In the early days of Covid-19 lockdown, reports of consumers panic buying beverage alcohol led to the impression that people were drinking more than usual during the pandemic. Although pantry loading behaviour soon tapered off, many industry watchers were asking themselves, “are consumers drinking more during Covid-19?”
IWSR looks to answer this question with the publication of an in-depth assessment of beverage alcohol consumption and consumer behaviour this past year. IWSR’s analysis covers 20 key markets (including the global travel retail channel) that drive 75%+ of global alcohol volumes.
Beverage alcohol volume consumption will fall by -8% in 2020
IWSR data shows that beverage alcohol volume consumption during the pandemic was down across almost all markets, including Australia, Brazil, China, Colombia, France, Germany, India, Italy, Japan, Mexico, Poland, Russia, South Africa, Spain, Thailand, Turkey, the UK and the global travel retail channel. Only the US and Canada will see increases in beverage alcohol volume consumption in 2020 (both at over 2% total volume increases). In total, beverage alcohol volumes across the 19 countries are set to fall by -8% in 2020. Global travel retail volumes are forecast to be down -68% in 2020.
The key reason for this decline is largely down to decreased purchasing in the on-trade. Some countries were able to bear the brunt of the on-trade closures better than others. In Australia, for example, the beverage alcohol market is generally weighted more towards the off-premise, which meant lockdowns did not impact drinking occasions as drastically as in other countries. Australian wine consumers, for example, almost completely transferred on-trade purchasing behaviours to the off-trade. Total beverage alcohol volume consumption in Australia will fall by approximately -1% in 2020. However, in many markets, the increase in at-home consumption did not compensate for the closures of the on-trade.
Longer-to-consume and lower strength offerings resonate during Covid-19
In the UK, IWSR estimates that total beverage alcohol volume consumption will decline by -10% in 2020. Most major categories will post volume losses, including beer, vodka, gin, and blended Scotch. There are some winners through the pandemic in the UK, such as still wine, low- and no- alcohol offerings, and RTDs (ready-to-drink products).
It may not be a coincidence that some of the better performing categories, such as still wine and RTDs, are relatively lower-strength product offerings. They are also more easily able to make the switch from on-premise to take-home consumption.
RTDs in particular resonate with global consumers who are increasingly showing a propensity for refreshing, flavourful and longer-to-consume drinks. Much of the volume growth in the US, for example, is driven by hard seltzers, which are seen by many US consumers as offerings that tap into health & wellness cues, such as lower ABV, low-carb or low-sugar.
The low-and no-alcohol sector has remained resilient through the crisis, although growth of low- and no- spirits has been hampered by the absence of a fully functioning on-premise channel, seen as key to bringing the category closer to consumers.
The pandemic has highlighted that moderation and wellness trends continue to resonate with consumers. In the UK, low-and no- alcohol beer, for example, will continue to grow at a volume CAGR rate of +4% (2019 to 2024). The trend also extends beyond the UK and other Western markets. Poland, for example, will see some of the largest growth in share of low/no beer versus the total beer category between 2019 and 2024. In Russia, the no- and low- alcohol beer category is expected to grow at a volume CAGR rate of +12% (2019 to 2024). Total beverage alcohol volume consumption in Russia and Poland will fall by approximately -1% and -6% respectively in 2020.
Government bans, lockdowns and market structure
Some markets will be particularly hard hit in 2020. Much of the specific impact is due to the spread of the virus, the type of lockdowns adopted and/or the structure of the market. In Spain, for instance, which suffered severely from the pandemic and where lockdown measures were enforced, total beverage alcohol is forecast to be down by -16% in 2020. About 70% of Spanish consumption takes place in the on-premise, so the industry was particularly impacted by on-premise closures.
South Africa (where total beverage alcohol volume consumption will be down by -34%, 2019 vs 2020) and India (-22%) will face larger declines due to both governments’ decisions to impose bans on the sale of beverage alcohol. After initial strong declines in volume consumption in China, the market has bounced back strongly, buoyed by the strength of its ecommerce sector and the return of the on-premise. IWSR consumer research data also shows that Chinese consumers are amongst those most comfortable with resuming everyday activities. The Chinese total beverage alcohol market will likely see beverage alcohol volumes decline by -9% in 2020.
As the year draws to a close, the impact of the pandemic continues to unfold. But one thing remains clear: IWSR data shows that people have not been drinking more during the pandemic.
While the news of a vaccine is certainly key for a rapid recovery of the hard-hit travel retail and on-premise sectors, new questions now arise: how will consumer spending and possible declines in disposable income impact the industry? Premiumisation trends are nuanced; will some consumers continue to opt for more premium offerings, tapping into a “less but better” approach to alcohol consumption? Value products have already seen gains in struggling markets where Covid-19 has led to downtrading; how will category and market nuance shift in the years to come? Stay tuned. IWSR continues to analyse the ongoing impact of Covid-19 on consumer attitudes and the future of the beverage alcohol market landscape.
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