Premium adult beverages are providing momentum to the on-premise channel, according to Chicago-based Technomic Inc.’s 2013 BarTAB Report. Although the channel is slowing overall as consumers control their spending, higher-priced spirits and beers are growing in restaurants and bars, Technomic reports. In 2012, the on-premise channel grew in 0.7 percent in total volume to reach 1.9 billion gallons, and sales rose 3.5 percent to $97.3 billion, it reports. However, Technomic projects there will be slight declines in volume but continued dollar growth in 2013 and 2014.

"Two seemingly opposing trends are at play," explained Eric Schmidt, director of research at Technomic, in a statement. "The slow economy and a level of uncertainty have some consumers reducing their visits to or spending in restaurants and bars, while at the same time their interest in more complex flavor experiences is prompting them to continue exploring more expensive products, such as single-malt Scotch, imported vodka and craft beer. It's reminiscent of the 'drinking less but drinking better' trend of the early 1990s."

One-quarter of total alcohol volume and half of sales occur in the on-premise channel, Technomic reports. Beer remains the largest category in both volume and dollar sales. Following a decline in 2011, beer expanded in volume in 2012, but the major domestic beer categories have continued to decline in 2013, it says.

However, spirits was the fastest-growing alcohol segment in restaurants and bars in 2012, expanding 1.9 percent in volume and 5.6 percent in dollars, Technomic reports. Although total spirits volume is expected to be flat by year-end 2013, several higher-priced categories continue to grow, it notes. Additionally, wine's growth trajectory is slowing overall, but its largest segment, domestic table wine, is posting ongoing gains, the market research firm asserts.

Spirits, wine and beer appear to be competing more directly for on-premise occasions, Technomic notes. In particular, competition between spirits and beer for millennial consumer drink purchases has increased, it reports.

"Millennials seem to be making drink choices in restaurants and bars more on the basis of desiring a particular flavor experience or as the result of influencers such as the occasion, food being ordered or promotions than due to loyalty to a particular type of drink," said Donna Hood Crecca, senior director at Technomic, in a statement. "Their adult beverage portfolio is broad and varied — millennials are driving many of the trends occurring in spirits, wine and beer, including the growth of premium and above-premium products."

Fastest-growing adult beverages in restaurants and bars

Source: Technomic Inc., 2013 BarTAB Report