You would think it’s the best of times considering recent consumer buying habits. Champagne, wine, sushi — what does it all mean? Nielsen’s Scott McKenzie explains why people are spending on high-end products and why it won’t last.
GDP forecasts for the foreseeable future are grim, expectations for long-term high levels of unemployment persist, and consumer confidence levels have sailed off a cliff... but champagne sales are up! Oh, and all that champagne is apparently being used to wash down all the extra sushi Americans are making for themselves.
That’s right, consumers are turning to the smaller luxuries in life as they abandon expensive vacations and delay big purchase items such as cars and appliances. All of this fits inside a broader behavioral reset playing out.
The numbers tell the first part of the story: in US off-premise channels, wine is up 25.5% in dollar growth for weeks February 29-August 15 and up 17.7% for the week ending August 15. Sparkling wine growth (+35.5%) continues to outpace growth of table wine (+13.5%), with French champagne leading (+72.3%) in the week ending August 15. Wine-based cocktails are also seeing consistently high levels of growth.
Across Europe, there are also signs of big sales lifts in similar items. In the United Kingdom, champagne sales are steadily tracking at about 15% up and in Russia, premium spirits are seeing higher ongoing levels of demand.
So, if summer vacations haven’t resulted in fancy drinks by the hotel pool, it appears the summer staycations were opportunities for a different kind of indulgence; one that is part of a larger change in the psyche of spending. As consumers back out of some categories, they’re heading with confidence towards consumer goods as a means of fulfilling their emerging entertainment and experience gaps in smaller ways.
Here’s who is trading up – for now
Nielsen analysis in the US highlights which consumers of key leisure and lifestyle activities are likely to trade up in order to compensate for the larger dining or vacation experiences they can no longer safely access.
US consumers who traveled abroad in the last three years are 21% more likely to purchase artisan bread and 11% more likely to purchase sushi than the average American. Similarly, Americans who visited restaurants in the last 12 months are 15% more likely to purchase cheese party platters and 10% more likely to purchase alcoholic beverage mixes.
At the same time, Americans are spending more on ’DIY’ categories such as baking, nail polish, hair coloring, and sushi (seaweed/sushi wraps have been in the +50% range in recent weeks). All those weeks in lockdown, and a desire to find ways to contain spending, mean the shift in dollars from out-of-home to in-home is continuing.
But it may not be realistic to see those champagne bottles filling shopping baskets for the longer term. There are signs of weakness ahead if Europe is a barometer.
Nielsen anticipates that consumers will start to re-prioritize what goes into their baskets, and that broad-based adjustment reflects a fundamental consumption reset. Consumer packaged goods baskets in markets like France, Spain, and Italy have begun to stabilize relative to March and April peaks. While basket size in these countries remains 9-15% above that of 2019, we’ve begun to see the first signs of consumers pulling back and minimizing added basket expenses brought on by the pandemic.
On the one hand, it shows that stockpiling behavior hasn’t re-emerged to the extent of March and April, even as spikes in the number of Covid-19 cases have played out. On the other hand, it signals that the basket composition is being reset, and consumers will place additional scrutiny on basket decisions now and moving forward. Until then, we may still hear a few of those champagne corks being popped.
Scott McKenzie is the global head of the Nielsen Intelligence Unit