IWSR has predicted five trends likely to shape the global beverage alcohol market this year:
1- Is at-home consumption the new drinking occasion?
Covid-19 Lockdowns and the subsequent rise of the at-home drinking occasion has forced many brand-owners to shift channel investment into e-commerce by necessity, according to IWSR’s data. The value of the e-commerce market in 10 core countries grew by an estimated 40% last year. Consumers have now become increasingly comfortable with purchasing alcohol online: IWSR data shows that in the US, for example, 44% of alcohol e-shoppers only started buying alcohol online in 2020 compared to 19% in 2019.
“As we move into 2021 channel shifts will continue to evolve,” states IWSR, “e-commerce will remain a critical investment and going forward, will require a nuanced strategy that’s coordinated globally but deployed locally, taking local laws into consideration.
“As at-home consumption increasingly becomes an occasion in itself, brand-owners will need to re-evaluate their balance of investments between bricks & mortar and on-premise channel splits.”
This tactic featured prominently in Diageo’s recent H1 Interim Results.
Globally speaking IWSR adds that, “Plans will need to be adapted to take into account a smaller on-trade sector, which is especially important for product activation strategies”.
2- How will premiumisation strategies evolve?
IWSR believes that brand-owners will need to take a more nuanced approach to premiumisation.
“The pandemic has had a nuanced impact on premiumisation trends and going into 2021, brand owners will need to apply a more considered approach to premiumisation strategies, dependent on country, channel, category and demographic combinations,” it states, “We will likely see three price trends moving forward:
- Premiumisation continues: despite the impact of Covid-19 some consumers, especially those in developed markets, would have benefitted financially from Lockdowns where spend on commuting, social activities or holidays would have decreased. Premiumisation trends will continue in some categories/markets such as for agave-based spirits in the US and blended Scotch in the UK.
- Return to tried-and-trusted: some consumers will return to well-known brands and avoid experimentation or high-level spending. In some cases this may be a result of changes in the bricks-and-mortar experience, where Social Distancing restrictions or personal preferences may make consumers less inclined to browse in shop aisles. This pricing trend will likely be apparent in categories such as rum in France and still wine in Japan.
- Democratisation or downtrading: Countries hard-hit by the economic impact of Covid-19 will likely see more consumers opting to down-trade as they focus on value-for-money options. Limited furlough schemes or a higher level of personal taxation may create longer-term income pressures for consumers in both less-developed as well as developed countries.
3- How will a shifting global political landscape impact the beverage alcohol market?
Changes in leadership, diplomatic relationships and legislation come into focus here, believes IWSR which points out:
- new leadership in the US brings former policies of protectionism into focus and is raising key questions such as whether the new administration will review beverage alcohol import duties or how tariffs imposed by the US may differ between the UK and the EU
- changes in global relationships with China and shifts in trade policies such as those on Australian wine exports will continue to impact the global industry landscape
- post-Brexit discussions will be key for arrangements within Europe. Industry stakeholders will be paying close attention, for example, to developments that could impact trade flows as well as future EU laws on alcohol ingredients labelling which would impact the Scotch industry in particular
- governments may review legislation on beverage alcohol e-commerce – for instance, a liberalisation of currently restrictive e-commerce regulations in large markets such as Russia or India could have a significant impact on route-to-market.
4- How will brands differentiate in an increasingly crowded RTD market?
The trend for convenience has fuelled the evolution of the global Ready-To-Drink category which includes hard seltzers, flavoured alcohol beverages and pre-mixed cocktails. This is under rapid transformation across leading markets, with volume growth outpacing that of other beverage alcohol categories globally, states the IWSR.
“While there are distinct differences across all countries, it’s clear that hard seltzers or seltzer-like products are growing in popularity as consumers look for sessionable lower-ABV options. The portability and single-serve nature of RTDs has proven a key factor of growth, especially during Covid-19. Convenience is a key tenet of go-to-market & channel distribution strategies, especially in countries such as Japan, the US, Mexico and Brazil.
“Between 2019 and 2020, consumers in 10 key RTD markets gained close to two thousand new RTD products. Throughout 2021 category evolution will be driven by factors such as innovation in alcohol bases, exploration of new and increasingly local flavours and premium product offerings. RTD brands that are seeking cross-border development will need to pay close attention to taxation rules for varying alcohol bases which differ between countries.”
5- Has Covid-19 prompted long-term changes in consumer attitudes towards the moderation trend?
No- and Low-alcohol offerings have become aspirational and 2020 cemented the NoLo category as a mainstay in consumers’ drinking repertoire with Covid-19 prompting key changes in consumer attitudes. These were driven by the at-home occasion and an increased awareness of health and wellness. IWSR research shows that across key NoLo markets relaxing at home represents the category’s key drinking occasion.
These consumer attitudes are set to continue into 2021, believes IWSR.
Where NoLo offerings were once almost stigmatised, the category has now become aspirational, with consumers increasingly willing to pay a premium for NoLo products.
IWSR data shows that while most markets are expecting to see elements of growth within the NoLo segment, key growth markets include the US, Germany and Spain, largely driven by the expansion of NoLo Beers and Wines. The US and UK will see some of the most rapid growth within the NoLo Spirits category.