There are a number of factors which will influence Australia’s packaged liquor retail market in 2019 and IRI’s Liquor Channel Manager, Stephen Wilson, has scanned the data to make his predictions for the year ahead.
As well as understanding the impact of the wider local and global economies on consumer spending, the data insight specialists at IRI have also looked at what they believe will be the trends that retailers can expect to see in different liquor categories. Wilson has given National Liquor News his predictions for the retail liquor market over the next 12 months.
“The themes of moderating alcohol consumption, cross category innovation, harm minimisation and associated government legislation, continued occasion based packaging innovation along with local and global political factors will all have an influence on growth for the Australian off-premise liquor market in 2019,” he said.
“On the local front, global uncertainty, high household debt, slowing household consumption, expected wages growth increasing inflationary pressures and falling house prices may weaken growth prospects and economists are forecasting a slowing economy for 2019. However, with strong employment outcomes, a stable unemployment rate and steady interest rates, Deloitte Insights are expecting GDP growth to be in a range of 2.5 per cent to three per cent.
“Australian off-premise liquor dollar growth of 3.2 per cent for 2018 was slightly higher than 2017 dollar growth of 3.1 per cent. Volume declined -0.6 per cent for 2018 compared to 1.1 per cent growth for 2017 and based on that trend there is no reason to suggest that volume will return to growth in 2019.”
Looking at the total liquor market, Wilson expects the overall trend of consumers drinking less but spending more to continue, while concerns over global political instability will also be a factor.
“With global and local political factors in play the first half of 2019 growth is expected to be more subdued until the fallout from Brexit, the impact of the current paralysis in the US driven by Trump policies, fears about an escalating trade war with China and the outcome of the Australian Federal Election are known,” Wilson said.
“Growth for the Australian off-premise liquor market for the first half of 2019 based on these events and trends is expected to be subdued, before reverting to stronger growth following the Federal Election for the remainder of the year. Based on historical growth numbers and trends, the prediction is for 2.8 per cent dollar growth and a further volume softening of -0.8 per cent for the 2019 calendar year.”
In terms of category-specific predictions, Wilson said that beer drinkers will continue to seek out easy drinking, sessionable styles.
He added: “Contemporary beer is predicted to continue to deliver strong growth and become the number one sub-category in beer.”
IRI expects that new brands will help premium beer to grow, while classic beer sales are predicted to move lower again and a slowing growth for domestic gateway craft beer will mean more subdued growth in the craft beer segment.
With wine, lighter styles and rosé are predicted to continue to rise along with growth from red bottled varietals Shiraz, Pinot Noir and Cabernet Sauvignon.
Wilson said: “Innovative packaging, half bottles and canned wine will increase the number of occasions that wine can be consumed and help drive growth. Cask wine sales are expected to soften further, while spritz is predicted to deliver growth aligned with global trends.”
Glass spirits growth is predicted to remain at similar levels to 2018, with Wilson saying this is “driven by the influence of social media making the look of your favourite cocktail or aperitif almost as important as the drink itself and continued growth of gin, vodka and world whiskies”.
He added: “More Scotch drinkers will gravitate from blended Scotch to single malt Scotch, a trend which aligns with the ‘premiumisation’ theme, more Bourbon drinkers will continue to gravitate towards offerings with premium cues. Irish whiskey and Canadian whisky are both predicted to deliver double digit growth in 2019 based on increased interest from whisky drinkers experiences in 2018.”
While RTDs experienced resurgent sales and strong growth in 2018, IRI is predicting this will be tempered slightly in 2019.
Wilson said: “Lower growth for RTD Bourbon based on trends appears likely and will be the main factor in the expected 2019 result. Growth from lighter RTD styles will balance the ledger with gin and vodka the catalysts. RTD drinkers’ interest in Canadian whisky and Irish whiskey RTD will also drive category growth and counteract the expected continued decline in RTD Scotch sales.”
And speaking on the cider category, Wilson added: “Cider sales have been relatively stable for each of the last three years. While pear/perry cider is experiencing significant lower sales fruit flavoured cider growth has been offsetting these losses and combined with stable apple cider sales, category sales are predicted to remain largely unchanged in 2019 based on trend.”
This article was written for the 2019 National Liquor News Annual Industry Leaders Forum published in February.