Total global alcohol consumption, boosted by increases in beer and RTD products, grew by +0.1% in volume and +3.6% in value in 2019. But the near complete shutdown of bars and restaurants across the world for several months this year has set the category back dramatically.
While there has been an uptick in liquor retail and ecommerce, this has not been enough to offset the losses in the on-trade.
IWSR predicts this will lead to double-digit declines in 2020, which will take until 2024 to recover to 2019 pre-Covid-19 levels. In the US and UK, this is likely to take even longer.
Global travel retail, severely affected by widespread travel restrictions, will see a particularly harsh decline in 2020 but is expected to reach pre-crisis levels by 2024.
“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, CEO, IWSR Drinks Market Analysis.
“Even the downturn following the 2008 financial crisis was less severe than what we are seeing now. In many ways, 2019 was perhaps the last ‘normal’ year for the drinks industry.”
Any bright spots? Hard seltzers
Bright spots for the alcohol beverage industry include hard seltzers – trending strongly in the US and now spreading to the UK and other markets – and other RTD beverages. Beer, too, is expected to recover quicker than wine or spirits.
Ecommerce in the alcohol industry, which was already growing pre-Covid-19, is becoming even more important.
And it's worth noting that beverage alcohol has proved to be a relatively resilient category in previous crises, said Meek.
“As restrictions ease, long term recovery is expected to be slower than the initial bounce back – driving a ‘Nike Swoosh’ rebound shape,” he said.
“Like many other industries, it’s incredible how a few months of lockdown will result in several years of recovery, but beverage alcohol has proven to be remarkably resilient in previous downturns, and this should be no different. A strong focus on innovation, premiumisation, and new routes to market such as ecommerce, are all factors which will help contribute to the industry’s rebound and future growth.”
Beer: Beer is expected to reach 2019 volumes by 2024, rebounding better than wine and spirits. Increases in non-alcoholic beer (up 15.2% in volume in 2019 vs 2018) is helping maintain the category. “Though the beer cateogry has taken a hit in 2020, the outlook for continued growth on no-alcoholic beer remains positive, with a forecasted +8.1% CAGR 2019-2024”.
Wine: Sparkling wine is forecasted to rebound stronger than still wine by 2024, as consumers shift to year round consumption of these products and continue its 1.4% volume growth (against a backdrop of 1.1% volume decline for the overall wine category).
Spirits: Whisky and gin are likely to rebound fastest to pre-Covid-19 levels, although some European markets are starting to show signs of ‘gin fatigue’ (global gin was up 6.1% in 2019 compared to 9.6% in 2018). Vodka volumes are not expected to recover to 2019 levels until after 2024.
RTD and hard seltzers: For the third consecutive year, RTD products were the fastest growing beverage alcohol category in 2019, up 19.6% in volume and 18.8% in value. In the US, hard seltzers grew by over 200% in volume.