ALEXANDRIA, Va.—The pandemic reshaped the way consumers snack and indulge in adult beverages, according to senior executives from Beam Suntory and Mars Wrigley.
CNBC reports that consumers are moving toward premiumization, or higher-end brands, and e-commerce sales have increased dramatically since the pandemic began. For over half of consumers (54%) who bought booze online during the pandemic, it was their first time buying libations via the internet. However, it’s ready-to-drink (RTD) cocktails and premixed drinks that have seen the biggest boom.
“There were a lot of people experimenting and had the time to have fun with cocktails, and there were a lot of people who realized they were not the greatest bartender in the world,” Jessica Spence, brands president of Beam Suntory, told CNBC. “When you want that cocktail, maybe you don’t want to do all the hard work.”
Premixed cocktails were the fastest growing spirits category last year with 42% year-over-year revenue growth to $1.6 billion, compared to 30% growth for tequila and mezcal and 16% for Irish whiskey, according to the Distilled Spirits Council of the U.S. RTD cocktails were second in volume consumption last year. (Vodka was the No. 1.)
“The innovation in that space is going to continue to grow,” Spence told CNBC. “It’s a tough category already but I think there’s still space to push it more into the premium.”
The candy industry also saw consumers move toward premiumization, as they wanted different kinds of confections or chocolates. However, the main trend Mars Wrigley saw was consumers purchasing larger packs of candy while they were at home.
Now that the pandemic has waned, convenience store sales are back to normal levels, but e-commerce and other types of sales channels are still strong. Anton Vincent, Mars Wrigley North America president, says this points to a larger shift in how consumers view small treats, such as candy bars.
“I think people really got back in touch with treating themselves ... in very small inexpensive ways,” he told CNBC.
Even amid four-decade high inflation and rising costs, consumers are still willing to pay more for treats, including snacks. During PepsiCo’s second quarter, revenue and profit grew faster than sales volumes, meaning the company charges more for its products, and customers continued to purchase them.
However, PepsiCo is moving with caution as it determines what the economic situation means for consumer spending.
“As inflation keeps going up, we’re going to have to be super agile and very precise on the choices we make with the consumer,” Ramon L. Laguarta, PepsiCo’s chief executive, said on the company’s earnings call.
Candy and salty snacks continue to dominate c-store inside sales, according to Tim Young, former category marketing manager, Newcomb Oil, who is now senior category manager – packaged beverage/alcohol, at MAPCO Express.
“Collectively they both put up huge numbers,” said Young during the NACS State of the Industry Summit in April. “Both categories are in the top 10 in sales and in gross profit dollars, with candy delivering the third-highest gross margin percentage of all the merchandise categories behind ice and health and beauty care. Both candy and salty snacks drive trips, and they help build baskets.”
Candy and snacks also respond well to promotional offers, according to Young, because they are impulse driven, and they are known as an expandable consumption, which is consumption built on demand.
See how these two categories fared in 2021 in NACS Magazine.