Has the pandemic disrupted how alcoholic drinks are sold?

Has the pandemic disrupted how alcoholic drinks are sold?

Alcohol e-commerce is not a temporary shift. It is here to stay

  • In 2019, the alcohol e-commerce market, in ten core geographies studied by IWSR, was valued at USD21 bn – twice the size of the global travel retail channel!
    • The ten core markets studied by IWSR include – Australia, Brazil, China, France, Germany, Italy, Japan, Spain, UK, and the US. Collectively they represent more than 90% of total alcohol e-commerce value globally
  • In 2020, the estimated growth of 42% was largely driven by an increase in at-home consumption due to lockdown and travel restrictions
  • By 2024, the market is forecast to double in size from its 2019 value
  • According to Euromonitor, even though online retail of alcoholic drinks is still in its early stages, the growth potential of the market is supported by increasing internet access, improving infrastructure, and expanding product availability across both emerging and developed markets

The structure of laws, channel-split, consumer attitudes, and even the pecking order of leading markets have evolved as a result of the pandemic

  • Local government regulations for alcohol e-commerce are likely to evolve to align with growth in demand
  • Share of off-trade e-commerce channel is set to grow in volume of sales from 1.5% in 2019 to 3.5% in 2024, propelling brand owners to re-evaluate their balance of investments in channel splits
  • China has by far been the largest market for alcohol e-commerce, but it is projected to be overtaken by the US by the end of 2021
  • Combined, the US and China will make up approximately 70% of the global e-commerce alcohol market value by the end of 2024
  • Mexico is projected to generate the greatest incremental value in online sales with over 60% CAGR during 2019-24
  • COVID-19 has prompted key changes in consumer preferences, benefiting the low-alcohol category that is projected to report the highest volume CAGR (c.16%) in South Africa during 2020-24
  • Technological developments, including big data, and improvements in logistics will help expand consumer targeting and geographical reach respectively 

Innovation in marketing strategies, especially the digital channel, is the key to growth in the coming years

  • In China, a new retail model combining online browsing/payment and offline pick-ups is getting popular with backing from some of the e-commerce giants like Alibaba and Tencent
  • Amazon had launched its own-label gin brand, Tovess, in the UK in 2019 with plans to extend the drinks range further “over time” but nothing has been reported further
  • Overall, poor e-commerce strategies, investors’ hesitation to pay higher valuations for companies temporarily boosted by the pandemic, and lack of big retailers’ aggressive involvement in the space have limited the number of deals in the space in 2020. As per Crunchbase data, the number of deals in the space were down across the board between 2019 and 2020
  • However, major investment activity was seen during the first quarter of 2021 with the following deals –
    • Uber agreed to acquire alcohol marketplace Drizly
    • Vivino raised a $155 million Series D
    • Vintage Wine Estates, a wine and spirits company, announced it would go public via a merger with special purpose acquisition company Bespoke Capital Acquisition Corp.
    • Gopuff, an instant delivery platform for everyday items, fresh off of its acquisition of alcoholic beverage seller BevMo, raised USD 1.15 bn in Series G funding, led by D1 Capital Partners and Fidelity Management and Research Co.
  • Crunchbase says that Vivino’s raise this year has particularly buoyed the market and the funding in 2021 is already nearing 2020 levels globally and exceeding investment dollars in the US
  • Catharine Dockery, a founding partner at Vice Ventures, expects more investments into e-commerce and delivery (even after bars and restaurants become fully operational again), as well as more alcohol companies, to enter the public markets. She expects ready-to-drink cocktails to represent 20% of the market by 2024, as reported by Crunchbase

This article is based largely on the report and articles published by International Wine & Spirit Research (IWSR) which is a credible and authoritative resource for the alcoholic beverages market. The aim is to present a market that looks promising for growth and investment during pandemic times. For deeper or customized research on specific countries, growth segments, local regulations, strategies of key players, identification of interesting opportunities in the space, and other market developments, write to us at – info@caleidoscopeks.com

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