Report: Worldwide Alcohol Sales Won’t Rebound Until 2024
by Chris Furnari
The global coronavirus pandemic may have initially caused a spike in U.S. alcohol sales at off-premise retail stores as consumers rushed to stock their pantries ahead of nationwide stay-at-home orders, but the long-term impact of decreased travel and on-premise closures could set the global booze business back five years, according to a new report.
IWSR, a market research firm that analyzes trends across the international alcohol beverage landscape, anticipates “double-digit declines” attributable to “widespread travel restrictions” and a “near complete shutdown of bars and restaurants across the world.”
“While we’re still assessing the full impact of the current COVID-19 situation, it’s very clear that the pandemic is set to cause a deeper and more long-lasting after-effect to the global drinks industry than anything we’ve experienced before,” said Mark Meek, the CEO of IWSR. “Even the downturn following the 2008 financial crisis was less severe than what we are seeing now.”
Meek said 2019, a year in which worldwide alcohol consumption remained relatively flat (+0.1%), was “perhaps the last normal year for the drinks industry.”
In a report issued this week, the firm said its research suggests that global alcohol volumes will not return to “pre-COVID-19” levels until 2024. Meanwhile, in the U.S. and U.K., the recovery could take even longer, IWSR suggested.
Indeed, many major North American alcohol companies have been stung by nationwide shelter-in-place orders and forced bar and restaurant closures.
Take Molson Coors TAP , the second-largest beer company in the U.S., for example. It recently reported an 8.7% decline in net sales during the first quarter, a result that was “disproportionately affected by the coronavirus,” CEO Gavin Hattersley said last month.
“Like everyone else, the full impact and what our new normal looks like going forward is still uncertain, but coronavirus has had, and will have, a material impact on our business,” he noted.
The early boost from pantry-loading shopping that many beer companies experienced in March did not continue in April, Molson Coors said, reporting that its sales-to-retailers (STRs) declined 14% in the U.S.
“In the U.S. we continue to see strong STR trends in the off-premise channel, but these trends are not fully offsetting the effective elimination of on-premise sales,” the company wrote last month. “We expect the negative on-premise trends in the U.S. to continue while social isolation continues to be practiced and expect that any increase in total off-premise volumes due to channel shifting will not be sufficient to offset the losses experienced in the on-premise.”
The loss of on-premise volume that Molson Coors and other alcohol manufacturers are grappling with is no doubt driving IWSR’s bleak outlook, especially as the majority of retailers remain unsure when they will be allowed to operate at full capacity again.
Nonetheless, IWSR has identified a few bright spots.
Beer is expected to rebound faster than both wine and spirits, and sales of non-alcoholic beer are predicted to grow at an 8.1% compounded annual growth rate (CAGR) through 2024.
Meanwhile, sales of wine in the U.S., which declined for the first time in 25 years in 2019, are also projected to recover more slowly. However, sparkling wine products are expected to perform better as consumers “increasingly shift to year-round consumption of these products,” IWSR noted.
IWSR also believes that whiskey and gin will return to pre-COVID-19 levels faster than other spirits offerings, however vodka volumes – which increased 2.3% in the U.S. last year — are not forecasted to recover until after 2024.
So what’s an alcohol manufacturer to do?
Double-down on e-commerce, IWSR suggests. The firm studied 16 “key markets” and found that online sales grew faster than total market sales in 2019.
Digital sales of beer increased 14% compared to just 1% for the total market, while online wine sales grew 18% compared to a total market decline of 1%.
E-commerce alcohol sales currently represent are $21 billion opportunity globally, and that channel is expected to more than double to $45.5 billion by 2024, IWSR predicts.
“A strong focus on innovation, premiumisation, and new routes to market such as e-commerce, are all factors which will help contribute to the industry’s rebound and future growth,” Meek said.