“To nobody’s surprise, during the 10-month period from March-December, off-premise depletions grew 13.6% while on-premise was down 55.1% and accounted for only 8.4% of total depletions for the full year 2020. If the on-premise recovery comes at the expense of off-premise growth, top line trends will be muted as strong growth on 8.4% of the total cannot overcome the losses in 91.6% of on-premise depletions,” says Dale Stratton, an analyst for SipSource, the Wine & Spirits Wholesalers of America affiliate that provides wine and spirits distributor depletion data.
“While I would like to go all-in on the best-case scenario, we believe [in the] ‘COVID hangover’ scenario, which calls for growth of 0.5%, is the most likely result for 2021,” said Stratton of a report issued by SipSource partner Kearney earlier this year which modeled over 30 predictive variables and found four likely outcomes for the beverage alcohol industry in the next year. “That scenario calls for a stronger economic recovery but a lower road to herd immunity from the vaccine.”
Stratton also calls for industry veterans to be wary of traditional business cycles to predict industry trends, “keeping a close eye on how trends are changing month-to-month is a better indicator of what’s coming ahead.”
The report explains that because the what, where, when and how consumers buy alcohol has changed so significantly in the past year and will shift quickly as the COVID vaccine becomes more readily available, analyzing depletion trends and acting quickly will give industry leaders a distinct advantage as the marketplace transitions to the next stage of disrupted business cycles.
Finally, the report highlights key consumer trends over the past year:
Premixed Cocktails – Consumers Continue to Drive Phenomenal Growth: “Premixed Cocktails continue their strong growth, up a phenomenal +55.2% for the year. Other sizes (think cans) are leading growth up +166% and doubled in share to 26.7% in 2020. The dominant size remains the 1.75 liter, which is up +49%. As Premixed Cocktails were not prevalent in the on-premise, shelter-in-place directives have been a tailwind for this segment,” said Stratton.
Cognac – Positively Trends will Continue: “It is difficult to point to any single reason for the sustained strong positive trends of Cognac, but take note of the +25.5% growth in 2020. The growth rates are strong in all regions but especially in the South, which is up +32.9% and the Midwest, which is up +32.4%. Cognac gained momentum starting in June, so we expect strong trends until at least mid-year 2021,” said Stratton.
Tequila – Super and Ultra Premium is the “Go-to” for At-home Consumers: “Tequila continues to be a powerhouse for growth and solidified itself as the third largest volume Spirits category this year. Premiumization continues for Tequila as the higher you go in price, the higher the growth rate. The Super and Ultra-Premium segments are up +16.0% and +20.4% respectively, while Popular priced products are down -18.1%.” said Stratton.
Pink Moscato continues to gain momentum and is up +11.3% for the year. This is likely driven by new entries from familiar large brands in the Popular price segment as it accounts for 71.8% of all volume. The 1.5-liter package accounts for 34.8% of all depletions. Pink Moscato seems most popular in the Midwest with a growth rate of +20.2%.
Red Blends – Driving Growth in the Wine Sector: Red Blends have been gaining momentum since March and ended the year up +6.6%. Red Blends represent a wide range of products across geography and price segment. Interestingly, while 75.9% of all Red Blend volume is domestic, imports are driving growth up +13.5%. The imported Super Premium price segment is leading growth up +60.6%.