Coronavirus (COVID-19)’s devastating effect on bars and pubs will last far beyond initial lockdowns, as will changes in purchasing behaviour. Most micro producers previously followed a taproom-orientated business model, but direct-to-consumer sales have proved a vital lifeline during lockdown. Maintaining a diversified approach could provide resilience as the period of uncertainty continues. However, with consumers across markets trading down in their drinking choices, where does craft fit in?
This report comes in PPT.
The inherently premium nature of craft brands places them in a vulnerable position as the economic effects of the COVID-19 crisis lead consumers to trade down in their drinking choices. Combined with the collapse of the on-trade and shift towards more familiar products, the short- to mid-term outlook for craft appears perilous.
COVID-19 has driven a shift towards national and international craft brands due to their wide availability and supermarket distribution. Small-scale micro producers that are less financially resilient are most at risk of closure. However, growing support for local level, community initiatives will drive interest in micro operations, for those that can survive the immediate challenges.
The on-trade plays a particularly significant role for craft. The impact of the pandemic on bars and pubs is expected to last beyond the initial lockdown phase, as a result of consumer caution, distancing measures and potential future waves. Diversifying into a business model less reliant on the on-trade could help to improve resilience as the period of uncertainty continues.
As the shift towards home socialising accelerates, alcoholic drinks players of all sizes are seeking ways to engage with consumers in this new environment, through virtual tours and interactive tasting sessions for example. Micro brewers and distillers which successfully use these opportunities to emphasise their processes and story will be at an advantage over those which focus solely on product.
Micro producers will not be able to compete with mainstream brands on price. Instead, placing an even greater emphasis on specific locations, sustainability and the traceability of ingredients will help craft brands to justify their premium price point.
Alcoholic drinks is the aggregation of beer, wine, spirits, cider/perry and RTDs.
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