Consumer confidence in the US remains broadly positive

Preliminary 2022 data from IWSR shows that all major categories across the total beverage alcohol industry in the US – beer, cider, wine, spirits, and ready-to-drink (RTDs) – posted growth across premium-plus price tiers (which refers to all price bands from premium to prestige). While total volumes of wine (-2%), beer (-2%) and cider (-4%) all declined in the US in 2022, the premium-plus segments of each grew: wine (+6%), beer (+4%), and cider (+11%). Total spirits volumes were up +2%, with premium-plus up +13%; while RTDs showed moderate volume gains at less than +1%, with premium-plus up a very strong +38%.

IWSR’s consumer research further supports this trend, showing that consumer confidence in the US remains resilient in the face of inflation and cost of living pressures. However, signs of fragility remain, especially in the on-premise – where cost is the major barrier to increased stated consumer spend – with millennials in particular continuing to trade up in the channel, and displaying a strong commitment to hedonistic behaviour across the market.

Early findings from wave two of IWSR’s consumer barometer price sensitive tracker (based on consumer surveys conducted in February 2023), show that premium consumption behaviour continues, but growing at a more moderate rate than previously. Richard Halstead, COO Consumer Research, IWSR, notes: “Consumer confidence in the US remains positive, with fewer financial worries than in September 2022 when we released our wave one price sensitivity findings. In fact, we found growing optimism around personal finances and the future in February 2023, although consumers are still net anxious about the future.”

Younger adults – especially Gen Z consumers of legal drinking age – tend to be more worried about their current financial situation, but they are also more optimistic about the state of their finances in 12 months’ time. Anxiety diminishes rapidly among consumers aged 45 and above.

The area most impacted by consumer pessimism is the on-premise. “There are consistent signs that on-premise spend is vulnerable, with alcohol drinkers watching spending in this space and going out less often,” says Halstead. “Cost is still the top barrier to going out.”

Amongst the findings, a notable trend is emerging within Tequila:

Tequila continues to be a driving force for premiumisation in the US market – although the category’s user base, consumption frequency, and volume momentum are all trending neutral, which suggests that it is now becoming predominantly a value-driver for brand owners.

At the same time, usage incidence for Cognac in the US has remained unchanged over the past two years – meaning that the category’s drinking population is essentially static – and consumption frequency now appears to be declining versus 2021.

According to Halstead, there is some suggestion that the dynamics across the two categories could be connected, although this needs to be confirmed by ongoing tracking.

He explains: “Around half of Cognac drinkers say they also drink Tequila, making the two categories strongly correlated – basically, you are twice as likely to be a Tequila drinker if you drink Cognac.

“This leads us to suspect – although we need to monitor this through our ongoing consumer tracking – that Cognac and Tequila may be competing for the same occasion in the US. This hypothesis is underpinned by the fact that Tequila has been repositioned as an aspirational sipping drink for up-tempo, high-profile occasions in style bars and clubs – historically speaking, the traditional heartland of Cognac.”

Full findings from IWSR’s consumer price sensitivity tracking will be released to IWSR clients by end March 2023. The IWSR Consumer Price Sensitivity Barometer, which is published over two waves (November 2022 and March 2023), tracks shifts in consumer sensitivity to price changes by alcohol beverage category, going out to on-premise locations, demand changes by category, and attitudes towards trading up/down across categories, across 17 key markets.

To access the full Study, please get in touch with your IWSR Account Manager or request access here.

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