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Where Consumers Shop for Alcoholic Drinks

June 2021

Alcoholic drinks distribution is evolving, with pandemic-driven developments generating lasting change. The on-trade has faced severe and well-documented challenges as a result of cycles of Coronavirus (COVID-19) lockdowns and restrictions, while e-commerce has suddenly become the major growth story after years of only gradual progress. This report examines the shifting landscape and identifies areas of opportunity.

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Key Findings

Unprecedented disruption

Alcoholic drinks recorded a substantial 6% global total volume decline in 2020, with off-trade gains only partially offsetting the collapse of the on-trade. The performances of cognac, tequila and non-alcoholic spirits represented rare bright spots.

Convenience and affordability boost key modern grocery channels

Store-based retailing remains at the core of alcoholic drinks distribution. Discounters and supermarkets saw solid global growth in 2020, benefiting from the convenience and value for money they offer. Speed and efficiency are key advantages for convenience stores, which also recorded a rise in sales.

E-commerce is reshaping the distribution landscape

The current developments in e-commerce will lead to lasting and significant change for the industry. As well as retailers’ online platforms, direct-to-consumer models and third-party apps are increasingly important in the online sales landscape. Virtual engagement initiatives will remain integral to building loyalty and enhancing brand equity long-term.

The on-trade adapts

Boosted by pent-up demand, there are signs that an impressive on-trade recovery is already underway, although many outlets will not survive the prolonged period of disruption. Cocktails-to-go will continue to offer an additional revenue stream. Initially employed as a necessity in many cases, social media, apps and other digital elements have a role to play in supporting on-trade innovation efforts going forward.

Polarisation to replace premiumisation?

Uncertainty and an uneven economic recovery will drive continued demand for value-focused offers, as polarisation trends become increasingly apparent. This is expected to provide ongoing support for discounters. At the other end of the scale, luxury brands are using direct-to-consumer channels to curate the consumer relationship throughout the purchase process, combining physical and digital elements.

Introduction

Scope
Key findings

Industry Snapshot

Taking stock of the tectonic shifts
Finding pockets of resistance amidst the gloom
Deciphering drivers behind regional performance

Impact of COVID-19

Restrictions and resource availability issues cause supply chain disruption
Online sales are here to stay
Uber’s Drizly acquisition: overdue disruption?
Convenience, cost and infection concerns influence behaviour
Craft suffers as consumers seek comfort in mainstream brands

Channel Shifts

Non-store retailing makes notable growth contribution, given low share
Gains across the board for e-commerce
Considerable e-commerce potential in the dynamic US market

Store-based Channels

Modern vs traditional grocery balance varies considerably by region
Convenience and affordability boost the leading modern grocery channel
Specialists need to focus on adding value
State-owned specialists demonstrate the global impact of local laws
Chained retailers support modern grocery’s strength in Western Europe
Discounters climb the rankings
Relatively weak wine branding opens the door to private label
Few signs of pandemic-related gains for private label
Will polarisation bring private label opportunities?

Non-store Channels

Very limited role for non-store channels except e-commerce
Navigating the complexities of wine online
Legislation and logistics shape regional e-commerce disparities
Alcoholic drinks is a growing focus for leading online companies
Blurring of the digital and physical worlds will only increase

On-trade

On-trade share declines differ in significance across regions
COVID-19 has a devastating impact on high-energy occasions
UK groups dominate global chained bars/pubs leader board
The on-trade taps into the rise of home cocktails
A digital future for the on-trade?

Future Developments

A tale of two industries: facing the same storm but not all in the same boat
Key takeaways
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