In the early months of 2020, COVID-19 began spreading across the world. Since then, the global pandemic has had a major effect on countries and industries, including the beverage alcohol industry. In this post, we will take a closer look at the various components of the industry, how it has been impacted by COVID-19 and potential opportunities that have been created by the pandemic.
What is the beverage alcohol industry?
First, it is essential to define the beverage alcohol industry. While the term is typically applied to businesses that produce alcohol, it can also include other players throughout the supply chain. Developers and producers work closely with farmers, trucking companies, capital goods manufacturing and packaging to create products. At the same time, marketers and sellers are essential to the industry. Retailers, from hotels and cafes to bars, wholesalers and point-of-sale operators, can also be included under the umbrella of the beverage alcohol industry.
All of these different components of the industry can be organized into five main categories:
- Raw material suppliers. This refers to the farmers who are responsible for growing all the ingredients, including barley, hops, sugar and grapes, that go into alcohol.
- Producers. Any company that manufactures alcohol through managing brewing, distilling and bottling is considered a producer.
- Distributors and wholesalers. These companies are responsible for connecting producers with vendors and typically take charge of transportation and storage.
- Vendors. This can include places where drinks are purchased and consumed, such as bars and restaurants, as well as off-premise vendors that sell drinks to consumers who then take them home to drink.
- Input suppliers and contractors. Any company that sells products and services to businesses in the previous categories is also considered a part of the industry. Examples include: selling distillation equipment and marketing, freight, and lobbying services.
With so many players contributing to the beverage alcohol industry, it is easy to see that even small shifts in the market can have major repercussions.
COVID-19 and the Beverage Alcohol Industry
As you might imagine, the COVID-19 pandemic has had a major impact on the industry. With bars and restaurants closed in cities across the world, sales took a hit. With more people staying home, there was an increase in retail sales although this shift in customer behavior has not been enough to make up for on-premise losses. While compared to other industries, the beverage alcohol industry has remained relatively resilient, total sales are expected to decline by 8% and experts don’t expect a full recovery until 2024. However, this isn’t true across the board. In both the US and Canada, alcohol consumption has remained steady and there could be a 2% increase in sales.
While the news hasn’t been ideal for everyone in the beverage alcohol industry, there are some ways to try and capitalize on changes in consumer behavior. Here are some trends that have created unique opportunities within the industry:
- Consumers are showing a preference for premium alcohols, which means that certain brands can snag a larger portion of the market.
- Younger demographics are negatively responding to globalization by purchasing local beverages and supporting their communities.
- Shopping local is also allowing consumers to support sustainability and purchase organic products.
- It has become clear that convenience is a consumer priority. Ready-to-drink (RTD) products, including hard seltzers have seen double digit growth.
- There has been a shift towards health and wellness, which has translated in higher demand for low and no-alcohol products. This niche market is ripe for new options from producers.
Consumers around the world have had to change their behavior in response to COVID-19. For the alcohol industry, the impact has been easy to track and measure. While some of the data can be disheartening, especially for bars and restaurants, there are also plenty of opportunities for the industry to take advantage of emerging trends and market the right products. With the right approach, the industry will be able to weather these challenges and come back strong.
FAQs
What is the beverage alcohol industry?
The beverage alcohol industry can be a broad term. Sometimes it is used to simply refer to those who produce alcohol, but many think of the beverage industry as including everyone across the supply chain.
Who are the key players in the beverage alcohol industry?
Key players include raw materials suppliers, producers, distributors and wholesalers, vendors and input suppliers and contractors.
How has COVID-19 impacted the beverage alcohol industry?
Globally, the industry is expected to see a 8% decline in sales. Bars and restaurants have been hardest hit while retail sales have increased. Only the US and Canada are on pace to see a 2% growth in 2020.
What opportunities has the pandemic presented in the beverage industry?
Consumer trends show that people want to purchase premium products, shop local products that are sustainable and organic, drink products with low to no alcohol and buy ready-to-drink products. This data can be used to support various product development and marketing efforts.
