own view of the market, broadly using three criteria: size (there is no upper limit, but the more a product sells, the more difficult it becomes for it to be classed as craft); ownership (brands owned by multinationals are less likely to be called craft, but it is not impossible); and production (products made using traditional methods or which are distilled in small batches are more likely to be defined as craft).

In spirits, craft accounts for just 1.4% of the category’s value. Then why is such a small sector so important? Craft spirits have grown by 44% year on year and are now worth £53.7 million. In addition, they have an average price point of more than £25 for a 70cl bottle, whereas mainstream spirits have an average price point of just over £13. 

Our State of the Nation survey shows that British shoppers, while still trying to cut back on their overall grocery expenditure, are prepared to treat themselves with sales of premium-priced products outperforming the rest of the market in several consumer packaged goods categories. 

It’s therefore key for retailers to stock craft spirits alongside more mainstream products to capitalise on this growth.

By far the biggest contributor to the growth of craft spirits is gin, with an increase of £9.8 million, equivalent to 53% versus last year. The next biggest-contributing categories, in value terms, are imported whiskies, up £3.7 million, and rum, which is up £2.9 million. 

The growth of all three categories can be attributed mainly to an increase in available products, but there is a significant contribution from rate of sale, particularly from gin. 

Shoppers increasingly want to buy these products and are prepared to pay a high price for non-mainstream spirits.

Craft beer has a slightly greater share of overall beer, currently at 1.8% of category value. This rises to 9.5% in ale specifically. In lager and stout, craft has less than a 1% share of total value, but craft lager shows a marked increase in sales compared with a year ago (up 39%).  

The trend towards craft beer has been inspired by the change in the US beer market. Shoppers are becoming more interested in what they are drinking. The State of the Nation survey shows those who buy craft beer say their number one reason for buying beer is the type or style of the product, which is notably different from the average beer shopper, who cites price then brand as determining factors.

Craft ale grew by 55% over the past year, with distribution and consumer demand propelling the category at roughly even rates. At £19 million, craft ale has contributed around 70% of the total value growth in the overall ale category. As with craft spirits, craft ale attracts a marked price premium, with an average price per litre of £4.06.

What do we know about the people who buy these products? Shopper numbers are increasing for both categories – craft is helping to drive penetration of spirits and beer and, in both, this sector is bringing in a more upmarket, younger shopper. For spirits, London, the south east and Scotland are driving the category and there is a clear opportunity for stores in the central and northern regions of the country to capitalise on this trend.

Craft beers show much less of a regional skew, but again there is scope for the Midlands to develop the category further as it is underperforming compared with its share of overall beer sales. 

Those who are buying into craft beer are doing so more often, so an opportunity presents itself for off-licences to benefit from shoppers making more trips to their stores.

Although small, the craft sector of beer and spirits is an important part of the market and looks set to increase. With the right selection of products, retailers can attract new shoppers and benefit from the increased interest and desire to buy into these emergent categories in the alcohol fixture.  

Sources:

Nielsen Scantrack, MAT to May 21, 2016 vs
year ago

Nielsen Homescan, 52 w/e May 21, 2016 vs
year ago

Nielsen State of the Nation survey, Q1 2016

Nielsen Scantrack total store read, MAT to January 2, 2016 vs year ago




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