Competition from on-premises sales will stifle growth, but specialization will boost demand.
Los Angeles, CA (PRWEB) October 01, 2013
The economic recession bolstered demand for the Beer, Wine and Liquor Stores industry. As discretionary income fell, consumers turned to liquor stores to purchase alcohol for consumption at home rather than go to bars. Although per capita alcohol consumption declined over the past five years, this industry grew due to deregulation and a revitalization in consumer demand. “In particular, consumers turned to low-cost liquor from industry operators,” says IBISWorld Industry Analyst Agata Kaczanowska. The recovering economy also bolstered consumer confidence in recent years, which made consumers more willing to purchase discretionary items like alcohol. However, consumer health consciousness also increased over the past five years, limiting alcohol consumption growth. Nevertheless, IBISWorld anticipates revenue to grow at an annualized rate of 2.4% to $46.6 billion in the five years to 2013, due to favorable regulatory changes.
This industry has benefited from state deregulation. In 2012, Washington privatized state-run liquor stores and allowed private businesses to enter the industry. As the number of participants increased, so did revenue. As state budgetary issues continue, more state governments are expected to privatize state-run liquor stores. This positive trend is expected to result in revenue growth of 2.0% in 2013. However, industry profit margins declined over the five years to 2013 due to falling product prices and rising competition for skilled labor. Stagnant income growth pushed consumers to purchase low-cost industry products, which hampered profit. Industry operators also competed for skilled employees to cater to a customer base that is more interested in craft beverages, keeping wages relatively high.
During the five years to 2018, demand for industry products will slow as external competition intensifies. According to Kaczanowska, “Disposable income is anticipated to grow over the next five years, bolstering consumer confidence and increasing attendance at restaurants and bars.” As more consumers go out for drinks, demand for liquor stores will decrease. As a result, revenue is forecast to grow during the five years to 2018 at a slower rate than in the past five years. On the other hand, due to deregulation, the industry will experience an emergence of large operators that can secure supply-side contracts with low prices. Industry profitability will subsequently grow in the next five years.
Many stores are family owned and operated, and about 97.8% of industry firms employ fewer than 20 people. The concentration of ownership of beer, wine and liquor stores is low due to state regulations that mostly prohibit vertical and horizontal integration (see Regulation and Policy). As states lift constraints, the industry is expected to consolidate in the face of increased competition. Large chains are expected to purchase mom-and-pop stores and are also anticipated to open new locations to provide liquor sales in locations convenient to desirable and under saturated markets. As such, the industry will become more concentrated in future years as the entrance of large chains allows large industry operators to capture market share by investing in specialized products to appeal to a market niche, developing a larger infrastructure and establishing a strong customer base through advertising and marketing.
For more information, visit IBISWorld’s Beer, Wine and Liquor Stores in the US industry report page.
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IBISWorld industry Report Key Topics
The Beer, Wine and Liquor Stores industry includes specialist and nonspecialist stores licensed specifically to sell alcoholic beverages for off-premises consumption. The industry excludes wholesale, grocery, convenience and gas station stores.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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