US on-premise rises to the occasion

Compared with five years ago, premium wine consumers in the US are spending significantly more on wine in the on-premise. What are the reasons for this, and what can the off-premise learn?

The growing trend of premiumisation in the US is well known: for the past decade US wine consumers have shown they are happy to pay more for a higher quality wine. The US off-premise retail trade has responded by improving the retail offer at $10-20 and $20+ to the point where consumers shopping at these levels have their pick of the best of the Old World and the New World. At the same time, spend on wine in the on-premise has also risen, and wine lists (particularly expensive wine-by-the-glass) has become a reliable cash cow for restauranteurs wanting to increase revenue per diner.

The question we analysed most recently, using a five year history of usage and attitude data among premium wine consumers (those spending over $15 in off-premise at least once a month), was whether the consumer propensity to spend on wine to drink at home was changing versus their spend in on-premise. The answer: spend by occasion in off-premise has more or less stagnated, while spend in on-premise has leapt quite significantly across all occasions – both formal and informal.

The average spent on a relaxing drink occasion in the on-premise has risen from $16.91 to £25.80 over the last five years – now surpassing the off-trade average by over $6 a month. Most significantly, the average spent by US premium wine consumers on a formal dinner in a restaurant has jumped from $22.68 to $36.56 a month. Evidently, US premium wine consumers are spending substantially more on premium wines when out at bars, pubs and restaurants than they were five years ago – and for every occasion.

As the world’s most attractive premium wine market, it may seem unsurprising that consumers in the US are paying more for their wine today than they did in 2014. Price perceptions have shifted, and US wine consumers are increasingly viewing wine as an ‘expensive’ or ‘very expensive’ drink. One key reason for this is that consumers are drinking wine less frequently but spending more on the occasions they do go out. In line with our findings on moderation, US premium wine consumers are trading in quantity for quality – replacing frequent wine consumption with an occasional exploration of the range of premium wines on offer in the on-premise. Subsequently, wine is now viewed as more of a reward item and something worth paying a higher price for. Particularly for those consumers who may be moderating their alcohol intake, a drink out with family or friends is seen as a special occasion, and one that feeds into the ‘treat’ consumer mindset that encourages conservative spenders to indulge that little bit more.

From a trade perspective, on-premise operators have been focusing more on their wine lists, to ensure that they have a larger proportion of higher priced wines for customers to enjoy. They have also placed more of a focus on building an experiential environment for consumers, one that allows consumers to feel more confident in trading up and experimenting with these higher priced wine offerings – particularly special ‘reward’ wines that they perhaps wouldn’t have previously consumed in these environments. The opportunity for these on-premise operators therefore stems from the willingness of US premium wine consumers to pay more for higher quality wines when drinking out, but also relies on the drinking environment and on-premise atmosphere being supportive and enticing enough for them to do so.

There is something special about drinking wine with family and friends, and the data would suggest that the US on-premise has managed to capture this mood perfectly. Consumer concerns over a lack of wine knowledge have been replaced with a new consumer confidence, and expensive wines may no longer seem so daunting for consumers guided by wine lists, personalised recommendations and a comforting ambience. The future looks bright, both for US premium wine producers and the on-premise operators that sell them, and it will be interesting to see to what extent other markets take note. For the off-premise, a fresh challenge – how to capture the attention of premium consumers in the same way, without the benefit of a well-briefed sommelier.

Author: Alice Brockman-More