Here’s what to expect
2020 has been a rough year for all industries. For businesses in the beverage alcohol industry that rely on on-premise sales, it’s been especially turbulent. While so many variables regarding COVID, vaccines, and the economy make it hard to make accurate predictions, here are some thoughts going into 2021.
The current state of on-premise sales amid COVID
Some reports are looking rather bleak as we wrap up 2020. From SipSource, a source for wine and spirits distributor depletion data:
“The situation in the on-premise is nothing short of catastrophic and continues to get worse every day…We anticipate on-premise share of total depletions to be around 9.5 percent for spirits and 7.5 percent for wine by the end of 2020 – nearly halving pre-COVID numbers.”
For scale, consider that just a few weeks in quarantine, on-premise sales for businesses dropped by about 24% compared to the year previously. That means roughly an average of $28,000 in lost revenue per business. Meanwhile, off-premise sales have done well. They’re up 5.3%.
For February 2020 (in other words, before the full effects of COVID hit) on-premise sales were 18.6% of total spirit depletions with 14% for wine. By September, those numbers were 12.1% and 9.2% respectively.
Restaurants in urban locations are underperforming compared to those in suburban locations. Restaurants in states that took aggressive lockdown actions, such as New York, are underperforming compared to operations in states that had fewer restrictions.
While a lot of uncertainty remains, nearly 3 in 5 consumers are positive about the outlook of next year for on-premise sales compared to now. The good news about COVID vaccines no doubt will encourage a more positive outlook in the months to come. When asked in a survey when they would visit a bar or restaurant on-premise again, 43% of respondents said they would when there is a vaccine/treatment available.
With a large percentage of on-premise consumers waiting for a vaccine or treatment before they’d return to an on-premise establishment, it’s safe to say there wouldn’t be a significant financial recovery in on-premise sales until the second quarter of 2021 at the earliest. Even if that means the second half of 2021 looks better, it’s going to be a while before we hit 2019 numbers.
Keep in mind that not everyone will return to their spending patterns from before the pandemic. Also, many on-premise businesses have closed during this year. Patterns in commuting and working have also changed drastically. These all mean big differences in how people live and spend money.
What is the current state of on-premise sales as we close out 2020?
Not great. One source expects things to be at about half pre-COVID numbers compared to the end of 2019.
What is the outlook for on-premise sales as we head into 2021?
Expect slow growth that probably won’t make much movement until the second quarter of the year.
Will on-premise sales make a full recovery in 2021, and if so when?
Most likely not, although some signs of growth will be there. Given the number of people who wouldn’t engage in on-premise drinking until there’s a vaccine, this would delay any growth until the second quarter of 2021 at the earliest. That plus fundamental changes in the ways people spend money, work, and live mean the market is going to be very different.