Oct 15, 2020
COVID-19 Impact on RTD Beverages in the Food and Beverage Industry
- Food & Beverage
- Sep 28, 2020
COVID-19 Impact on RTD Beverages in the Food and Beverage Industry
The COVID-19 pandemic is reshaping everything around the globe. It has impacted almost every industry around globe in positive or negative ways. The impact of the COVID-19 pandemic on global economic conditions has impacted and may continue to impact the proper functioning of financial and capital markets, as well as foreign currency exchange rates, commodity and energy prices and interest rates.
The food & beverages industry has also got affected due to the COVID-19 pandemic situation. As the COVID-19 pandemic turning lives upside down, the trends such as RTD beverages are accelerating in the beverages industry. The beverage companies are taking exciting initiatives such as RTD beverages which are easy to consume and available. RTD coffee continues to perform well in China which is growing in double digits year-over-year in 2019. Also many Chinese dairy companies have also entered the RTD coffee sector with their own drinks. With the on-trade shut down in many major markets and the movement of people severely restricted, e-commerce sales have grown exponentially in the past few weeks. Sales of ready-to-drink cocktails in the U.S. off-premise have been soaring in the past few weeks.
Many companies have shut down or working well below full capacity. These companies may struggle to supply markets such as China as they emerge from the worst of the crisis. This situation has created a potential opportunity for local players, as there will be real pressure on markets and it may push people back to local suppliers, but it will likely be a short-term change. The retail sales of ready-to-drink coffee have doubled in the past five years. According to Beverage Marketing Corp (BMC), the sale has risen to $4.25 billion in 2018. Most of the grocery stores and convenience stores have selections that include Monster Energy Coffee, Starbucks, Coke, Forto Organic Energy Coffee, and Califa nitro latte with oats milk among others.
“In mid-March, North America-based online beverage alcohol platform Drizly reported business growing at three-and-a-half times the rate of earlier in 2020, with wine and spirits growing twice as fast as beer.”
The pandemic could also accelerate the development of e-commerce in markets where it has been in its infancy until now.
“According to IWSR, Ready-to-drink (RTD) products in 2019 were the fastest growing beverage alcohol category, up +19.6% in volume and +18.8% in value.”
As the effects of COVID-19 beverages that support immunity, sleep and stress reduction will likely remain strong throughout the year. The low alcohol content, low sugar and natural ingredients attract health-conscious consumers and also the price of RTD cocktails is half the cost of on-trade servings. The drinks enhanced with functional ingredients such as turmeric, blue majik and coconut water, kombucha are more demanding due to their health benefits.
Many companies are planning for the expansion or new product developments in the ready-to-drink beverages.
“In July 2020, Quintessential Brands Group has launched The Opihr Gin RTD brand which is available in two flavours such as a dash of ginger and twist of orange.”
“In June 2020, Calm Drinks has launched an immune booster CBD beverage, Calm water immunity +CBD.”
“In May 2020, Aquarelle, Molson Coors Beverage Co.’s line of vodka-based canned drinks has launched across Canada with a multi-million-dollar marketing blitz.”
“In June 2020, The Coca-Cola Company and Costa Coffee have today unveiled Costa Coffee Ready-to-Drink (RTD), a chilled, canned coffee brewed with Costa Coffee beans, designed for consumers looking for a genuine coffee hit.”
COVID-19 outbreak has affected every sector in the market which also includes beverages industry. The industry has affected as the supply and demand are badly disrupted. Many companies are losing their key revenue sources as food services outlets are closed or decreased sales. Many companies have closed their production facilities or lowered the workforce to mitigate potential risks from COVID-19.
This has created an opportunity for local players because there is a huge pressure on market due to increasing demand for Ready-To-Drink beverages. Some companies are facing lack of capital so for that they need to sell their equipment’s to raise funds.
“The company is funding vital support including protective gear for healthcare workers, testing and screening services, and is already in the process of distributing more than 50 million nutritious meals to at-risk populations by supporting food banks and other partners around the world. PepsiCo is leveraging its own distribution expertise and investing heavily in partnerships to increase access to nutrition in response to worldwide COVID-19-related school closures that have left 1.71 billion students out of school and many deprived of a key source of nutrition.”
- Ramon Laguarta, Chairman & CEO PepsiCo.
” We are also focused on providing for our communities by supporting frontline healthcare workers who are fighting this crisis day in and day out head on. We don’t make masks or medical equipment at our Company, but we do make beverages and, through our new Fuelling The Frontline program, we are donating Keurig brewers, coffee and other beverages to hospitals in need, as our way to say thank you for the unwavering commitment and courage of the entire medical community.”
- Robert Gamgort, Chairman & CEO of Keurig Dr Pepper Inc.
“We are focusing our giving during the Coronavirus outbreak on organizations with the on-the-ground resources and expertise to help slow the spread and protect both front-line healthcare providers and impacted communities, we are proud to support the great work of our longstanding partners at the Red Cross and Red Crescent during such a critical time.”
- Helen Smith Price, president, The Coca-Cola Foundation.
“The COVID-19 pandemic is a global problem and consequently we are offering help on the ground everywhere, drawing on our extensive presence and experience in 187 countries.”
- Mark Schneider, Chief Executive Officer, Nestlé S.A.
“Starbucks is committed to caring for the health and well-being of our partners and customers and playing a constructive role in supporting local health officials and government leaders.”
- Kevin Johnson, Starbucks president and CEO.
“Financial support of € 300M, financed by Danone's cash flow, to the 15,000 small businesses in our global ecosystem (farmers, suppliers, service providers), to the entrepreneurs of Danone Manifesto Ventures’ portfolio, and to the communities of Danone Ecosystem.”
“As the number of people infected by the COVID-19 continues to rise around the world, our efforts to keep our business with ensuring the safety of Group employees worldwide of approximately 30,000 employees and their families, which has been our top priority in this difficult time. Meanwhile, our many Group companies and employees around the world, although in a difficult time such as none of us have ever before experienced, are continuing to coordinate closely with customers and business partners and provide support to their local communities while working to fulfil our responsibilities as a supplier.”
- Akiyoshi Koji, President and Representative Director, CEO, Asahi Group Holdings, Ltd.
“From the beginning of the COVID-19 pandemic, the Company’s top priority has been the health, safety and well-being of its employees. Early in March 2020, the Company implemented global travel restrictions and work-from-home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. The Company is incredibly proud of the teamwork exhibited by its employees, co-packers and bottlers/distributors around the world who are ensuring the integrity of its supply chain.”
- Monster Beverage.
The demand for RTD beverages is increased due to the COVID-19 outbreak. The factors which influence the demand are the beverages which support immunity, because people are becoming health-conscious. Also the regulatory norm such of social distancing across the nations is impacting the growth of the market as people doesn’t prefer going out of the home. As the demand is more for the RTD beverages but companies are not able to fulfil those demands due to supply chain disruption throughout the world. Many companies have shut down their manufacturing plants because of the lockdown or working below full capacity. But due to the supply chain disruption, many local players of the particular region have got an opportunity to dominate the market.
Many companies are launching new RTD products in the market because the demand is increasing for RTD beverages during the COVID-19 outbreak. For instance, In July 2020, Quintessential Brands Group has launched The Opihr Gin RTD brand which is available in two flavours such as a dash of ginger and twist of orange.” This is indicating the demand for nutritional RTDs and company is expanding its portfolio towards the nutrition by various flavours of the RTD beverages. Also companies such as The Coca-Cola Company, Calm drinks, Starbucks are introducing new RTD beverages in the market. Government initiatives in various countries are increasing demand for RTD beverages.
Thus, the impact of COVID-19 is positive for the RTD beverages across the world, compared to other beverages segments, and hence the growth is increasing for the industry during coming years.