Cost of living pressures are having an effect on on-premise sales velocity, according to CGA by NIQ’s recently introduced Pulse+ Sales Report, while the latest monthly CommBank Household Spending Insights (HSI) Index has also showed a slowdown in on-premise spending.
Utilising BeverageTrak data for the quarter ending 26 August, the report revealed a 16 per cent drop in velocity compared to the same period in 2022. This decline can be attributed to a 14 per cent drop in traffic and a two per cent drop in average check value.
There have also been decreases in category performance, with beer falling 10 per cent and spirits falling 13 per cent. Wine experienced a more pronounced drop in sales, falling by 25 per cent, likely driven by the category losing out to spirits in eating-led venues over recent weeks.
This aligns with CGA’s consumer research, which found that almost two in five consumers stated that they have been going out less in August and September. The main drivers of this shift are cost of living pressures, a factor for 75 per cent of consumers, and price increases when eating and drinking, affecting 56 per cent of consumers.
Interest rate pressure
A decrease in spend on the on-prem was also confirmed by the latest monthly CommBank Household Spending Insights (HSI) Index, which fell 1.0 per cent in October. This was led by declines in spending across recreation, hospitality and food and beverage as the ongoing effect of interest rate rises continues to be felt on consumer spending. Hospitality had the second biggest decline in spend after recreation (-4.7 per cent), declining by 4.5 per cent in October.
“October’s CommBank HSI Index demonstrates a clear tightening in consumer spending compared to September’s result, which was buoyed by a number of one-off events like the FIFA Women’s World Cup,” stated CBA Chief Economist Stephen Halmarick.
“We are clearly seeing the flow-on effects of the interest rate increases from earlier in the year. Last week’s decision from the RBA to raise the case rate by a further 25 basis points, to 4.35%, is likely to add further downward pressure to household spending over coming months. However, November will be an interesting one to watch with potential increases in spending due to the November sales.
“Looking ahead, our base case is no further increases in the RBA cash rate, although there remains upside risk based on the inflation figures due at the end of January.”
James Phillips, Client Solutions Director – ANZ explained the importance of sales velocity data to the on-premise.
“As the cost of living affects consumers behaviour in the on-premise, it’s becoming increasingly important to have a full view of the market. CGA’s BeverageTrak data provides a granular view of sales velocity, traffic and check value, paired with our consumer insights gives clients a magnified view of the current state of play, identifying gaps and enabling brands, suppliers, and operators to adapt their strategies to fully appeal to all audience types,” Phillips said.
The declines facing the on-premise are primarily due to a reduction in traffic, indicating that the biggest challenge for the on-premise is driving footfall to venues. However, there is a core segment of customers who are still prioritising visits to the on-premise, meaning that venues can still target their offerings to these customers.
Identifying which categories are in decline in a specific venue will allow operators to profile consumers and category drinkers. This data can then be used to target activation and marketing, encouraging engagement in the channel.
