Millennial 'Buyer's Guide' (Part 2): Beverages

Shifting from CSDs to energy drinks, beer to wine & liquor

Steve Holtz, Editor in Chief, CSP Daily News

Red Bull and Vodka

CHICAGO -- High-income consumers under the age of 35 spend an average of 8% less on 30 major food and household personal care categories, according to a study by analyst Nik Modi of RBC Capital Markets, Chicago. And this includes the beverage category, where these up-and-coming consumers--millennials--have traded carbonated soft drinks for energy drinks and beer for hard liquor.

"High-income millennials may be the key trendsetters," Modi write in the report titled Consumer Staples: Understanding millennials as They Enter Their Buying Years. "It has been easy to point to economic forces as a reason for shifting consumption of the under-35-year-old crowd. And it is true that more under-35-year-olds are lower income today than a decade ago. However, there are also more high income millennials—and it is among these high income millennials that the biggest buying pattern changes have occurred."

Wine, Whiskey and Vodka--The Millennial Favorites. Household penetration for whiskey, vodka and wine is higher today among millennials and the entire population; while beer penetration is lower (contracting 500 basis points among both millennials and the entire population since 2009), according to the report.

"We attribute this finding to the aspirational nature of millennials, who prefer to consume the more expensive and sophisticated beverage categories, including craft beer (when they choose to drink beer)," Modi wrote.

Trading CSDs and Energy Drinks--"Despite investor concerns over a contracting carbonated-soft-drink (CSD) category, early data in our analysis points to a near 1-for-1 trade off with energy drinks. (We think energy drinks should be categorized with CSDs)," Modi wrote. Average spending on traditional CSDs per household is down $13 from 2009 levels, while energy-drink spending is up $11.

"Household penetration of energy drinks among millennials is 15 percentage points higher since 2004 levels, while CSD household penetration is only down 4 percentage points."

Changes in Annual Household Spend Rates (2014 vs. 2009) By Income and Age

  High income     Medium income     Low income    
Category Younger than 35 35+ Total Younger than 35 35+ Total Younger than 35 35+ Total
Vodka 14% -12% -9% -22% -7% -15% -15% -19% -5%
Wine 13% 5% 4% -18% 2% -3% 8% 12% 11%
Whiskey 4% -22% -10% -37% -18% -26% -84% -8% -2%
Energy drinks -6% 39% 21% 34% 32% 23% 16% 21% 37%
Beer -14% -6% -10% 24% 2% 6% -31% -7% 2%
CSDs -30% -13% -13% -22% -11% -13% -23% -4% -6%

Source: Nielsen

Watch for more from Modi's report, including an analysis of millennials' eating habits.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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