ALSA IRI State of the Industry Report 2018

Transcription

1 ALSA IRI State of the Industry Report 2018 AN OVERVIEW OF THE AUSTRALIAN RETAIL LIQUOR INDUSTRY MARCH 2018 AUSTRALIAN LIQUOR STORES ASSOCIATION

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3 Welcome to the 2018 ALSA-IRI State of the Industry Report. An overview of the Australian Retail Liquor Industry. ALSA & IRI are delighted to join together again to bring you the 2018 ALSA-IRI State of the Industry (SOI) Report. The Australian Liquor Stores Association (ALSA) is the national association representing all types of retail packaged liquor licences across Australia. IRI is a global analytics and insights provider helping retailers and brand owners to pinpoint pockets of growth through better market performance, shopper understanding and in-market execution. Its blend of deep analytical rigour and innovative technologies is powering the journey for countless businesses in the liquor, grocery, pharmacy and P&C channels. The ALSA - IRI SOI Report provides a wealth of factbased analysis with a clear snapshot of the jobs, economic and social contribution that the retail packaged liquor sector and the overall alcohol beverages industry makes to the Australian economy and to the fabric of the Australian way of life. ALSA has collated the analysis of consumption trends, identification of challenges for our members businesses from the increasing burden of regulatory issues, to help politicians, regulators and retailers understand and deal with the major issues in our ever changing marketplace. Thanks to the professional market analysis from IRI, the report also importantly identifies many opportunities for retailer members of ALSA to build on the continuing shift in Australia s relationship with alcohol beverages, away from volume, to preferences for more premium products. The regulatory environment continues to throw up challenges as Governments around Australia have reacted to some community issues with policy changes on-the run which provide significant costs and inconvenience for consumers and retailers by increasing regulatory pressures, often without a sound evidence base and stimulated by the well-funded neotemperance advocacy movement and unfortunately without solving the issue in question. ALSA continues to advocate for the national retail liquor industry on policy affecting our members. We continue to search for opportunities to work together with governments, regulators and police on evidence based and targeted policy to build a more sustainable platform and enable our retail liquor members businesses to function both profitably and responsibly. We all want a safer and better drinking environment and one where ALSA and its members are recognised and respected for the economic and social well-being contribution that the retail liquor sector makes to the fabric of the Australian way of life. ALSA and IRI trust the report will again be a valuable contribution to help retailers, manufacturers, policy makers and regulators navigate to a sustainable packaged liquor retailing environment to service Australia s ever-changing consumers. Terry Mott CEO ALSA AUSTRALIAN LIQUOR STORES ASSOCIATION In doing so, it provides extremely useful detailed category insights focusing on the key performance driving segments. The macro trend of recent years continues with Australia s consumers drinking less volume of alcohol but drinking better quality, more interesting and more premium products, a key feature in all key market segments. The continued growth of premium products, heralds a buoyant marketplace in 2018, with increased opportunities for retailers to prosper and grow to satisfy the needs of the changing consumer and marketplace. David Shukri Channel Development Director IRI MARCH 2018 ALSA wishes to thank and recognise the professional market analysis written by Daniel Bone of IRI, also to Gohar Yazdabadi from Alcohol Beverages Australia for assisting with collating some of the statistical evidence contained in the report. ALSA State of the Industry Report

4 Key Findings: Liquor Industry Snapshot Economic Contribution, Jobs and Businesses Annual retail liquor sales of $17.5 billion 1 generate indirect Commonwealth alcohol Excise and WET taxes of $6.2 Billion 2, before GST Revenue, company taxes and personal income taxes and before State and Territory Payroll Tax or Liquor Licence Fees. WA PLL 593 JOBS 4,210 Retail liquor provides flexible employment options for 48,000 people directly employed across Australia. 3 The 6,553 packaged liquor licences (PLL) 4 underpin an industry generating employment of 166,000 Australians when also factoring in the additional indirect jobs. 5 Many of the retail employees are trainees and apprentices who go on to make a career in retail and ALSA is committed to support and encourage career development opportunities for the diverse workforce employed by our member retailers. NT PLL 95 JOBS 675 SA PLL 198 JOBS 1,406 VIC PLL 2,063 JOBS 14,647 PLL: Packaged Liquor Licences QLD PLL 817 JOBS 5,801 NSW PLL 2,494 JOBS 17,707 ACT PLL 205 JOBS 1,456 TAS PLL 88 JOBS 625 $17.5bn Total packaged liquor retail turnover $6.2bn Excise & WET 48,000 Direct Employment 166,000 Jobs 15.7m Adult Australian consumers 6,553 Australian packaged liquor licences 24% 10 Yr Growth

5 The ABS says total Australian population by June Potential market of population m m 2018 Changing population creates new opportunities Australia s population is growing by 240,000 net overseas migration annually, 8 creating further influences on overall consumption patterns and beverage choice. They come from different cultures, with varied attitudes, beliefs and rules about drinking than Australia s historical immigrants 9 and different preferences than Australia s historical immigrants creating new opportunities for Australia s producers and liquor retailers. AIHW reports that 80.2% of Australians over 18 years consume alcohol 6, m 2018 Australia reportedly has around 20% abstinence whilst India (85%) and China (56%) have significantly higher abstinence rates forecast Australian alcohol consumers 18+ years 6,7 24.0m 2050 There are also significant differences in drinking preferences with 93% spirits consumption in India and 69% in China compared to 13% in Australia. 10 ALSA State of the Industry Report

6 Beer, Wine, Glass Spirits, and RTD all recorded dollar growth in Australia s $17.5 billion retail liquor market grew by 3.4% in 2017 Retail liquor is showing ongoing resilience to the broader consumption trend of alcohol moderation. Dollar growth was up 3.4% in 2017 versus 2.7% in 2016, with Australian produced products core to this. Increased sales amounted to an additional $570 million in value up from $452 million in All categories except cider delivered growth. Beer was the standout performer primarily influenced by Great Northern s extraordinary success. Industry dynamics point to repertoire drinking as Australians enjoy beverage formats across categories on different occasions. Accelerated growth as the year progressed was underpinned by seasonally influenced trading-up With consumers drinking less, industry growth has become more reliant on choice premiumisation as shoppers opt for high quality drinking experiences. IRI sales data reveals that Australians are opting for upscale beverage options in a way they would likely not if drinking more frequently. This is evidenced by dollar growth being 3 times higher than volume growth in 2017, and the strong performance of premium formats across categories. Craft beer, pinot noir, malt scotch, premium RTD s, shiraz, craft cider and champagne are just a few of the high performing premium tier segments. Another telling cross-category trend in 2017 was the way in which the dollar-volume growth gap expanded in Q4, indicative of seasonal gifting/ trading up. Overall, it reflects drinking occasions that retail liquor stores serve evolving ever more around premium and responsible drinking. Australia s $6.5 billion retail beer market accelerated in 2017 Dollar growth of 4.1% amounted to an additional $257 million, up from $184 million in Accelerating sales consolidated a stronger year of category expansion in The theme of wellbeing and moderation continues to be an industry driver, especially in beer. Low carb and/or mid strength beer collectively grew 9.7%. The craft beer boom, while slowing in 2017 (+11.9%), propelled beer dollar growth that was almost 3 times higher than litres growth. Most craft beer sold in retail liquor is Australian produced (94%), compared to 80% of all beer. The near half-billion retail cider market contracted in 2017 Cider s decline in 2017 ended a long running sequence of the category s growth contribution over-indexing alongside decade-long penetration gains. A -0.8% decline in 2017 amounted to -$4m in lost value. Cider is the only retail liquor category where value growth has consistently lagged behind volume growth in recent years. Domestic cider has been a bright spot in recent years having recorded double-digit growth in both 2016 (+20.5%) and 2017 (+12.3%). Going forward, retail liquor looks set to play a role in enabling Australian produced craft cider to finally realise the latent growth opportunity. 4

7 2017 was a standout year for the $2.4 billion retail RTD market 2017 bucked the trend of RTD generally being the most challenging fixture of retail liquor. Dollar growth of 4.1% in 2017 amounted to $94 million in added value, the most significant category expansion in around a decade. RTD s average price per litre was up 2.9% versus 2015 levels, as more sophisticated brand expressions exert more influence in the sales mix. Lower abv, cleaner and more natural products, and modestly sweet flavour profiles are also emerging as key themes among trending RTD brands. Glass spirits performance in 2017 was broadly consistent with previous years Annual dollar growth between 3 and 4% has characterised the $3.7 billion glass spirits category for the last 3 years. The 3.4% increase in dollar sales in 2017 amounted to $119 million in additional revenue. Consistency of performance owes to ongoing double-digit gains in malt scotch, gin, Irish whiskey, and spiced rum. The same goes for robust single-digit growth in vodka and Canadian whiskey. Price band analysis reveals that premium tier glass spirits priced upwards of $60 per litre are the engine room of growth. Wine growth slowed to levels below the total industry average Retail liquor is an enabler of one of the few primary Australian industries, with 77% of retail wine dollar sales being domestic produced brands. Australia s near $4.5 billion retail wine market recorded slower growth in Dollar growth of 2.4% amounted to $104 million, down from $146 million in Wine growth dynamics show that Australians are eager to experiment and explore new varietals was the year of rosé; it significantly overindexed by generating $12 million more than any other wine varietal. VALUE SHARE OF TOTAL LIQUOR 2017 % GROWTH (000s) $ SALES (BILLIONS) 2017 CONTRIBUTION TO VALUE GROWTH TOTAL LIQUOR 1.1% 3.4% 17.5 Beer (37%) 1.4% 4.1% % Wine (26%) -0.4% 2.4% % Spirits (21%) 1.7% 3.7% % RTD (14%) 2.2% 4.1% % Cider (3%) -0.8% 0.4% 0.5-1% Dollars Growth % YA Litres Growth % YA ALSA State of the Industry Report

8 Australia s changing relationship with alcohol beverages Australian per capita consumption long term trends Australians are now drinking less overall alcohol than at any time in the past forty years. 11 Litres per capita (pure alcohol) Total Beer - Total Wine - Total Spirits and RTDs - Total Cider Alcohol beverages preferences have changed significantly over that time 11 Cider Spirits /RTD s 0% 13% Spirits /RTD s Wine 17% % Beer 70% 19% Cider Beer 40% Wine 37% Availability vs consumption Suggestions that there is a mysterious link to where a product is purchased and how much will be consumed, or the behaviour of those who are consuming the beverage are unsubstantiated. The available evidence does not show any link in availability or where a product is purchased, to either an increase in total volume consumed or to inappropriate consumption behaviours APPARENT CONSUMPTION OF ALCOHOL VS NATIONAL PACKAGED LIQUOR LICENCES BY YEAR Total Per Capita Consumption (litres) 11 - No. of PLL s 4 6

9 Convenience more important than price - influences where to shop $ Contrary to popular belief, recent industry research 12 continues to show that price is not the most important driver of customers to a liquor store and comes in behind Convenience and Range of product. A driver is the beliefs about a store or brand that leads to intention to shop with that store or brand and through statistical analysis, the extent to which different beliefs about liquor store brands explain differences in purchase intention. So while differences in perception of price are important and have an impact on likelihood to purchase, perceptions of convenience are even more important. Range/ product 17% Sells high quality products 3% Its relative importance is demonstrated in the chart on the right showing liquor category shopper drivers. The opportunity for retailers is to continue to challenge the race to the bottom on pricing as the changing consumer preferences present many opportunities to leverage positive changes in the alcohol consumption patterns with Australian consumers. Australians of today are clearly drinking less volume of alcohol but drinking better quality, with premiumisation being a key feature in all key market segments. Staff/service 7% Price/promo 16% Social responsibility 3% Convenience 24% Momentum 14% Environment 14% Loyalty/ rewards 2% Increased availability does not lead to increased harms Alcohol-related harms in the community have declined during a period when consumers have benefited from increased availability, lower real costs, and increased competition through exposure to alcohol marketing. The most independent and high integrity police statistical collection agency, the NSW Bureau of Crime Statistics and Research (BOCSAR) has charted a decline in alcohol related domestic assaults, non-domestic violence alcohol related assaults 13 against a rise in packaged licences 4 (prior to the lockout laws and 10pm bottleshop closing): ALCOHOL-RELATED HARMS IN THE COMMUNITY 13 YEAR ENDING JUNE Rate of Assault per 100,000 of population Number of Packaged Liquor Licences - Assault - DV related - Assault - Non-DV related - Assault Police - Number of PLL s ALSA State of the Industry Report

10 The Regulatory environment ALSA advocates for evidence based and well-targeted approaches to encourage the safe and social enjoyment of alcohol beverages among Australia s 15.7 million legal drinking age consumers 6,7 the overwhelming majority of whom are already making informed and sensible choices about their drinking behaviour. The retail liquor sector is proactively committed to responsibly enabling the safe and social enjoyment of alcohol beverages, by providing a wide choice of premium beverages at competitive prices, for people to share with friends and family in the safety of their homes. One of the biggest issues affecting our members is regulatory creep, where small incremental increases in regulation and restrictions on how our members operate, progressively cumulate to significantly impact on their business viability and their ability to service their customers needs. Just like the frog in the pot you don t even know its happening until it s too late! A few more fees and charges, a container deposit administration fee, a small tax increment or yet another piece of red tape and administrative cost that you reckon won t impact on your business right now!...and SO FRANCIS, BY A GRADUAL PROCESS OF INCREMENTAL TAXATION, I DECLARE THAT THE GENERAL POPULACE WILL BE UNAWARE OF THE STRANGLE-HOLD OUR GOVERNMENT WILL EVENTUALLY HAVE OVER THEM! HUH? IS IT ME OR IS IT GETTIN HOT IN HERE, MAURICE? Little regulatory adjustments keep mounting until they become a significant impact on business and alas, mostly don t have any real impact on the supposed problem they were designed to fix. ALSA advocates to provide balance to the debate and build a level playing field for our members and their customers on national policy and industry issues, including cost of doing business, participating in inquiries, reviews of Liquor Acts, forums and the media. $40.00 Original price (inc. GST) +$2.40 +$1.31 $ EXAMPLE IMPACT ON 24 PACK BEER STUBBIES What consumers can return and earn Scheme s handling and administration fee =$43.71 New price (inc. GST) Relevant and targeted NOT overly complex regulation The NSW Container Deposit Scheme has been a great example of how NOT to develop a litter recovery program. Hopefully other States and Territories will both consult and listen to advice from industry and the public. NSW consumers are being severely inconvenienced and are expected to pay over $1 billion 14 for a system that seems to duplicate and also may destroy the viability of the very successful and well established kerbside recyclables recovery system. Additional costs are not simply the NSW 10 cent deposit they also include the cost of running the very complex scheme so for a typical carton of 24 beer stubbies when a retailer simply passes on the costs as advised by Exchange for Change, 15 it translates into a hike of at least $3.71 / carton resulting in a reduced percentage retail profit margin. To stay in business, operators need to make their own decisions about how they price their products and what profit margin they need to continue to pay their overheads, their staff and to provide the right service levels for their customers. 8

11 ALSA advocates for balanced, evidence based and targeted policy The case for alcohol regulations has been to protect people from the potential harms of excessive alcohol consumption. But government regulations rarely target only those who misuse alcohol and are mostly population wide measures that impact on the over 80% of the adult Australian population who enjoy alcohol beverages. 16 The vast majority of those drink in moderation without harm to themselves or others. The 2013 National Drug Strategy Household Survey (NDSHS) collected data from nearly 24,000 people across Australia and results found that Australians support targeted measures rather than whole of population control measures to curb alcohol abuse. 17 AUSTRALIANS SUPPORT TARGETED MEASURES TO REDUCE PROBLEMS ASSOCIATED WITH ALCOHOL (PERCENTAGE OF SUPPORT) Most supported 85 % 84 % 82 % 84% of Australians support stricter enforcement of supplying alcohol to minors 17 Least supported 44 % 35 % 28 % More severe legal penalties for drink driving Enforcement of the law against supplying minors Enforcement of the law against customers who are drunk Increasing tax Reducing the number of outlets that sell alcohol Increasing the price of alcohol ALSA State of the Industry Report

12 ALSA voluntary measures ALSA has adopted a range of voluntary measures to discourage underage access to alcohol and reduce harms from excessive drinking in the community ID-25 discourage attempts at underage purchase, anyone that looks under 25 will be asked for photo ID Don t buy it for them encourage adults to reconsider whether to buy alcohol beverages on behalf of a minor ALSA product ranging guidelines provide retailer members with a check list of issues to consider when making product ranging choices Tackling underage drinking Focus on educating young people appears to be paying off with the Australian Institute of Health and Welfare (AIHW) recording declines in both lifetime and single occasion risky drinking by Australians and an increase in abstention by year olds CONSUME 5+ DRINKS (MONTHLY) YEAR OLDS ABSTAINING FROM DRINKING ALCOHOL 29 % 26 % 25 % 72 % 82 % 14% %

13 AUSTRALIAN LIQUOR STORES ASSOCIATION ALSA Stakeholder engagement Key publications The second ALSA-IRI State of the Industry Report published in 2017, generated a great deal of positive stakeholder and media engagement throughout the year, used in briefings with members, supplier partners and other industry stakeholders. It s also been widely commented on by media, politicians and regulators as providing a clear and concise snapshot of Liquor retailing in Australia and the issues affecting our members. ALSA IRI State of the Industry Report Alcohol Beverages Australia ALSA is also extremely proud of the role it played in the establishment of Alcohol Beverages Australia (ABA) with all major sectors of the industry demonstrating their commitment to collectively promote the benefits and contribution of our industry and to challenge the myths often pedaled around alcohol consumption by the wellfunded temperance advocacy movement. ALSA was also instrumental in developing the concept for and then managing on behalf of ABA, the successful launch of ABA with the Celebration of Industry Dinner in the Great Hall of the Australian Parliament House in August An overview of the AustrAliAn retail liquor industry MARCH Clear and concise snapshot of Liquor retailing in Australia and the issues affecting our members DrinkWise ALSA remains a founding board member of the industry funded DrinkWise Australia, which has developed and run highly effective and award winning campaigns to positively change Australia s drinking culture. Promote the benefits and contribution of our industry and to challenge the myths often pedaled around alcohol consumption ALSA Events ALSA has been known over the last 24 years for the ALSA conference, and recently the new 2 ½ day format was more accessible for both retailers and corporate delegates alike, with a much shorter time commitment to attend, contribute and learn, while networking with key retailers and suppliers from across Australia. However, ALSA continues to review more flexible options to identify the most efficient way to engage with our broad range of members from around Australia. Award winning campaigns to positively change Australia s drinking culture ALSA conference An opportunity to contribute and learn, while networking with key retailers and suppliers from across Australia ALSA State of the Industry Report

14 ALSA International Study Tours ALSA has conducted two further small and targeted International Retail Study Tours to London and to New York, providing learning s and inspiration around the importance of convenience and flexibility to adapt to changing consumer demand, seeing the importance of shopping experience and theatre as part of customer service in those markets, to deliver a sustainable competitive advantage. Professional Development for members - includes RSA On-line training alsatrain.com.au High quality on-line and accredited RSA training * at discounted members only rates International Retail Study Tours to London and to New York Communications ALSA has also developed a strong communications program in conjunction with the Intermedia Group in their Publications The Shout and National Liquor News. ALSA-TRAIN: High quality on-line and accredited RSA training* at discounted members only rates, is now available via The ALSA-TRAIN on-line website training program was established by ALSA to provide cost effective training for liquor store staff, managers and owners, stimulating career path development for young or mature retailers and to encourage responsible, profitable and professional retailing. *Victoria does not yet allow on-line RSA Training Certification alsaretailinsights.com.au Strong communications program in conjunction with the Intermedia Group Online knowledge resource for liquor retailers and the industry ALSA RETAIL INSIGHTS: ALSA Retail Insights is an online knowledge resource for liquor retailers and the industry to access up-to date and unique insights on the market and shopper behaviour. ALSA Retail Insights supports and encourages well informed and professional liquor retailing. 12

15 ALSA Young Liquor Retailer of the Year Sharni Fenton from the 9/11 Bottleshop Group in Tasmania was our third winner of the ALSA Young Liquor Retailer of the Year Award. It was developed to encourage and stimulate bright, young people to focus on developing a career in the retail liquor sector. Interest has been very strong with applications from across Australia. Sharni Fenton won funded participation on the 2018 ALSA International Retail Study Tour to New York. Sharni Fenton Young Liquor Retailer of the Year References 1 IRI MarketEdge, MAT to 31/12/17. On the basis that take- away retail packaged liquor accounts for approximately 80% of volume and 60% of value, ALSA estimates that the total alcohol beverage sector generates an estimated $29 billion in turnover including product sold on-premise. 2 Australian Government Budget Outcome ALSA estimates using varied data including New South Wales OLGR Biennial Return sector average 7.1 employees per PLL, head count including head office and store support staff 4 PLL numbers derived from ALSA National Licence Database 5 Indirect employment as per Deloitte Access Economics, Australia alcohol industry economic contribution and employment (2013) and ALSA estimates 6 ABS data catalogue using B Series with a 2012 base population 7 ABS population nsf/mf/ and AIHW 2014, / NDSHS 2013, Table ABS Population Projections, Australia, 2012 (base) to ABS Frameworks for Australian Social Statistics, Jun WHO Global status report on alcohol and health 2014 and Dept of Immigration and Border Protection 11 ABS Apparent Consumption of Alcohol, Australia, Released 01/09/ Recent industry research 13 BOCSAR NSW Alcohol related domestic and non-domestic assaults NSW NSW EPA CDS CRIS ISBN EPA 2017/0224 May 2017 (P 12) 15 LSA NSW MR Nov 22, ABS population and AIHW 2014, / NDSHS 2013, Table Australian Institute of Health and Welfare (AIHW) 2014, NDSHS 2013, Table Australian Institute of Health and Welfare National Drug Strategy Household Survey 2016: detailed findings. Drug Statistics series no. 31. Cat. no. PHE 214. Canberra: AIHW. ALSA represents a broad spectrum of take-away packaged retail liquor stores Established in 1983, ALSA is the National Association comprised of State & Territory Liquor Stores Associations, representing a diverse range of retail liquor store members around Australia. ALSA represents a diverse range of off-license retail liquor outlets in Australia, including many of the most recognised and trusted names in Australian liquor retailing. These range from local and convenient small family owned independent outlets, also independently owned and run outlets operating under banners, through to the national chain owned and operated stores. ALSA State of the Industry Report

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