Despite all the reports about consumers stocking up on alcohol, the global liquor industry doesn’t expect to rebound to 2019 consumption rates for at least another few years.
A new report from research firm IWSR Drinks Market Analysis is predicting double-digit declines in 2020 for total global alcohol consumption, a far cry from a 0.1% uptick in volume and 3.6% growth in value in 2019. And the report says it will take until 2024 to bounce back globally to pre-COVID-19 results in 2019—although the agency warns that beverage alcohol volume levels in the U.S. and U.K. won’t recover until after 2024.
And no, notwithstanding the mad rush for getting your drinks delivered, all of the losses during the shutdown of bars and restaurants over the past few months have not been offset by upticks in liquor retail and e-commerce. While it varies by market, approximately a third of U.S. dollar sales for the top 10 alcoholic beverage categories (from beer to wine to various spirits) stems from bars alone.
Mark Meek, CEO of IWSR Drinks Market Analysis, tells Fortune that recovery could take up to five years because drivers for beverage alcohol consumption will be subdued over the medium to long term.
Among those growth drivers were the trade segment (restaurants, bars, nightclubs, etc.), consumption at outdoor events (concerts, festivals, sporting events), international travel, lower tariffs between countries, robust supply chains, and a higher rate of disposable income within the younger legal drinking age consumer segments. All of these channels, Meek says, will be or are already under pressure due to COVID, hence the cautious forecasts.
“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 aftereffect to the global drinks industry than anything we’ve experienced before,” says Meek. “Even the downturn following the 2008 financial crisis was less severe than what we are seeing now.”
Hospitality and travel-related channels, severely affected by international travel restrictions, will see a particularly harsh decline in 2020, but those sectors are expected to recover to pre-pandemic levels within the next four years.
Direct-to-consumer sales are going to become a critical lifeline for liquor producers. Across 16 liquor verticals tracked by IWSR, all alcohol beverage categories grew in value faster online versus all other distribution channels in 2019. That trajectory is expected to continue. Beer e-commerce value grew by more than 14%, wine grew by 18%, and spirits grew by 15% last year. Overall, e-commerce channels—worth $21 billion in 2019—are pegged at twice the potential value compared to global travel retail channels (hotels, restaurants catering primarily to tourists, and other hospitality venues) as border restrictions are upheld indefinitely. Up until now, global travel retail partners accounted for 5% to 10% of sales for large spirits brand owners.
Beer is taking a particularly hard hit during the pandemic. Craft beer producers, in particular, are hurting extra without the resources of a global conglomerate and a shorter timeline for the product before it goes bad. Countless craft breweries around the world have been seen dumping gallons upon gallons of beer as higher-priced taprooms and beer pubs remain closed.
But analysts expect beer to rebound better than both wine and spirits, with a compound annual growth rate of 8.1% from 2019 to 2024.
“The aftershocks of COVID should see bigger brand owners increasing their share of the market, with the smaller craft producers either getting acquired by bigger brand owners or going out of business altogether due to lack of financial liquidity and access to markets [and] supply chains,” Meek says.
Wine consumption rates have already been particularly shaky, as millennials have shied away from higher-priced bottles, especially, compared with previous generations. Last year, wine consumption in the U.S. declined for the first time in 25 years.
And yet the big surprise might have some Champagne producers popping bottles sooner rather than later. Sparkling wines were highlighted with stronger rebound expectations than still wine, as analysts observe consumers are increasingly adopting a year-round proclivity for bubbles, rather than saving them for special occasions.
Spirits are more of a mixed bag. Whiskey and gin will likely rebound fastest to pre-COVID-19 levels by 2024, but vodka volumes are not expected to match 2019 results until later.
The two sectors already poised for the most growth within the next few years had nowhere to go but up: hard seltzer and nonalcoholic spirits, the latter of which IWSR didn’t even start tracking until 2018. Both categories posted double-digit growth in 2019 and are not expected to see drops in 2020, but they also each represent fractions of the overall spirits market. It’s also worth noting that both nonalcoholic cocktails and canned hard seltzer drinks are more likely consumed at home—or at least away from bars or restaurants—than any of the other beverage categories, so they don’t suffer the same way because of the shutdown.
That said, volume for hard seltzers and the rest of the ready-to-drink category is expected to grow with a compound annual growth rate of 7.2% from 2019 to 2024.