Alcohol e-commerce has grown in almost all markets this year but some have experienced more rapid increases than others.
New research from IWSR Drinks Market Analysis forecasts that the value of alcohol e-commerce will increase by 42% this year across 10 core markets to reach $24 billion.
In 2019 alcohol e-commerce value in those 10 markets grew by just 11%.
The 10 core markets in IWSR’s comprehensive new Global E-commerce Strategic Study are Australia, Brazil, China, France, Germany, Italy, Japan, Spain, the UK, and the US. Collectively they represent over 90% of the total value of alcohol e-commerce.
The report also examines an additional 10 “markets to watch” (Mexico, Colombia, Argentina, Netherlands, Israel, Nigeria, Kenya, South Africa, Singapore, and the Philippines.) Across these 20 markets IWSR expects the total value of alcohol e-commerce to exceed $40 billion by 2024.
“Consumers’ increasing proclivity for online purchasing has been driven by necessity in recent months” says Guy Wolfe, Strategic Insights Manager at IWSR, “but these purchasing behaviours are here to stay. As brand owners increasingly invest in the channel, markets must be assessed on their own merits with a bespoke strategy developed. This is especially important as government regulations for alcohol e-commerce may evolve as the channel continues to grow.
“The forecast size and growth of e-commerce means it can no longer be viewed as merely an interesting niche. Online is now a market in its own right and one that the IWSR forecasts to equal the Indian beverage alcohol market in value by 2024. The channel should therefore be given an equivalent level of focus and be fully integrated into route-to-market strategies.”
China is currently the largest online alcohol market in the world. However its growth rate (23% value growth 2019-2020) has been slower than that of the US, the UK, Australia and Brazil.
According to IWSR this is because alcohol e-commerce is already reasonably well-developed in China, allowing less room for growth. IWSR consumer research findings show that most (46%) Chinese consumers who buy alcohol online have done so for several years now. The market is also heavily reliant on restaurants and bars, where about half of China’s alcoholic drinks are sold.
After witnessing value growth of over 80% in 2019-2020, the US is poised to overtake China to become the largest alcohol e-commerce market in the world by the end of 2021. Between 2019 and 2024 total alcohol e-commerce value in the US will grow six-fold from half that of China to nearly double.
Growth, however, is coming from a low base: in 2019, e-commerce represented just 1% of off-trade retail alcohol volume in the US. By 2024, IWSR estimates that e-commerce will account for 7% of total off-trade beverage alcohol volume in the country compared to 6% in China.
“This year, there has been a huge increase in awareness of alcohol e-commerce among US consumers, while some states have relaxed legislation to facilitate online sales and home deliveries,” notes Guy Wolfe, “IWSR consumer research data shows that in the US 44% of alcohol e-shoppers only started buying alcohol online in 2020 compared to 19% in 2019. Growth is largely being driven by the omnichannel segment as supermarkets and traditional retailers seek to rapidly enhance their online offering. On-demand players are also expected to gain significant share.”
Across the 10 core countries, marketplaces currently account for nearly half of total online alcohol sales by value but the omnichannel and on-demand channels are predicted to gain share. The value of the Direct-To-Consumer channel will also grow by almost $3 billion between 2019 and 2024 at a CAGR value of 24%.
RTDs Set to drive e-commerce value growth through to 2024
Though wine is the dominant e-commerce category in most countries, across the 10 core markets e-commerce for Ready-To-Drink products is predicted to represent 10% of total alcohol e-commerce value by 2024 – up from 2% in 2019.
The US is the main market driving RTD category growth and RTD products are set to represent 20% of US alcohol e-commerce value by 2024 compared to 5% in 2019. This would make RTDs a bigger online business than beer in the US.
“Spurred by the trend for the category in the market as a whole, the expansion of the US omnichannel and the prevalence of younger legal drinking-age consumers in e-commerce, online sales of RTDs are expected to soar in the coming years,” believes Guy Wolfe.
Outside RTDs, agave-based spirits (tequila and mezcal) and US whiskey are also seeing growth across e-commerce.
Mexico, Argentina, South Africa and the Netherlands: markets to watch
Among the “markets to watch” the Netherlands is currently the largest for online alcohol sales. But countries such as Mexico, Argentina and South Africa are also expected to post high value growth this year. Over the next five years Mexico is projected to generate the greatest incremental value in online sales at over 60% CAGR 2019 to 2024.
In these 10 “markets to watch,” beer is expected to grow the fastest overall but trends vary by market. In Mexico, for instance, e-commerce wine is forecast to increase by more than 80% CAGR 2019-2024 while spirits are on track for 50% online growth in the Philippines.