Analysis: The popularity of spirits across hospitality

10-May-2024 - Last updated on 10-May-2024 at 12:24 GMT

Myriad challenges: Some venues faring better as spirits sales continue to struggle (Credit:Getty/Alex Potemkin)

The spirits category has faced myriad challenges post-pandemic but some venues are faring better than others within the segment.

Varied obstacles such as tax hikes and duty changes as well as legislative action on packaging, have all caused pressures for consumers, publicans, suppliers and producers alike.

As a result, sales have been dampened in recent years, with the CGA by NIQ Daily Drinks Tracker having shown numbers have been consistently down post-pandemic, as consumers increasingly monitor their discretionary spending and alcohol intake.

In total, spirits sales across the on-trade fell by 4.6% in 2023, totalling £7,646m, compared with 1.3% growth for total on-premise drinks sales the previous year, according to data from CGA.

However, some areas of the hospitality sector are having better luck than others within the segment.

Looking at different venue types, data from CGA revealed nightclubs suffered the most in the year to February 2024 when it comes to spirits sales while the sports/social club sector fared best, though high street pubs saw the biggest real terms downturn.

Real-terms decline

Nightclubs saw a 29.4% drop in volume during this period as sales of 9-litre cases fell from 269,254.1 in 2023 to 189,989.8, and there was a 20.2% decline in value sales too – from £311.4m to £248.5m.

The value share of spirits also fell, plummeting by 0.8 percentage points of the segment’s total wet sales from 55.7% to 54.9%, while the value of spirits sales dropped by 0.1 percentage points – from 1% to 0.9%.

However, the drop-off in spirits sales in nightclubs is unsurprising as the late-night sector has battled rapidly rising closures over the past 12-months, with almost 400 having shut for good since 2020, according to figures from the Night-Time Industries Association (NTIA).

Shortly behind nightclubs, bars saw a 19.4% drop in volume to February 2024 as sales of 9-litre cases fell from 511,935.8 in 2023 to 412,684.7, equating to an 11.9% value decline, from £692.3m to £609.7m.

This meant spirits accounted for 2.9 percentage points less of the bar segment’s total wet sales, dropping from 42.3% to 39.4%, while bars accounted for 0.1 percentage points more of total spirits sales in the on-trade during this period, rising from 4.6% to 4.7%.

Conversely, high street pubs, the largest sector measured, saw the biggest real-terms decline with an 11.7% downturn in volume as sales of 9-litre cases fell from 1,122,196.6bn in 2023 to 1,079,592.6bn.

Spirits sales in high street pubs also suffered a 7.9% drop in value sales, from £1,408.7bn to £1,297.1bn with a 2.2 percentage point decrease for total wet sales, from 33.4% to 21.2%.

Though the segment saw growth in terms of total value sales in the spirits category across the on-trade during this period, rising 0.1 percentage points from 6.2% to 6.3%.

Despite challenges within the spirits category, there are plenty of opportunities for operators, including a spike in premiumisation trends and desire for alcohol-free and cocktail options.

Meanwhile, sports and social clubs fared best in terms of spirits sales during this time, with a 3.8% rise in value, from £585.5m to £607.6m despite a 3.2% drop in volume as sales of 9-litre cases fell from 669,262.3m in 2023 to 648,130.4m.

In addition, spirits accounted for 0.7 percentage points more of the segment’s total wet sales, rising from 17.8% to 18.5%, though sports and social clubs accounted for 0.2 percentage points less of total spirits sales in the on-trade during this period, dropping from 21.2% to 21%.

These figures demonstrate the ongoing challenges within the spirits market, despite the freeze to alcohol duty in the last Budget.

Figures from the Wine and Spirits Trade Association (WSTA) earlier this year estimated the price of a bottle vodka stood at £17.04 as of January, a 9% increase on 2023, while a bottle of gin had increased 6% year-on-year to £17.11.

Elsewhere, community and food pubs experienced an 8% and 8.1% drop in volume respectively in the 12-months to February this year.

Sales of 9-litre cases fell from 1,038,057.3bn in 2023 to 954,559.8m for community pubs and 1,129,262.1bn in 2023 to 1,037,319.6bn for food pubs, equating to a 3.8% and 3.9% downturn in value respectively.

Opportunities

When it comes to overall share of spirits sales, both segments saw an increased share during this period, though community pubs had the edge.

Community pubs accounted for 0.2 percentage points more of total spirits sales, rising from 18.9% to 19%, while food pubs contributed 0.3 percentage points more of total spirits sales in the on-trade during this period, rising from 12.1% to 12.3%.

However, 0.8 percentage points less of the community pub segment’s total wet sales came from sprits, dropping from 17.4% to 16.6%.

In addition, 1.3 percentage points less of the food pub segment’s total wet sales were attributed to spirits, dropping from 19.8% to 18.5%,

Despite challenges within the spirits category, there are plenty of opportunities for operators, including a spike in premiumisation trends and desire for alcohol-free and cocktail options.

As part of the Morning Advertiser’s Drinks Masterclass series, Diageo head of category development for on-trade Jennifer Runciman said consumers are “drinking less but better”, meaning they are willingly to “spend more money on high-quality” products.

Furthermore, focusing on strengths in key areas was something Tim Bird, owner of Cheshire Cat Pubs & Bars and recent winner of the best drinks offer at the Publican Awards, told the MA was imperative for pubs looking to expand their spirits offering.