A new survey has revealed how COVID-19 has changed the habits of Australian alcohol shoppers and the key trends shaping the future of the drinks industry.
Consumer data business Fonto launched in the Australian market last month, aiming to provide a more accurate and insightful picture of what consumers are thinking, feeling and doing. It recently surveyed the alcohol consumption habits of 2000 Australians and linked the responses to their transaction data.
“We are giving our clients and partners a unique means of measuring market share, category dynamics, impact of promotional activity and in-the-moment understanding of customer experience,” said Jon O’Loughlin, Head of Client Development.
“Australia is currently witnessing rapid movements in spending habits, coupled with states going in and out of lockdown. This requires suppliers, distributors and retailers to make faster and better-informed decisions. Fonto’s transactional data is updated on a daily basis, meaning we can provide immediate insights into changing dynamics.”
O’Loughlin said the liquor category has proven to be highly adaptable during COVID-19, coping well with numerous lockdowns impacting both on-premise and off-premise sales.
“However, the major retailers covet their data, leading to suppliers not having a clear view of market dynamics,” he noted. “As a result, suppliers are having to second guess where to prioritise and where they might get the best ROI. Fonto’s ability to capture consumer transactions across the retail landscape provides the industry with an alternative lens on the market.”
O’Loughlin has given his view on the top trends that are rapidly changing the landscape in Australian liquor retail.
The shift to online alcohol shopping
According to Fonto data, Endeavour Group has 57% market share in Australia, while Coles Group has 20%. As for the other 23% of the market, ALDI and ALM are performing “especially well” in bricks and mortar sales, while Fonto is also seeing a significant shift in the spend among pure-play online retailers.
“COVID-19 has permanently changed the way we shop,” O’Loughlin said. “Alcohol is no different, and we expect this to accelerate in the category in the future. Consumers tell us they like to take their time to consider more options when buying alcohol online. If the online ordering process is made really easy and click and collect is seamless, customers will keep coming back.”
The rapid adoption of online purchasing across large swathes of consumer categories has been replicated – albeit to a lesser extent – in the alcohol category. Currently, 26% of retail alcohol sales are online.
“As alcohol retailers have been allowed to stay open during lockdowns, the transition to online purchasing has, perhaps, been held back,” O’Loughlin added.
“However, as regions emerge from lockdown, we anticipate consumers will increasingly see that ordering alcohol online saves them time and is more convenient. Therefore, the future for alcohol will likely be predicated by speed of delivery and ease of collection.”
Size of basket vs trolley
According to O’Loughlin, there is a distinct difference in basket size between retailers. Stand-alone formats such as Dan Murphy’s and First Choice are targeting different alcohol shoppers and purchasing occasions to the likes of BWS and Liquorland, which are more likely to be smaller footprint as well as in-mall.
“The increased product offering combined with the convenience of being able to wheel a trolley directly to the car at Dan Murphy’s or First Choice translates to fewer transactions, but with more dollars spent,” he said. “On the other hand, BWS and Liquorland see more passing trade, resulting in more frequent transactions, but with a lower dollar value for the average basket.”
In the online space, when alcohol shoppers are placing an order they will make it worth their while, so they usually spend more. Online spend is typically around 74% higher than in bricks and mortar.
“Where they buy a case of wine in bricks and mortar stores, the same person will buy two cases of wine and a case of beer when ordering online,” O’Loughlin noted.
There has also been a huge rise in premiumisation, with 43% of Fonto survey respondents buying more expensive brands since the first COVID-19 lockdown.
The rising popularity of RTDs among over 35s
In the US, where the hard seltzer subcategory of RTDs grew by +130% in 2020, data shows RTD volume is already larger than the total spirits category, and by the end of this year, RTD volume consumption will be larger than that of wine.
In Australia, suppliers are reporting double digit growth in the category, while LMG revealed in May that its dollar sales for RTDs were up 40.2% over the 12 months to March 2021 compared to the previous year.
Fonto’s research shows 25% of alcohol shoppers bought an RTD in the last month. Interestingly, 57% of consumers buying RTDs were aged over 35, disproving the hypothesis that RTDs are the domain of the younger generation.
“We know the category is exploding, and seltzers are adding to the growth,” O’Loughlin said. “They are also likely to develop into an integral part of the RTD category longer term, as consumers seek refreshing and not too sweet options. However, the sheer number of SKUs coming to market suggests that we are likely to see some rationalisation in the future.
“Volumes may not translate into economically sustainable product lines. Critically, retailers will be limited to the number of SKUs they can stock, and retailers will go where the volume/margins are best. RTD brands looking to successfully launch and maintain their products should be looking to conduct research among consumers, to test new products before they launch, as well as identify emerging trends from the consumers’ perspective. Don’t try and second-guess the consumer.”
Lack of consumer loyalty
Fonto’s research has revealed low levels of loyalty among alcohol shoppers. Its transactional data shows that consumers purchase from an average of 2.1 different alcohol retail brands each month. For Endeavour Group, this increases to 2.6 different retail brands and for customer of Coles Liquor outlets, they visit 3.3 different retail brands per month.
“We also measure how many consumers only shop in one retail brand,” O’Loughlin said. “This shows that fewer than 40% of consumers only shop at one retail brand. The remaining 60%+ shop across multiple brands.
“Why is this the case? This comes down to why they use each store. For Dan Murphy’s it is about having the largest range and offering best value for money. Dan’s is also used as it has lots of special offers. For BWS and Liquorland, it comes down to proximity to home/work and being conveniently located. While for First Choice, it is about lots of special offers, offering best value for money as well as being conveniently located. For ALDI, it is primarily about value for money.
“Overcoming these issues and challenging the major players is not easy. However, a critical element, and one which is relatively easier to implement, is having a strong online offer linked to a convenient click and collect service.”
The future for zero alcohol drinks
Consumption of zero-alcohol products increased by 2.9% in Australia in 2020 and is expected to rise by 31% by 2024.
Among the suppliers reaping the benefits are Australian Vintage Limited, which announced a record 79% rise in net profit for the 12 months to June 2021. The McGuigan Zero range now representing 5% of all McGuigan brand sales into the UK, Europe and Americas, with sales growing $5 million over the prior period. The brand’s recent arrival on shelf at Australian supermarkets is expected to boost its growth exponentially.
Meanwhile, data from Endeavour Group shows sales have increased more than 83% in the past 12 months at its stores.
Fonto research reveals 3% of respondents bought a zero alcohol drink in the past month, with half of consumers being over the age of 35.
“We also see the greater adoption of zero alcohol drinks continuing, however this is likely to plateau as it will likely become occasion-based consumption, primarily on-premise and away from home,” O’Loughlin concluded.
Pictured main: North Shore Tavern bottle shop, Pacific Paradise, Queensland.