The leading authority on the global beverage alcohol market has revised predictions it made last May on the impact of coronavirus on the global alcohol market.
Based on how the pandemic has unfolded in 2020 so far, IWSR conducted an in-depth mid-year assessment on the outlook for the global beverage alcohol industry. It reviewed beverage alcohol consumption in 19 key global markets and in Global Travel Retail channel (representing over 75% of total global alcohol consumption).
The key markets reviewed were Australia, Brazil, Canada, China, Colombia, France, Germany, India, Italy, Japan, Mexico, Poland, Russia, South Africa, Spain, Thailand, Turkey, the UK, the US and Global Travel Retail.
“Given the incredibly tough measures the industry has continued to face due to Covid-19, it’s encouraging to see that beverage alcohol in the 19 focus countries is only projected to decline by -8% in 2020, rather than by the double-digit losses originally expected,” stated the IWSR, “Excluding national spirits such as baijiu and shochu, total beverage alcohol in the 19 focus countries will recover to 2019 levels by 2024.”
And we may see that recover even faster now given the recent news on encouraging vaccine trials, says IWSR’s Chief Executive Mark Meek.
“The rise of e-commerce and the efforts by retailers and on-premise operators to adapt to this crisis, coupled with consumers expanding to new occasions, created a dynamic, albeit challenging new environment for beverage alcohol,” he said.
As on-premise suffers long-term damage, alcohol e-commerce sees strong growth
New IWSR research also examines Covid-19’s impact to the on-premise which has suffered long- term potentially permanent damage in many markets.
The IWSR estimates that only four of the key markets will see a share gain over 2019 levels in the on-premise by 2024: Russia, Poland, Australia and Colombia.
In many markets Covid-19 has accelerated a long-term pre-crisis trend of declining traditional on-premise consumption.
The clear winner during the Covid lockdown has been alcohol e-commerce which has increased in all focus markets. The value of e-commerce in 10 core countries (Australia, Brazil, China, France, Germany, Italy, Japan, Spain, the UK and the US) is forecast to grow by over 40% in 2020, to reach €14.38 billion (US$17bn) and this is expected to grow to over €33.8 billion ($40bn) by 2024.
US and China prove resilient
Though volume losses in several markets including Russia, Australia, Japan and Germany will be under 5%, only the US and Canada are expected to show actual volume growth this year (both at over 2% total volume increases) according to the updated IWSR figures.
“The 2020 volume consumption increase in the US is in line with 2019 trends, indicating that Covid-19 has not impacted overall consumer demand,” states IWSR, “However, gains in retail and e-commerce contrast with heavy losses in the more profitable on-premise channel in the US.”
China also performed better than initially foreseen at the start of the pandemic as Chinese consumers – including 400 million millennials in the country – have returned to almost all everyday activities. The international spirits market in China in particular will see full recovery by 2021, predicts IWSR which believes the US and China to be key growth drivers of global beverage alcohol. Combined, they account for one-third of global volume consumption and over 40% of global value.
Not surprisingly, markets such as India and South Africa, which experienced partial or full shutdowns of all beverage alcohol during the pandemic – and Mexico, which saw beer banned for some time – will experience some of the largest volume losses this year.
Global Travel Retail down 68%
Volume consumption in Global Travel Retail, impacted by the huge disruption in business and leisure travel, is estimated to be down by 68% this year.
Only the Ready-To-Drink sector will see volume growth in 2020 (up 43%), largely driven by strong performance in the US, the largest RTD market in the world by volume.
Global consumers have shown a propensity for refreshing, flavourful and longer-to-consume drinks, which bodes well for RTDs. The category is also well suited to the off-premise which further boosted its popularity during lockdown. RTDs are expected to post volume gains of 21.8% Compound Annual Growth Rate between 2019 and 2024, stealing share primarily from the beer category.
In the US the RTD category will be bigger by volume than the spirits category by the end of this year.
IWSR projects that total volume consumption of international spirits (excluding national spirits such as shochu and baijiu) will be down by 7.2% in 2020, however it’s set to recover in full by 2022, it believes.
Within spirits, Canadian whisky and US whiskey are the only categories expected to grow in volume consumption in 2020. US whiskey will also be one of the most resilient spirits through to 2024 along with Cognac/Armagnac, agave-based spirits, Irish whiskey and Japanese whisky.
Wine & Beer
Wine and beer are both forecast to be down about 9% in total in 2020, with each unlikely to regain volumes for several years, believes IWSR.
No and Low alcohol beer, however, is a bright spot for the category as moderation and wellness trends continue to resonate with consumers. NoLo beer will remain resilient through to 2024, with a volume CAGR of 5.9% forecast between 2019 and 2024.
“No-alcohol spirits will grow at a slightly lower pace, hampered by the absence of a functioning on-premise channel in 2020, seen as key to bringing the category closer to consumers,” states IWSR.
Sparkling wine volume consumption is anticipated to recover to 2019 levels by 2023. Premium-and-above Prosecco is expected to be least impacted by Covid and premium-and-above still wine is forecast to recover lost volumes by 2022.
Consumer Sentiment mixed, with comfort levels varied across markets
The IWSR’s study focusing on consumer behaviour shifts across key markets indicates that adult consumers’ drinking behaviours have remained steady in most markets, with increases driven by generally younger, urban and more affluent consumers who’re relatively comfortable in the new normal.
Consumers are not reporting much shift in their preferred categories though they do report spending more on whisky, Cognac, Champagne, wine, tequila, craft beer and gin.
“Covid-19 has had a polarising effect on the world economy and thereby the global beverage alcohol market,” says Mark Meek, “Large markets such as the US and China have survived the best while less developed regions and countries such as Africa, Mexico and Argentina have unfortunately suffered more.
“Very premium high-end spirits have also held up well while low-end and value products have seen gains in struggling markets as Covid-19 leads to downtrading. Some of the more standard middle-ground categories, blended Scotch for example, have lost share.”