The impact of COVID-19 struck industries in unique and unpredictable ways. Restaurants, movie theaters and other social businesses continue to lose money at a terrifying rate. In contrast, consumers spending shifted to products enjoyed from the safety of one’s home. Nowhere is this more apparent than the alcohol industry – where different sub-segments suffered markedly different fates. Big brand liquor and wine sales surged as consumers shifted to at-home consumption. Meanwhile, artisanal and small-batch producers that depend on restaurant sales now struggle to stay afloat.
Craft beer and smaller vineyards enjoyed considerable ground swell prior to the pandemic. As the public turned away from name-brand products and chain restaurants, artisan liquor became a hot commodity. Although this trend may well continue when the world returns to normalcy, many of these small producers will not survive. Bigger conglomerates are seizing this opportunity to scoop up desirable mid-sized businesses. Recent alcohol M&A activity includes Ryan Reynolds’ Aviation gin brand, which was recently acquired by Diageo for $610 million.
Restaurant and Celebration Dependent Alcohol
Champagne is one of the chief losers in the pandemic economy. Closely associated with celebrations, the effervescent wine saw sales stagnate and prices tank. Producers cut grape harvests appropriately to shore up prices, but it seems few are celebrating these days. It is unlikely that champagne consumption will return to normal prior to the 2021 harvest season.
Smaller vineyards are also facing a major loss of sales. These small batch wineries depend on a combination of associated restaurant sales and tourism – both of which are almost non-existent in the current environment. The same is true for craft beers, although some enterprising small brands saw sales improvements through innovative measures. Zoom “happy hours” are a hot new trend.
Thinking “Outside the Box”
Famously, some distillers pivoted out of the liquor business entirely. Due to the instant hand sanitizer shortage that struck the world at the beginning of the pandemic, many distillers shifted production. The shift was not limited to large brands or small craft distillers – both stepped up to meet the emergency demand. For some, this provided a welcome lifeline. For others, they are now sitting on costly stockpiles of unused product.
While the fate of small producers remains in flux, alcohol sales are booming. In part, this is due to almost every locale deeming liquor stores an essential business. As alcohol is one of the few substances that can cause fatal withdrawal, it is highly unlikely that any lockdown protocol would stop sales entirely.
Article By: Adam Stone