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How Covid-19 and Ecommerce Disrupted the Alcohol Industry in 2020

How Covid-19 and Ecommerce Disrupted the Alcohol Industry in 2020

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December 28, 2020
in eCommerce
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One might assume that the drinking public didn’t have much to cheers to this year, but those who do imbibe found ample opportunities in 2020—albeit at home, for the most part.

With drinkers locked out of their usual watering holes during shutdowns, demand for alcohol delivery skyrocketed, launching apps like Drizly and ReserveBar to unprecedented success. At the same time, state governments loosened alcohol regulations, allowing breweries to sell directly to consumers and restaurants and bars to add alcoholic drinks to to-go orders.

Despite those changes, however, bars and restaurants that rely primarily on on-premise consumption have witnessed painful losses in the last nine months. Globally, the alcohol industry contracted by 8% this year, according to IWSR Drinks Market Analysis, and experts don’t see that changing in coming months.

On-premise sales went from around $66,000 sales velocity, which estimates sales for an average on-premise establishment, per week in February to just $13,000 per week at the lowest point in March, according to Nielsen. Sales slowly climbed back to around $50,000 per week in October, only to dip again to $33,000 in early December as governments imposed new lockdown orders.

But Americans have been remarkably successful at procuring alcohol throughout 2020 despite limited access to bars and restaurants. Alcohol delivery and direct-to-consumer (DTC) brands have seen explosive growth, with global ecommerce alcohol sales on track to grow more than 40% by the end of the year, according to IWSR.

“If you were in the retail trade, you had a good year. If you were in the on-premise trade, you had a really bad year,” said SipSource analyst Dale Stratton.

There were other niche categories within the industry that had an unexpected year due to less obvious implications of the pandemic. For example, overall sales for sparkling wine “got hurt pretty badly,” which Stratton attributed to the sudden halt of bottomless brunches. Conversely, vermouth saw a spike at the beginning of lockdown as drinkers stocked up on ingredients for cocktails.

Looking toward 2021, experts expect the pandemic to continue impacting on-premise business for at least the first half of the year. These alternatives to on-premise consumption—especially alcohol delivery, DTC and off-premise sales—are likely to carry momentum well into 2021.

Growth in the ready-to-drink category

On the Rocks, a Dallas-based bottled cocktail company launched in 2015, began the year energized by incredible growth it saw between 2018 to 2019 through partnerships with airlines, hotels, cruise lines and golf courses.

While the Covid-related decimation of the travel industry could have spelled disaster for the young brand, it ended 2020 at roughly 400% growth year over year. That’s because the ready-to-drink (RTD) category truly exploded during the pandemic, growing by 1,114% on Drizly this year.

Loosening regulations around restaurant to-go and delivery orders were also a big part of On the Rocks’ success this year, according to co-founder Rocco Milano. “We saw the birth of a completely new market, one that never existed pre-Covid,” he said.

RTD cocktails and malt-based hard seltzers see a lot of overlap. They’re both riding the health and wellness trend that has fueled a push for more transparency in ingredients, lower carbs and less sugar.

And that growth continues to motivate the big players to expand their footprints within the category. Anheuser-Busch is launching its seventh hard seltzer brand in March 2021 with agave-based and tequila-inspired Cacti Hard Seltzer, a collaboration with rapper Travis Scott.

Tags: AlcoholCOVID19DisruptedecommerceIndustry

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