Alcoholic Drinks and Pandemic Ripple Effects; Has Premiumization Peaked?

Delivery

This report comes in PPT.

Key Findings

Pandemic repercussions will be multidimensional and unprecedented but the economic effects are becoming clear and have historic parallels

   While psychological, sociological and lifestyle shifts are ongoing and evolving, there is now little doubt that the pandemic’s macroeconomic ripple effects will lead to severe and protracted recessions in the vast majority of key markets . While the scale, severity and length of these contractions is up for debate, parallels with other cyclical severe downturns can be enlightening. It is in that context that the Great Recession of 2009 provides relevant and actionable insights.

Premiumisation peaks ?

While the potential for premium products remains very much alive, the seemingly infinite premiumisation narrative will pause or go into reverse. Polarisation ( both super premium and economy products accelerating while mainstream positioning feels pressure from both sides) trading down and trading across will all become key, at the very least in the short to medium term .

Learnings from the Great Recession

While drawing parallels to previous major financial crises is not a perfect exercise, it can provide a compass to help the industry navigate the challenges ahead. From champagne’s severe contraction to other sparkling wines capitalizing on it and from a return to local spirits specialties to rising headwinds hitting segments like single malt, key learnings and cautionary tales hence find fresh relevance

Redefining premiumization in a pandemic world

  Regardless of the significant challenges ahead, premium products and aspirational drinking will retain a degree of relevance while also holding long term potential , once recovery begins in earnest. Nevertheless, any associations with conspicuous consumption should be replaced with a focus on genuine craftmanship, a unique identity and social and corporate responsibility .