The Covid-19 pandemic caused a 6.2% decline in global alcohol volumes last year. However, that was a smaller than expected downturn, as the acceleration of ecommerce, the growth of RTDs, buoyant o-trade sales and resilience in the US and China compensated for the shutdown of bars and restaurants around the world.
The data analysts at IWSR believe the global drinks industry will return to pre-pandemic levels by 2025, with a compound annual growth rate of 1.5%. The fastest growing categories will be no-alcohol “spirits” and RTDs, with a 30.6% CAGR and 10.2% CAGR respectively.
“In many global markets, Covid-19 accelerated the impact and growth of key industry drivers, such as the development of ecommerce, premiumisation, the rise of the ‘home premise’, moderation, and the need for convenience in product formats,” said IWSR chief executive Mark Meek. “These are the trends that will also underpin the industry’s resilience as it pivots to meet consumers where they are in the years to come. Additionally, across many markets, some segments of the population now have significantly more disposable income than they did in 2019, some of which will be spent on beverage alcohol products.”
IWSR crunched the numbers in 160 countries to arrive at its 2020 sales figures. The star performer was undoubtedly the US, which saw its largest volume gain in almost two decades, despite on-trade shutdowns. Total alcohol volumes increased by 2%, the strongest gain seen since 2002. Spirits were up by 4.6%, the largest volume increase since 1990, while value increased by 7.7% as consumers traded up to more premium drinks.
Agave-based spirits – tequila and mezcal – shot up by 15.9% in volume, overtaking rum to become the third largest spirits category in the US, behind vodka and whisky. The cognac and armagnac category was also a big winner last year, posting volume gains of 20.1%. These categories are expected to continue their impressive growth paths over the next five years.
IWSR expects US alcohol sales for 2021 to be up 3.8% in volume and 5.5% in value year on year, as bars reopen and the o-trade remains strong.
RTDs grew 62.3% by volume in the US in 2020, led by hard seltzers, which grew 130%. Hard seltzers now represent 56.7% of the total RTD category in the US. IWSR expects RTDs to account for 22% of alcohol sales in the US by 2025, up from 9.6% today.
“A key driver of US beverage alcohol consumption is flavour,” says Brandy Rand, IWSR’s chief operating officer of the Americas. “Flavoured subcategories – from beer to vodka to US whiskey – are significantly outperforming traditional non-flavoured sub-categories. Flavour is also the top consumer driver of the fast-growing RTD category, and that’s likely creating a halo effect on total alcohol as well.”
On a global basis, RTD volumes are expected to increase by 26.4% this year. IWSR forecasts that beer will grow by 2.5%, with wine expected to see more modest growth. The global whisky industry experienced a 10.7% volume decline in 2020, but the category is forecast to rebound by 5.5% this year, and post 4.2% volume CAGR between 2021 and 2025.
IWSR also noted that ecommerce alcohol sales increased 45% to reach $29 billion in 2020, and it expects that trend to continue.
