Drinks industry performs better than expected in 2020: IWSR analysis

By Rachel Arthur

- Last updated on GMT


Related tags Alcohol

While total beverage alcohol is expected to see an 8% decline in 2020, that’s a lot less than the double-digit losses predicted earlier this year. But the long term recovery is still expected to be slow.

Ready-to-drink alcohol and low and no beverages are bright spots for the alcohol category: particularly with RTDs seeing volume growth of 43% this year.

Meanwhile, the US and China – key growth drivers for the global beverage alcohol market – are looking more promising than anticipated.

Positive news on an impending COVID-19 vaccine (leading developers Pfizer and BioNTech reported 90% efficacy for their vaccine​ earlier this week) has also led to more optimism in the industry.

'A dynamic - albeit challenging - new environment for alcohol'

The analysis is based on 19 focus markets: Australia, Brazil, Canada, China, Colombia, France, Germany, India, Italy, Japan, Mexico, Poland, Russia, South Africa, Spain, Thailand, Turkey, UK, US, and the global travel retail channel.

Mark Meek, CEO of IWSR Drinks Market Analysis, said: “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. Excluding national spirits such as baijiu and shochu, total beverage alcohol in the 19 focus countries will recover to 2019 levels by 2024. We may see that recover even faster now, given the recent news on encouraging vaccine trials.

“The rise of ecommerce 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.”

The clear winner of 2020, according to IWSR, is ecommerce. The value of ecommerce in 10 core countries (Australia, Brazil, China, France, Germany, Italy, Japan, Spain, UK, US) is forecast to grow by more than 40% in 2020, to reach $17bn, with further growth expected to boost the category to $40bn by 2024.

US and China maintain growth

A key issue to note is that global markets have been impacted very differently by COVID-19.

“Covid-19 has had a polarising effect on the world economy and thereby the global beverage alcohol market,” ​says 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.”

The US and China are key growth drivers for global beverage alcohol: combined, they account for one third of global volume consumption and more than 40% of global value. This means their fortunes in 2020 is a good marker for the global industry.

The US is expected to see volume growth in beverage alcohol this year: at around 2%. “The 2020 volume consumption increase in the US is in line with 2019 trends, indicating that Covid-19 has not impacted overall consumer demand,”​ says IWSR. “However, gains in retail and ecommerce contrast with heavy losses in the more profitable on-premise channel in the US.”

China, meanwhile, has seen almost all everyday activities resumed. This leads the IWSR to suggest that the international spirits market in China will see full recovery by next year.

Other markets

Brazil: has proved ‘remarkably resilient through 2020, and is expected to recover to pre-pandemic volume consumption levels in 2021.’ It has seen a decline in beer and cachaca categories – ones that are key for the country – but both are expected to bounce back quickly. Wine is in growth; and RTDs are starting to make their mark.

Japan: another market that has proved resilient and is expected to pre-pandemic volume consumption levels next year.

India: Will report one of the larger volume losses in beverage alcohol this year

South Africa: With bans on alcohol in effect for considerable time periods in 2020, this is another market that will be hard hit.

Mexico: Another market that will see volumes hard hit, given a ban on beer for a considerable period.

Global travel retail: unsurprisingly, this market has been hard hit with volumes predicted to fall 68% in 2020.

RTDs set to overtake spirits by end of 2020 in the US

The RTD alcohol sector is the only one expected to see volume growth this year: but this growth is impressive with volumes expected to rise 43%.  Its success is largely being driven by strong performance in the US, which is 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 lockdowns. RTDs are expected to post volume gains of 21.8% CAGR 2019-2024, 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. Total volume consumption of international spirits (which excludes national spirits such as shochu and baijiu), is projected to be down by -7.2% in 2020, however is set to recover in full by 2022."

Low-and-no alcohol beer is another bright spot for the category, as moderation and wellness trends continue to resonate with consumers. Low-and-no alcohol beer remains resilient through to 2024, with a volume CAGR of 5.9% (2019 – 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. 

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