Alcoholic drinks registered positive growth in 2021 as sales rebounded from the severe declines recorded at the peak of the COVID-19 pandemic in 2020. In particular, on-trade sales slumped in 2020 due to the absence of foreign tourists and an extended hospitality sector shutdown, while off-trade sales came under pressure due to a month-long alcohol sales ban.
Sri Lanka’s alcoholic beverage industry was among areas of the local economy hardest-hit by the COVID-19 pandemic. In particular, the requirement for off-trade and on-trade outlets, including hotels and restaurants, to remain closed for extended periods during quarantine lockdowns that were imposed at certain points throughout 2020 and during the first half of 2021 had a very negative impact on sales by making alcoholic drinks unavailable to consumers for extended periods.
The majority of Sri Lanka’s people are Theravada Buddhists, with these accounting for an estimated 70% share of the country’s total population. Most within this group view drinking alcohol as a violation of the Five Precepts, which state that Buddhists should avoid alcohol and other intoxicating drugs.
Low-income men are believed to be the most significant consumer group for alcoholic drinks. Drinking is not only most common and frequent among this group, but many men from this socioeconomic group also consume alcohol in large quantities when they drink.
While Sri Lanka’s compact size and relatively small population mean that the COVID-19 pandemic had a relatively moderate impact on supply chains and other commercial factors relating to the manufacture and distribution of alcoholic drinks during 2020 and 2021, the already adverse economic situation the country has been greatly magnified due to interruptions that the pandemic has caused to commercial activity in key sectors. Thus, many alcoholic drinks companies have faced significant retrenchment of their operations.
Sri Lanka currently has 27 licensed alcoholic beverage licenses in operation. In 2021, the Sri Lankan government was considering four new applications for licenses to produce alcoholic products.
During 2021, the prohibition on liquor sales as part of the travel restrictions that were in place as a key measure to control the spread of the COVID-19 virus dealt a crippling blow to the Excise Department by drastically reducing tax revenues. It has been estimated that the Excise Department was deprived of around LKR600 million per day in excise duties as a result of restrictions on the legal sale of alcoholic drinks.
With the COVID-19 pandemic and the official response to what having put extreme pressure on the ability of alcoholic drinks companies to generate profits, all key players across the industry have pinned their hopes on the current rapid vaccination drive to bring a swift resolution to the background issues that have encouraged Sri Lankan policymakers to adopt a very strict approach to social distancing in a bid to minimise the impact of the COVID-19 pandemic on Sri Lankan society. However, the chaos and uncertainty that has plagued Sri Lanka’s economy in recent years means that it is likely to be very challenging for alcoholic drink players to return to their full pre-COVID-19 potential in terms of the ability to generate sales and profits.
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Alcoholic Drinks
Alcoholic drinks is the aggregation of beer, wine, spirits, cider/perry and RTDs.
See All of Our DefinitionsThis report originates from Passport, our Alcoholic Drinks research and analysis database.
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