According to a report by the Bureau of Labor Statistics featured on NPR, alcohol is getting cheaper at stores, while drinks at bars and restaurants are getting more expensive.
And a statistic that hasn’t changed in the past 30 years? American consumers spend $1 out of every $100 on alcohol.
What has changed, however, is where and how much consumers spend on alcohol: more money is spent in bars and restaurants, and less at stores.
But more dollars spent by consumers in bars and restaurants hasn’t translated into more frequent visits, because adjusted for inflation, the price of alcohol at bars has gone way up, while prices at stores has gone down.
The BLS study indicates that of the money spent drinking at home, more goes to wine and less goes to hard alcohol. The percentage of what consumers spend on alcohol with respect to beer hasn’t changed much.
Fewer Visits to Upscale Restaurants Limits Alcohol Buying
According to the NPD Group, a leading market research company, weak consumer demand for upscale dining and closer consumer scrutiny of their dining checks has softened alcohol consumption at casual and fine dining restaurants.
Based on findings from NPD’s recently released Beverage Alcohol Report (BAR), which profiles habits, attitudes, and brand preferences for on-premise beverage alcohol consumption, thirty-six percent of consumers ordered alcohol away-from-home in the last three months.
The report also notes the majority of upscale restaurant consumers order non-alcoholic beverages and an increasing amount of free tap water.
NPD reports that visits to upscale restaurants declined by -2 percent but beverage alcohol servings at casual and fine dining restaurants are down only by -1 percent for the year ending November 2011 compared to same period year ago.
“Most of the beverage alcohol servings losses came from younger consumers, ages 21 to 34, while those 35 and older increased their orders of alcoholic beverages.”
NPD’s Beverage Alcohol Report (BAR) claims key motivations for purchasing alcohol at bars and restaurants are atmosphere, food, convenient location, and price.
Other motivations include value, an environment at the establishment that dovetails with the customer’s personality, an attentive staff, and stocking a preferred alcohol brand.
“Beverage alcohol remains an important factor in the upscale restaurant dining experience,” says Warren Solochek, vice president, foodservice at NPD.
“Upscale restaurant operators just need to keep in mind that their beverage alcohol consumers want to manage their spending and pay reasonable prices.”
A Pew Research Study released in June 2010 found that 71% of Americans bought less expensive brands to save money during the economic downturn, with 30% reducing their spending on tobacco and alcohol.
According to a November 2010 report by California Board of Equalization Chief Economist Joe Fitz, U.S. alcohol spending dropped 1.7 percent during the recession.
Writing for UT San Diego, Tanya Mannes notes the Board of Equalization report analyzed U.S. spending on alcohol during seven recessions (1970, 1973, 1980, 1981, 1990, 2001 and 2008), including the most recent one.
The report “compared the growth rate on inflation-adjusted spending on alcohol for the four quarters before each recession with the average quarterly growth rate during the recession.”
The report data suggests consumers behave in a variety of ways during recessions:
• Drinking less to save money.
• Drinking more to “drown their sorrows.”
• Shopping for cheaper brands of alcohol or drinking at home. In four of the seven recessions studied, there was lower growth in alcohol spending at bars and restaurants. That might mean that more people are drinking at home to save money on going out.
• Switching from distilled spirits to less expensive alternatives such as beer.
A few years back, Kevin Attiq, co-owner of the San Diego-based Dandee Co., which operates a wholesale business and three liquor stores, said customers were not cutting consumption, but looking for value.
And the same customer behavior basically applies today.