The threat of coronavirus on the travel retail liquor market

The coronavirus recalls memories of the 2003 SARS epidemic that primarily hit Southeast Asia, and that was also caused by a coronavirus, killing approximately 800 people. Although these are relatively few deaths in a global context, the SARS virus did have a negative impact on international travel. Figures from International Air Transport Association show a 2.4% drop in international passenger traffic for 2003, with a 9% decline in Asia Pacific.

Translating this to travel retail sales, IWSR figures show spirits volumes in the travel retail channel in Asia-Pacific fell by 1.6% in 2003, picking up again by 5.9% in 2004 and 5.2% in 2005. Cognac and Scotch, key categories for the Asia-Pacific travel retail market, suffered similar fates; Cognac volumes fell by 7.3% and Scotch fell by 1.5% in 2003. Both categories picked up considerably in 2004, with volumes increasing by 7.0% and 6.1% respectively.

Although the ban on travellers leaving Wuhan comes in the week leading up to the Chinese New Year, when millions of Chinese are expected to travel, the holiday primarily sees mass transit within China itself, with only minor international travel.

“Restrictions on travel during this Chinese New Year won’t have a big impact on the travel retail liquor sector. The real threat will be felt by international travel. Fear was a key motivator in decreased international travel during the SARS epidemic. What is difficult to judge right now is whether the coronavirus will be contained, in which case, the impact will likely be minimum. However, if consumer fear and uncertainty around the spread of the virus rises, we may be poised to see a repeat of something closer to the scale of 2003,” remarks Alastair Smith, Director at the IWSR.

It will be crucial to keep an eye on the situation as health experts understand more about the scale of the coronavirus. To date, most patients have shown relatively mild symptoms when compared to those of SARS. But the key question now is how easy the virus will be to contain, and how consumer sentiment will respond as the news unfolds.

In response to industry demand for greater clarity during global threats, IWSR has announced plans to launch the IWSR Coronavirus Risk Assessment Model (CRAM). This tool will quantify and forecast the impact of coronavirus, giving industry leaders data-driven insights and situational forecasts to navigate the situation and manage risks. You can read more here. 

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