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This summer’s best happy hour deal isn’t at your local bar

Budget drinkers might want to skip the bar and raise a glass at home this summer.

Alcohol prices are up 2% since last year, according to the consumer price index for April, but beer and hard liquor served at bars and restaurants saw steeper hikes, jumping 4% and 2.7%, respectively.

The booze squeeze comes as households rethink what they spend on food and drinks at home versus out and about. With grocery prices 1.1% higher than a year ago but restaurant checks up a steeper 4.1%, many eateries are seeing slower demand as diners balk at climbing menu prices.

Consumers have long been used to paying a premium for drinks outside the house, but the inflation gap is stark heading into the summer: Prices for distilled spirits and wine consumed at home each rose just 0.8% from April 2023 to last month. Liquor prices at home fell 1% between March and April — a period when alcohol prices overall have been largely flat or declining slightly.

Even so, costs for alcoholic beverages are 15% higher than before the pandemic, federal data shows.

Bars will have happy hours and things, but they’re very restricted promotions.

Neil Saunders, managing director at Global Data

“That’s quite a lot,” said Neil Saunders, managing director of the retail consultancy Global Data. “Consumers are spending or having to pay a lot more for alcoholic beverages than they were historically. That is obviously a very negative thing.”To help offset the blow at bars and restaurant tables, beverage-makers are pushing more ready-to-drink (RTD) cocktails.

Bud Light’s parent company, AB InBev, told investors in its latest earnings call that its canned margarita and vodka seltzer brands “continue to grow strongly.” Even juice- and jam-maker Welch’s is getting in on the action, unveiling a line of canned cocktails last week.

Premixed cocktails were the fastest-growing spirits category last year, rising nearly 27% to hit $2.8 billion in revenue, according to the Distilled Spirits Council of the United States (DISCUS). The RTD category was the alcohol industry’s only segment to show both positive dollar and volume growth over the past year, NielsenIQ found in research released last month.

“Compared to traditional categories like beer, wine, and spirits, RTDs are experiencing explosive growth,” Nielsen said. “This is due to factors like convenience, variety, and portability, while targeting specific consumer need-states and occasions.”

Within the category, spirit seltzers — distinct from malt seltzers, hard sodas and hard teas — are growing fastest.

Alcohol offers a miniature snapshot of the broader inflation picture, Saunders said, encompassing everything from manufacturing to transportation costs. Spirits are typically sold in glass bottles that tend to be heavier than plastic ones, for example, which can weigh on fuel expenses. Energy prices were up 1.1% in April from the previous month and 2.6% from the year before.Plus, wage pressures in roles not requiring a college degree, including many in leisure and hospitality fields where alcoholic drinks are served, can trigger eye-popping bar tabs for a night out with friends.

As a result, Saunders said, the best deals are still likely found in wine shops, beer aisles and liquor stores.

“Bars will have happy hours and things, but they’re very restricted promotions, whereas in retail stores you’ve got a lot more choice,” he said.

Consumers might also want to reconsider their drinks of choice.

I do see cautious behavior from consumers.

Gavin Hattersley, CEO of Molson Coors

Shifting weather patterns have driven up the price of wheat — a crucial beer ingredient — from $5.53 per bushel to $6.87 — the highest level since August of last year. Meanwhile, agave costs have plummeted in recent months, with continuing declines expected ahead. That’s giving high-end tequila brands a chance to make deeper inroads with American consumers this year.Vodka remains one of the most popular summer spirits ordered at bars and restaurants in big cities, according to data from payments processor Square, but tequila already dominates in San Antonio, Los Angeles and Miami. In New York and Washington, D.C., the choice is split.

In the meantime, brewers and distillers are keeping a close eye on consumers’ spending habits.

While spirits held their market-share edge over beer and wine for the second straight year in 2023, totaling $37.7 billion in revenue, “the phenomenal sales growth we saw during the pandemic was unprecedented and unpredictable but also unsustainable,” DISCUS CEO Chris Swonger told CNBC in February. “Now the spirits market is recalibrating.”

“Inflation is proving to be a little more sticky than folks expected,” Molson Coors CEO Gavin Hattersley said on the company’s earnings call last month. “So I do see cautious behavior from consumers.”

But price pressures aren’t turning people away everywhere.

Despite the jump in beer prices, AB InBev reported rising sales in its latest earnings, with CEO Michel Doukeris telling investors that the beer industry “remained resilient.”

This post appeared first on NBC NEWS

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