While ecommerce was already a growing channel for alcoholic drinks sales, Covid-19 has dramatically accelerated its importance across all markets. The vast majority of absolute value growth will be generated across 10 core countries, and one in particular – the US. With retailers and brand owners now investing heavily in the channel, the US is on track to overtake China by the end of 2021, replacing it as the world’s leading market for online alcohol sales.
To date, China has consistently been the world’s largest beverage alcohol ecommerce market by far – in 2018 and 2019, the value of China’s alcohol ecommerce market was 2 to 3 times that of the next largest market – the US. The channel’s value continues to grow in China, driven by a growing and increasingly affluent & connected middle class. Sales in China are expected to have risen by around 20% in value in 2020.
In the US, however, alcohol ecommerce sales are expected to rise by around 80% in value in 2020, having experienced three to five years’ normal development in just six months.
“While on first inspection the forecast growth of online alcohol in the US appears dramatic, it is important to note the low base level of development in the channel,” notes Guy Wolfe, strategic insights manager at IWSR.
Ecommerce represented just 1% of off-trade alcohol volume in the US in 2019. This compares with around 6% in the UK and approximately 4% in China. This is due to a range of factors, key of which are the varying state-by-state laws that limit and control the sale of alcohol, including online and direct-to-consumer.
Covid-19, however, triggered a change in this dynamic. In order to help alcohol producers struggling with the closure of the on-trade, multiple states temporarily relaxed laws governing alcohol delivery and some of these changes look set to become more permanent. “Control states such as Virginia and New Hampshire are now testing the online sale and delivery of alcohol via the state monopoly retailer,” notes Wolfe. “I would also highlight Kentucky’s recent decision to allow direct-to-consumer alcohol sales, including from producers outside the state.”
Coupled with this, consumers faced with lockdown restrictions have been forced to turn to ecommerce as a lifeline, creating a huge spike in awareness of ecommerce as a channel for alcohol, even in states where this was already legal. As a result, retailers and brand owners are heavily investing in the channel – take Uber’s acquisition of Drizly for example. Retailers with bricks & mortar sales at the forefront will be driving much of the channel’s growth in the years to come as well.
The impact of Covid-19 on the penetration of ecommerce alcohol in the US means that strong growth is expected from the channel’s current low base. The value growth of ecommerce alcohol is expected to significantly outperform the wider drinks market.
Looking ahead in China, sales of online alcohol will continue to increase over the next five years, with the channel’s value growth far outperforming that of the total trade as well. However, overall growth rates in ecommerce alcohol will be limited by a higher base level of penetration, as well as the market’s reliance on the on-trade and baijiu.
Although increases over the next five years will be much less strong than in the US, China will continue to be a crucial market for online drinks sales, growing by approximately 5% to 10% each year through to 2024. The ‘new retail model’, which combines online browsing/payment and offline pick-ups, is quickly establishing itself and expanding its consumer base in the country thanks to backing from some of the largest ecommerce players in the industry, Alibaba and Tencent. Technological developments that use big data to target consumers, as well as improvements in logistics that increase geographical reach, will help to push online alcohol to new heights moving forward.
Combined, the US and China will make up approximately 70% of the global ecommerce alcohol market value by the end of 2024.
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