Many countries across the globe are starting to enter phased re-opening plans, trying to strike a balance between public health concerns and economic recovery.
Over the last couple months, IWSR has been producing bi-weekly Covid-19 Impact snapshots. This report series captures the latest developments of the pandemic and its impact on the beverage alcohol industry across 12 key markets: Argentina, Australia, China, France, Germany, India, Italy, Mexico, South Africa, Spain, the UK and the US.
As our analysts review global developments for the bi-weekly report series, a notable trend they have seen as governments relax lockdown rules, is the role of the consumer and the differences in consumer behaviour across the 12 markets. For example, while Australians seem to more enthusiastically embrace the fact that pubs and restaurants are back, consumers in other countries, such as Germany and France, appear a bit more reluctant.
These differences are due to a complex combination of factors, which may include:
- How severe the impact of Covid-19 has been in terms of infections and recorded deaths, and the resulting national mood
- Fears of a second wave of infections – linked to both prevailing press coverage and the national mood
- Political considerations – some spectrums of society may see restrictions as an infringement on civil liberties and will make a point of enjoying new-found liberties, even if at the cost of contravening social distancing rules
- Actual distancing restrictions – larger crowds in the on-premise (such as those increasingly in Australia) may be perceived to provide a more ‘worthwhile’ experience
- The ultimate appeal of adapted spaces – will consumers accept a degree of sterility in on-premise surroundings, such as table service only, queuing systems for bathrooms, protective wear for service staff?
- After three or more months of on-premise absence in many markets, are consumers still willing to pay on-premise prices, now that they are used to off-premise price levels? Early indications in Germany, for example, are that, given nice weather, patrons are just as happy to gather in parks with supermarket- or kiosk-purchased off-premise alcohol
- If restrictions persist, how can the on-premise still be positioned in an attractive light? In London, for example, one of the city’s key local authorities moved to temporarily pedestrianise key entertainment areas in the capital’s West End, in anticipation of a mooted 4th July rule change. This was broadly welcomed by the hospitality sector
- In terms of consumption at home (through off-premise or ecommerce), when will households be comfortable entertaining other households in their home? In several countries, such as in the UK and South Africa for example, larger gatherings at home are still not allowed (although rules can be difficult to enforce)
Among all countries under review, China is the one that has seemingly attained the highest degree of “normality”, but with important caveats. More so than structural restrictions, it is consumer confidence, both in terms of spending levels and in terms of re-adopting previous consumption habits, that is crucial to the country’s road to “normality”. For example, drinking out of home is not yet being fully embraced, and the traditional way of Chinese consumption, where both dishes and bottles are shared amongst larger groups, are being seen, by some, with a degree of hesitation. The week of 15th June 2020 saw a spike in infection rates in some Beijing neighbourhoods, one of the few areas in China with some continuing restrictions, which may hinder consumer confidence elsewhere in the country too. A test will come in the autumn, which is traditionally a peak time of the banqueting season during the mid-autumn festival. This will show whether a) banquets will, indeed, be organised, and perhaps more importantly, b) whether patrons feel sufficiently confident to attend.
In Germany, there is a large disparity in consumer willingness to go out, with many still fearful of non-essential exposure to the virus, so a lot depends on trust – trust that the establishment owner will ensure visitor safety, and trust that the socially-distanced, registered visit to the restaurant (with face mask) will be worth the time and expense. Alternatives to the on-premise also provide consumers with a way to enjoy social interactions with less perceived risk – ubiquitous kiosks in the cities (where groups can gather in the open air) are seeing their clientele congregate there instead of in the pub.
In France, while the Parisian on-trade remains significantly restricted (only bars with terraces are open, with no customers allowed inside), the first restaurant reopenings outside of Paris – some as early as midnight on 2nd June – prompted long queues for entry, scenes of celebration and, finally, a mood of optimism among on-trade owners. However, there are signs that, two weeks down the line, the initial euphoria of deconfinement is losing its gloss, and that economic pressures and concerns over a possible second wave are making their impact felt. However, deconfinement and the reopening of parts of the on-trade (mostly for daytime occasions) has provided a much-needed boost to the French beverage alcohol market, with consumers enjoying their newfound freedom and increasing purchase frequency (and quantity).
In Australia, early indications are that consumers have flocked back to the recently reopened on-premise as much as they can. A patchwork of capacity restrictions persist, with differing rules state-by-state (reservation-only; seating-only; compulsory food accompaniment; maximum time slots; differing density regulations etc.). Attendance restrictions are gradually being eased though, with larger crowds allowing for a stronger feeling of conviviality.
In fact, Australia is the first country under review in the report series to have announced a roadmap to allow mass gatherings. On 12th June 2020, the federal government announced its first move on Step 3 – that stadia with 40,000- seats would be able to open to 25% capacity, indicating up to 10,000-person outdoor gatherings (largely meant to be referring to sporting matches and cultural events) will be allowed from July. Patrons will need to be ticketed and seated, and maintain a 1.5 metre distance. A cap on indoor gatherings of 100 persons has also been scrapped from July, revised to a more flexible rule that each person needs to be able to occupy 4 square metres – the latter meant to assist workplaces but also parties, weddings and funerals with unlimited attendance, as long as there is enough space. As these are federal guidelines, much depends on whether states, which have the ultimate say on implementing these rules, will, indeed, adopt them. However, their implementation should boost alcohol consumption, particularly beer and RTDs at sporting functions, but also wines and simple spirit mixes.
Across all markets, tourism will likely take a longer time to gather pace. In Australia, for example, the government announced on 17th June 2020, that international tourism will likely not be reopened until 2021. By contrast, countries in Southern Europe are working towards shorter timelines to reopen their borders.
In the meantime, however, governments will need to focus on ramping up participation in the on-premise amongst locals, with conviviality being one of the cornerstones of alcohol consumption. In China, for example, the government has launched a number of programmes to encourage a return to the on-premise, such as the organisation of a ‘night festival’ in Shanghai aimed at inviting both local and visiting patrons to start enjoying night life again, with extended shopping hours and special events in the on-premise. Domestic travel in the country has largely reopened, and several provinces continue to offer coupons and vouchers to boost consumption, particularly in tourism and cultural sectors.
Now that legal frameworks, at least in some countries, are beginning to open up, we will likely see the hospitality sector launching innovative solutions to help drive consumer confidence.
The findings from this article are based on IWSR’s report series examining the impact of Covid-19 on 12 key markets. This report series is available complimentary for current subscribers to the IWSR Global Database.
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