According to Nielsen, the “homebody mentality” created during pandemic restrictions is continuing to drive off-premise spirit sales, which surged 26.2% for the week ending August 22 in the US. American and Irish whiskey sales rose 27.8% and 27.6%, respectively, while tequila sales spiked 59.1% and RTD sales gained 101%.
GlobalData’s latest report, ‘Coronavirus (COVID-19) Case Study: Alcoholic Beverage Innovation’, notes that the scale and impact of the global health crisis has changed consumers’ consumption habits.
Mitsue Konishi, Senior Innovation Analyst at GlobalData, said: “As more people avoid bars and clubs, alcoholic beverage manufacturers need to consider consumers’ ‘New Socializing’ occasions such as home drinking in product development. One key consideration will be catering to premium and budget-friendly alcoholic innovations to allow consumers to capture the bar-quality drinking experience at home.”
“I almost call it a phenomenon that has happened in the US, the amount of home consumption of spirits,” Brown-Forman President and CEO Lawson Whiting told Yahoo Finance’s The First Trade.
“What you have is the dynamic where the bars and restaurants close and global travel retail — which is a big segment for us at close to 25% to 30% of the business — goes not all the way to zero, but close to it. So the grocery channel, the liquor store channel and all those locations are absolutely booming now as consumers love to throw the home parties. It has worked out well for us.”
Whiting added during an analyst call: “I think as long as people are largely unable to spend on travel and other forms of entertainment, we think that the spirits’ strong growth will continue predominantly in the off-premise.”
Diageo CEO Ivan Menezes said one of the major trends the company has embraced is the booming popularity of at-home cocktail making.
“Younger Americans in the 21-plus are consuming much more spirits,” he said. “And in the time of lockdown cocktails at home have only gone up. And so I see the long-term trend here in terms of premium spirits brands continuing.”
Strong spirits sales in the off-premise have also been a bright spot for Pernod Ricard during the pandemic as a result of the at-home alcohol trend.
Chairman and CEO Alexandre Ricard said Pernod would invest more in the digital sector following the rise in home alcohol consumption and gatherings on platforms such as Zoom, Facebook, WhatsApp and Teams.
“I do think the emergence of these virtual parties where people connect and share a drink, in some cases, actually make cocktails together cocktails is something that has emerged,” he explained.
Pernod’s star spirits performer was Jameson, with sales up 14% in FY20, including double digit growth in Australia.
Australian at-home consumption boom
It’s been a similar story in Australia, with Coca-Cola Amatil’s Peter West, Managing Director Australian Beverages, revealing spirits were the “star performer” in Alcohol & Coffee for FY2020.
West said spirits was the “star performer” in Alcohol & Coffee. Amatil maintained value share in Spirits, underpinned by share gains in vodka, gin and scotch. It said the Jim Beam trademark brand delivered a significant improvement in volume trajectory driven by volume growth in the Spirits and Zero variants.
Canadian Club’s performance was impacted by on-premise outlet closures. However, the brand has shown a strong recovery spirits sales in June, delivering double digit volume growth.
“Our alcohol business grew volume by approximately 19% in July as on-premise outlets reopened and socializing resumed,” West said. “There was also ongoing strong growth in at-home consumption of spirits, a trend that we’ve noticed since the second quarter of 2020 and an increase in demand for premix.”
Campari also registered a strong organic growth in Australia during the current off-premise skewed market in its half-year 2020 results, with sales up 18.7% due to the at-home alcohol trend.
It was driven by “very strong” Wild Turkey RTD sales as well as Wild Turkey Bourbon and American Honey. Campari and Espolon also grew by double digits off a small base.
Holiday season fears
However, Brown-Forman has reservations about how well the holiday quarter will perform, which usually makes up close to 30% of its annual sales.
“I am still concerned about the holiday season,” Whiting said. “Without bars and restaurants, without company Christmas parties, all of that is likely to go away. I think you’ll get the home entertainment, and you will likely get a lot of that. I worry a bit about what the holiday season is going to do for the spirits business. I think it’s going to be a tough one.”