Is Coronavirus the End for Craft Beer and Spirits?

September 2020

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?

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This report comes in PPT.

Key Findings

Pandemic brings huge challenges for small producers

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.

Increased polarisation in craft

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.

Brands should reduce their on-trade reliance

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.

Engagement efforts shift to the home

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.

The need to defend, not abandon, a high-end position

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.

Key findings
What is craft?
Being seen as “independent” is more important than ever
Identifying leading craft markets: beer
Identifying leading craft markets: spirits
Innovations in flavour have an ongoing role to play in beer
White versus brown spirits: reluctance to commit to aged variants?
Global GDP is likely to contract in 2020 under the baseline scenario
A gloomy forecast for global beer…
… and trading down will shape the outlook for spirits too
Considerable uncertainty remains
Initial expectations looked bleak for craft
Micro producers are acutely exposed to on-trade shutdowns
Expected closures to drive a reversal of fragmentation trends in beer
Cost advantages for crafty brands
Growing focus on core lines amid metal beverage can shortage
Calling time on craft’s on-trade reliance?
Setbacks expected in emerging craft markets
Where does craft fit as consumers trade down?
Novel engagement initiatives for a “new normal”
Homebrewing as an opportunity for craft?
Post-lockdown, sustainability expectations will accelerate
Cannabis developments open up alternative occasions
Long-term opportunities in moderation trends

Alcoholic Drinks

Alcoholic drinks is the aggregation of beer, wine, spirits, cider/perry and RTDs.

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