COVID-19 exerts deep impact on global drinks industry, full recovery not before 2024?

According to the latest IWSR Drinks Market Analysis, the ongoing coronavirus pandemic will have a “deeper and more long-lasting impact on the global drinks industry than the 2008 financial crash”. IWSR believes the impact will be this time bigger on small craft distillers which “rely on cellar door and on-trade sales, both of which have been negatively impacted by the pandemic”. To conclude, IWSR Drinks Market Analysis “forecasts total global alcohol consumption will experience double-digit declines in 2020 and will take until at least 2024 to reach pre-crisis levels”.

Still, 3 months after the beginning of COVID lockdowns in Europe, readers may come across the occasional sensational headline giving the impression that Europeans are drinking largely over the limits. However, in most such cases, articles are simply mixing up consumption and sales figures, and fail to take stockpiling effects into account which happened especially at the beginning of the crisis.  

The current economic reality is quite different! Whether in volume or value, our sector and those selling our products in travel retail and hospitality outlets are registering significant losses which cannot be compensated by e-commerce or off-trade sales. In Spain, spirits sales seem to have fallen by -20% (volume). An even sharper drop has been observed for Ireland where alcohol sales fell by 35.6% (4.9 million fewer 35.5ml serves of spirits sold in April 2020 compared to the previous year).

These trends are also reflected in recent consumer surveys: A study by UCL University in Belgium shows no general increase in alcohol consumption during the lockdown. 46% of 6.500 respondents reported a stable level of alcohol consumption and 29% reported they were drinking less than before the lockdown. In Germany, 1 in 5 consumers says they have reduced purchases (March survey results by Appinio). In Sweden, a recent survey shows that 73% do not drink more during COVID 19, 18% drink less and the biggest decline (30%) can be observed in young Swedes between 17-29 year-old. Only 7% indicated that they have increased their alcohol consumption during COVID 19.

According to Santé Publique France,  almost a quarter of French people have reduced their alcohol consumption. Recently collected survey data from McKinsey have also shown that Europeans are planning to spend less on alcohol in the near future: “net spending intent” on alcohol was down by 18% in Belgium, 20% in Denmark, 29% in Italy, 33% in France and a massive 43% in Poland.

Policy support will be therefore be key to help producers and service providers to recover and return to a growth path. The announcements this week by Commission President von der Leyen about a major recovery plan are going into the right direction when focussing on sustainable development and digitalisation of the single market to boost jobs and growth. We are also particularly glad to read that “global trade and its integrated value chains will remain a fundamental growth engine and will be essential for Europe’s recovery”. The spirits producers stand ready to contribute to a Trade Policy Review as announced by the Commission to ensure the continuous flow of goods and services worldwide and to reform the World Trade Organisation (WTO).

We look forward to doing what we can to help Europe’s economies recover, and for a return to the more social and welcoming Europe we enjoyed before!

 

Ulrich Adam*

Director General

*In his capacity as permanent representative of SPRL ADLOR Consulting