COVID-19 Impact on Alcoholic Beverage in the Food and Beverage Industry

COVID-19 Impact on Alcoholic Beverage in the Food and Beverage Industry

  • Food & Beverage
  • Aug 07, 2020

COVID-19 Impact on Alcoholic Beverage in the Food and Beverage Industry

In food and beverages industry the alcohol sector play a major role and are considered as a second largest source in terms of revenue generation in beverage sector. The COVID pandemic have disrupted the liquor sale initially due to the lockdown of restaurants, food service providers, liquor shops, hotels and bars. The year on year volume of the alcohol beverages have shown tremendous increment in their consumption. For instance, according to Wine & Spirit Education Trust total volume growth of alcoholic beverages is considered to be 23,963,469 thousand Liters worldwide.

COVID-19 Impact on Alcoholic Beverage in the Food and Beverage Industry

The largest sources of revenue generation of alcoholic beverages are service sectors such as restaurants, bars, clubs and many others. The revenue generation from the restaurants sector for alcohol comprises around 20.0% to the total turnover of alcoholic beverages. As the demand for the craft beer, wine, and other sprit drinks is high, it has been observed that the brewing industry has always carried two-digit growth since the past time.

But, due to COVID-19, there has been a worldwide shutdown of the local breweries shops, supermarkets, taprooms that have largely affected the supply of the breweries or alcohols in the local market. For instance, Brewers Association has organized a survey and found that in the United States among 900 brewers; approximately 90.0% have stated that there is a negative impact on the alcoholic beverages due to COVID-19 via on-site sales, distributor orders, and others. They have also confirmed that around 30.0% of brewing alcohol productions has stopped and 61.0% of the productions have been slowed down.

The shutdown of the local shops and pubs has generated opportunities for the online service providers, for instance in Spain the online sales of liquor in March 2020 were approximately 30% on average whereas the number has been increased to an average 50% in April 2020. Which have led to the growth in the off-premises purchase in Spain considering the growth of beer up to 45.6%, wine 44.3%, and sprits 19.5% till April 25th 2020.

The lockdown of the pandemic has majorly impacted the size of the package of the liquors and has made commitments to the manufacturers in the larger size production of beer cans and wine. Various researches have been implemented and the results till April end have been considered in the percentage sales growth of larger packages.

FIGURE: % CHANGE IN SALES OF LARGER BEER PACKAGES IN APRIL 2020

COVID-19 Impact on Alcoholic Beverage in the Food and Beverage Industry

Due to the larger shutdown craft brewers, a major sector in the beer market has been impacted a lot and their sales have been suffered in the United States Majorly. For instance.

In 2017, Brewers Association (BA) Industry trade group has stated that the sales of craft beer in terms of value or the volume will continue to hover in the mid-single-digit at various stores such as convenience stores and groceries chain. However, the COVID-19 pandemic has led to the declination in the consumption and the production of craft beer especially from the local and regional small breweries due to shut down and social distancing actions.

Online Sales as Opportunities:

As the pandemic has affected badly, this has led to the worldwide lockdown of the restaurants, pubs, drinking, and dining and because of this the supply chain of the brewers through off-trade retailing channels has reduced completely during the first quarter of 2020. So, at this point of time, the online service provider of liquors found an opportunity to deliver the liquors direct to the consumers at their doorsteps. The home delivery option for smaller brewers could be challenging as this is not a usual method of delivery but major companies are getting tied up with the e-commerce sector which is helping them to generate the revenue.

A number of small brewers in the Swiss countries have been taking orders for alcohol from the usual sites and delivering it to home. For instance, Bier Factory showcasing small breweries and helping them to deliver their alcohol products such as beer throughout the country.

Home delivery should not be measure for a temporary basis as one out of five customers found it is convenient for opting for home delivery options and hence it remains an important channel for the distribution or retailing in the alcohol industry. Alcohol is the fastest-growing via e-commerce department in the non-store based retailing among consumer packaged goods (CPG), and the weekly growth has continued.

FIGURE: % CHANGE OF THE U.S. ALCOHOL SALES IN THE STORESFIGURE: % CHANGE OF THE U.S. ALCOHOL SALES OFF-STORE

FIGURE: % CHANGE OF THE U.S. ALCOHOL SALES OFF-STOREFIGURE: % CHANGE OF THE U.S. ALCOHOL SALES OFF-STORE

Online sales represent an opportunity for the on-premise channel too. The last few weeks have seen retailers and operators become more sophisticated in their approach to restaurant takeout and delivery options.

ALCOHOLIC BEVERAGES SECTOR: PERSPECTIVE AND INITIATIVES

All over the world, due to coronavirus, people have been asked to stay at home and follow social-distancing guidelines. This has led the restaurants and bars to sit empty. Due to which consumption of alcohol declined at the start of 2020. But the demand is still high from consumer end which has to lead the alcoholic product manufacturer to take new initiatives such as adopting e-commerce, partnership, strict measures adoption, and many others to fulfill the consumer demand at their doorsteps.

For instance,

“Heineken and Tiger Beer have taken measures to revise marketing strategies and double-down on product innovation after seeing online sales surge after the COVID-19 pandemic outbreak hit on-trade consumption.”

                - Heineken and Tiger Beer

Wines of Great Britain (WineGB), a national organization of grape growers and winemakers, have announced new initiatives to support producers during the crisis created by COVID-19.

“We’ve been hit pretty hard by COVID-19 and the lockdown, although as part of the agricultural sector we are permitted to continue some of our operations compared to some other industries.

“Many have lost significant business through the closure of cellar doors and tastings and of course the shutting down of the hospitality industry which is a major source of income for some. However, we are greatly encouraged to see the increase in internet sales over the last week which is helping many.”

                  - Simon Robinson, WineGB Chairman

Global spirits company Bacardi has announced that it will be producing more than 1.1 million liters of alcohol, essential for making hand sanitizers to support the efforts of reducing the spread of coronavirus COVID-19.

“All our brands and partners involved in this initiative will help people most in need benefit from the supply of these hand sanitizers. Our goal is to make a very real difference in the fight against COVID-19.”

                    -Bacardi

New Alcohol Beverage App Launches to Improve Social Distancing Nationwide During COVID-19

A startup has launched a secure, Web-based application that helps off premise alcohol beverage retailers, including liquor stores and grocery departments, improve social distancing related to the COVID-19 pandemic. BeverageX, based in Denver, has partnered with Big Bear Wine & Liquor in Southern, Colorado for the service.

“By minimizing in-store business activities during these challenging times, we’re not only better protecting our employees and distribution partners from COVID-19, but also every Big Bear shopper who walks the aisles of our stores,”

                  - Ryan Seybold, Big Bear Co-Owner

 “Molson Coors Beverage Company has unveiled initiatives in order to support and protect its employees amid the coronavirus (COVID-19) outbreak.

As part of its initiatives, the company has indefinitely extended its work from home recommendation for employees and contractors involved in non-business-critical activities in North America.

It has also created a new voluntary paid leave program for the whole of next month and can be availed by employees who are required to work on-site.”

“These are challenging times for the world and our company, and our priority is to ensure the safety of our people and the stability of our business.”

                 - Molson Coors president and CEO Gavin Hattersley

CONCLUSION

The COVID-19 has affected the worldwide population and also the economy. A various decision such as global lockdowns and extreme public safety measures taken by the governing authorities, public health departments, and hospital fraternity together has led into the economy go-slow. The major factor that has slowed down everything is lockdown due to which demand and the supply chain have badly impacted. In the alcoholic beverages sector such as wine, beer, whiskey, rum, and others, demand is rising as it is highly consumed among consumers. As the lockdown led to the shut of the services sector, there was declination in the revenue of the alcohol industry during the start of 2020. The worldwide lockdown has led to a gap in demand and supply because in alcoholic sector demand is much higher among consumers but the supply chain is not able to fulfill the demand. To cater the problem and to provide the products to the consumers, manufacturers have taken new initiatives such as getting tie-up with e-commerce. With e-commerce consumers are feeling more convenient for ordering alcoholic beverages. Another fact seems that the black market for this industry was seen increasing due to the gap in supply. At present time, the demand is fulfilled by online premises and somehow companies can generate revenue, but once the pandemic is under control, the alcoholic sector will be able to generate revenue from onsite and offsite premises both. With this, the alcoholic beverages sector will grow with a strong growth rate in the future.

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