Covid recovery a marathon not a sprint

The global alcoholic drinks industry will take at least four years to return to the level of volume sales seen before the Covid-19 pandemic, according to IWSR.

Year-on-year sales were broadly at in 2019, as declines in wine and spirits were off set by gains in beer and RTDs. IWSR analysts warn there will be a steep drop in 2020 as a result of the coronavirus crisis, and they believe the industry will not fully recover until 2021. It likened the decline and subsequent rally to a “Nike swoosh”.

IWSR chief executive Mark Meek said the downturn would be more severe this year than during the 2008 financial crisis. “We expect declines of almost 12% in 2020,” he said. “There will be some recovery at the end of 2020 and through to 2021. At its most simple, our view is that beverage alcohol consumption is going to take at least five years to get back to where it was in 2019.”

The  firm believes that the US and Africa are the best-placed regions to weather the storm, and that Europe, South America and Asia Paci c will be hit the hardest. “We see almost no effect from the virus in the US and Africa in 2020 and beyond, or minimal,” said Meek. He pointed to the strength of the burgeoning hard seltzers category and a successful pivot towards o -trade and ecommerce as reasons for the US trade to be optimistic.

“Although we forecast some declines across the five-year period, it’s holding up pretty well,” he said “Many brand owners are reporting to us that the strength of off-premise sales is negating and outweighing the downturns in on-premise.” IWSR notes that Africa has the youngest demographic in the world and a growing middle class, so it believes the continent will be less severely impacted.

“Europe had declining consumption anyway in many key categories, and there has been quite a severe impact of the virus on the on-trade and travel,” said Meek. “South America will see steep declines because of the whole uncertainty around the virus, particularly in markets like Brazil. We see growth disappearing in the short term, with sharp declines in those three markets in 2020.”

IWSR does forecast some pockets of growth amid the doom and gloom. “RTDs is a small category, and it accounts for less than 5% of the volumes of major brand owners,” said Meek. “Having said that, RTDs has grown phenomenally over the past five years, particularly in the past year or so, driven almost entirely by the huge success of hard seltzers in the US. The growth rates have been incredible. 

“We don’t expect that growth rate to continue, but there is every reason to believe strong growth will continue. There are other innovations around RTDs – hard teas, hard kombuchas in the US – that are really driving this category. Outside the US, there is very strong growth in Japan, which is a big RTD market. Even during and a er the crisis, we see a growing number of the population drinking increasing amounts of RTDs, particularly at home.