Alcohol is proving lifeline to ease lockdown woes

Alcohol is proving a luxurious lifeline to ease lockdown woes, but that doesn’t mean that the overall drinks market is on the rise, nor that consumption levels are becoming a threat to health.

While the lack of commute may allow lockdown drinkers to enjoy their first glass of wine, beer or spirits a little earlier in the day, it’s likely that the consumption is measured

Since the coronavirus lockdowns began, it’s been widely reported that sales of wines, beers and spirits have been booming in the retail sector, especially those businesses with direct delivery operations and e-commerce sites*.

And for those in the trade, it’s been heartening to see that alcoholic drinks have, for the most part, not lost their appeal during the pandemic; indeed, they have become essential mood-enhancers during the present particularly testing times.

However, it is unlikely that overall consumption levels have risen, and that the year-end figures for the drinks trade will show any growth in volume, while it’s expected that the numbers concerning turnover will have dropped.

Why? In terms of the volume of drinks sold, the market has experienced a spike in retail sales for two main reasons. One of course concerns the total shuttering of the hospitality sector in the UK, meaning that those who were regular drinkers in pubs and restaurants are now consuming that alcohol entirely at home, and buying it through drinks websites, specialists and supermarkets – and hence the sudden rise in demand through such channels.

The second factor, which served to exacerbate the surge in retail sales, is connected to stockpiling, itself due to a fear that the supply of drinks may run out, or that access to them may be curtailed for any number of reasons during the lockdown.

But such hoarding doesn’t necessarily point to increased consumption, and, if anything, the current trend of at-home drinking has precipitated a more measured and sensible approach to imbibing.

While the lack of a daily commute may allow lockdown drinkers to enjoy their first glass of wine, beer or spirits a little earlier in the day, it’s more likely that the consumption is gradual, and enjoyed with food.

Meanwhile, the temptation to drink quickly and heavily that comes with going out – be it to a pub or nightclub, as well as social gatherings such as parties and weddings – has gone away entirely for the time being.

And what about the drop off in total turnover? This is connected to the fact that the majority of sales in retailers are within the mainstream drinks sector, whatever the category.

In contrast, most of the upmarket drinks sales take place in the more luxurious environment of the on-premise, which is obviously not open at this time.

Then of course there’s the fact that the post-lockdown economic outlook is dire, with the Bank of England saying this morning that the UK economy is expected to shrink by 25% in the second quarter (with unemployment rising by 9%), representing an economic contraction not seen in 300 years.

Such uncertainly no doubt explains a reduction in household spending of 30% in the UK since the lockdowns began.

Nevertheless, the economic recovery is forecast to be faster than it was following the global financial crisis of 2008-2009, and the Bank of England has said that the economy should bounce back with 21% growth in 2021.

But the message is this: the long term trend of a stagnant market for alcohol in the UK will persist, meaning that the very gradual decline in per capita consumption seen in the nation is not about to reverse. Rather, the spike in retail sales is simply compensating for a complete absence of consumption in the hospitality sector.

So, the suggestion by health lobby groups that the coronavirus lockdown is turning the Brits into a nation of alcoholics is not backed up by the total market figures.

However, the pandemic is highlighting the irrepressible appeal of great wines, beers and spirits as a mood-enhancing little luxury whether times are good or bad.

The temptation to drink quickly and heavily that comes with going out – be it to a pub or nightclub – as well as social gatherings such as parties and weddings has gone away entirely for the time-being

With this in mind, here’s what head of the WSTA, Miles Beale, said last month in an exclusive interview with db:

Firstly, speaking about the positives of the lockdowns for the drinks industry, he commented:

On the bright side, demand [for wine and spirits] may have shifted around but it’s still there, and it’s a sign that perhaps more than ever people appreciate the little luxuries and treats in life, and alcohol does well in that context. However, with the on-trade shut, they have to source it in a different way, which means that all of the demand is being satisfied down fewer channels.”

Commenting on the challenges, he said this, focusing on the hospitality sector: 

“For the on-trade, it looks tougher – and I’m sure it will return – but I can’t believe the same number of businesses will be available to us as consumers. Some won’t survive and the ones that do will be leaner. Consolidation [in the industry] will be closely connected to the on-trade. But it won’t sound the death knell for everything – or even half of everything – but businesses will have to survive long enough to be around to respond.”

Miles Beale, chief executive at Wine & Spirit Trade Association (WSTA)

As for the overall trends for the trade, he remarked:  

“In terms of the overall picture [of alcoholic drinks sales in the UK], it may look like some off-trade businesses are doing very well and some on-trade businesses are dead in the water. 

In the off-trade, demand has definitely increased – particularly for online retailers and multiples/specialists – but it is temporary, the demand has shifted, and some have taken advantage of that better than others. 

Demand overall is not going to recede too much – but it is not growing either. Overall it is flat; it’s just that the channels have changed.”

Continuing to look ahead, he added:

“It is a marathon not a sprint, and things will get back to normal over time, although normal will look different, and compared to 12-24 months ago, people will start by going out a lot less, but because there will be fewer places to go, those businesses that survive might find they have the same number of covers.”

Finally, he opined:  

“Gosh we will all want to go out again when we can, and we are all missing social contact… really really missing it… and that may be something to hanker after, and it’s why the on-trade is not damaged beyond repair.  

At the moment, we are weathering the storm… but it’s difficult when we don’t know how hard it will rain or how long it will last.”

* Nielsen’s Weekly FMCG Update (for week ending 11 April) showed that, when compared with the same week in 2019, BWS sales in supermarkets were up 29%.

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