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Key Trends Driving the Global Beverage Alcohol Industry in 2022


December 20, 2021

IWSR analyses the key drivers that will shape the global market landscape in 2022, highlighting growing ecommerce market for beverage alcohol
Source: https://www.theiwsr.com/

Glossary of Terms

“On-Premise/On-Trade” refers to bars & restaurants or ‘by the glass’ outlets. 
“Off Premise/Off Trade” refers to liquor stores or  “by the bottle” outlets.
“Home-Premise/Trade” refers to the emerging direct to consumer, ecommerce market for beverage alcohol.

Note, Management has gone in and bolded comments that are pertinent to ONE ROQ’s business model. 

Key Trends Driving the Global Beverage Alcohol Industry in 2022

Beverage alcohol has proven itself to be one of the most crisis-proof consumer goods categories at a time of significant disruption.

While government schemes and grants have kept spending buoyant in some markets, economies have been set back by disruptions to key industries. Shipment costs and delays, container shortages, higher packaging costs and rising energy costs continue to challenge the market. Meanwhile, soaring inflation and a changing political landscape have contributed to recruitment challenges in the hospitality sector which have caused significant pressures to bar & restaurant owners ‘just trying to hang on.’ 

In the US, for example, inflation hit its highest level in 40 years in November 2021, up 6.8%, while the UK’s supply chain and recruitment struggles continue to be impacted by the fall-out from Brexit.

Nevertheless, consumers are increasingly comfortable with returning to the on-trade, especially the millennial and Gen X cohorts. Ecommerce has now developed into a sophisticated and nuanced channel, and digital engagement has become a crucial part of the customer journey. As ecommerce and the on-premise grow in strength, structural long-term changes to the off-trade will present a very different beverage alcohol market landscape in the years to come. 

Here are the key trends driving the beverage alcohol market landscape, as consumer behaviors continue to shift and guide market strategies and product innovation.

Ecommerce landscape becomes more nuanced as sub-channels blur

The value of ecommerce increased by almost +43% in 2020 across 16 key markets, up from +12% in 2019. IWSR data shows that by 2025, in these markets ecommerce is projected to represent about 6% of all off-trade beverage alcohol volumes, compared to less than 2% in 2018.  Meaning, physical trips tot he local liquor stores are decreasing and that trend is anticipated to be ongoing.

As ecommerce alcoholic-drinks sales develop, the number of retailers is increasing and the range of business models they employ is becoming more diverse and nuanced. Distinctions between different ecommerce channels, and even between online vs offline purchasing, are becoming increasingly irrelevant to consumers.  

This is leading to a blurring of lines between online sales channels – for example, omnichannel retailers are establishing logistics partnerships with on-demand services in order to offer faster delivery; on-demand platforms are using ‘dark stores’ to improve delivery times and so become more like marketplaces; and marketplaces are establishing networks of physical stores.

A more sophisticated home-premise impacts the return of the on-premise

Changes in living location, work commutes and hybrid working policies mean that consumers are spending more time at-home and in local on-premise venues. As such, IWSR findings indicate that premium consumption may potentially shift, to some extent, from the on-trade to the home-premise.

As consumers return to the on-trade, their experiences will be shaped by the last two years of premium at-home experiences, such as at-home cocktail-making and subscription services. Consumers will therefore be more conscious of higher prices and more easily deterred by poorer quality products or experiences in bars, pubs and restaurants.

IWSR expects brand owners to be more selective in where they support their brands in the on-premise, likely increasing focus on the top-end and most active on-trade accounts.

The move towards premiumization will appeal to spirits and wine brand owners, as most of the value growth within the broader spirits and wine categories over the past decade has come from the premium-and-above segment.

Diversification as category lines blur

People are switching with increasing frequency between beverage options or trialing completely new beverages. IWSR research shows a wide repertoire of product trial, with consumers showing strong interest in trying craft beer, hard seltzers, wine and Japanese whisky, and more — underpinning alcohol as an “experience” market.

Drinks companies are responding by moving into previously unexplored categories to diversify their portfolios and in some cases, proactively plan for the softening or decline of existing core brands and/or categories. Diversification also better positions beverage alcohol categories to address changing consumer tastes and the blurring of lines between traditional soft drinks and alcohol, or alcohol adjacent products, such as CBD and other enhancements.

Companies are no longer selling products to groups of consumers, but are selling products that fit particular consumption occasions. Having a wider portfolio allows them to be more exhaustive in their approach, better understand the adjacent and competing categories, and use small-scale investments to learn more about new products and occasions.

Clear commitments to sustainable practices

Sustainable packaging solutions have been at the top of corporate and social responsibility agendas in the drinks industry for many years. But concerns around climate change have been growing in intensity, especially following events such as COP26. Influential figures across the industry, as well as consumers, are increasingly looking for drinks companies to show a clear commitment to sustainable practices.

Solidarity with local brands and businesses has also been a key trend during the pandemic, and is one that is closely associated with consumers’ sustainable mindset. For example, consumer research from IWSR shows that 48% of US alcohol drinkers say their purchase decisions are positively influenced by a company’s sustainability or environmental initiatives; rising to 72% among Brazilian alcohol drinkers, and 70% of urban affluent Chinese alcohol drinkers.

Shaky international supply chains and relative price were not the only drivers of this trend: in many cases, consumers reported they also wanted to ‘do their bit’ for the local economy. Building on this crisis response, local brands may hope to reinforce their status for the long term by emphasizing sustainability, quality and community values.

External pressures

Factors beyond consumer demand continue to impact production and route-to-market for the global beverage alcohol industry. Rising packaging costs, container capacity and other supply chain issues, inflationary pressures, and environmental change will impact some suppliers significantly. Some companies may therefore need to be more tactical and adjust some of their near-term market and brand strategies to adapt to the economic and operating environment.

Brand owners should also be conscious of false positives witnessed through 2020 and 2021 that will revert to previous historical trends, especially as international travel resumes. Particularly for premium beverage alcohol, the past two years saw a marked shift in where products were purchased – a trend that may reverse as the market normalises. As such, purchasing spikes seen in domestic markets throughout 2020 and 2021 will likely face some downwards correction going forward.

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