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Indian liquor trends pre and post COVID

The Covid-19 pandemic has continued to impact India since its arrival in spring last year. The government initially reacted by imposing a national lockdown from 23rd March to 4th May last year. The on-trade was completely closed, as were most liquor shops in every state. Places of work shut down, so many young office workers left the urban centres. With the on-trade stifled, retail purchases and consumption of beverage alcohol at home became the norm in most mainstream categories. In India, however, women and younger consumers still feel uncomfortable drinking in front of more conservative parents and family members at home. Limitations on space and refrigeration favoured spirits over beer, RTDs and – especially for young urban women – wine, all of which are usually consumed cold.

The implications of the pandemic response for India’s status as a federal republic soon became clear. The importance of excise duty income from alcohol, tobacco and fuel was brought into sharp relief as revenue streams dried up and the diminishing income from national taxes, such as GST, were used to offset fiscal shortfalls at state level. Most states responded by increasing excise duties – often suddenly and steeply – as well as charging taxpayers one-off cess payments, commonly levied by central governments for a specific purpose. Unusually, this cess (tax on tax), commonly levied by central government for a specific and clearly defined purpose (and not shared with state governments), has been applied in a number of instances at state level as a Corona-cess. Some states have been more reluctant than others to review, reduce or cancel such supposedly temporary measures. For instance, Andhra Pradesh – where the government had tried to enforce prohibition before the pandemic – imposed a 75% excise duty incre for two days just as the national lockdown ended last May; and on the same day, Delhi imposed a 70% cess on the maximum retail price (MRP) of all liquor, which remained until 7th June.

The timing of the lockdown could not have been worse, especially for beer. The category relies on young urban drinkers and after-work occasions and its peak season for consumption was about to start. When lockdown ended, bars and restaurants re-opened in most states, but were limited to 50% occupancy, and workers were slower to return to offices. Many are still working from home or – during Q1 2021 – have returned to it.

Compared to some countries, where citizens often remained risk-averse and pessimistic after the first lockdown, Indian consumer confidence seemed to bounce back quickly. Many Indians assumed – wrongly – that their everyday hygiene challenges afforded them a high degree of natural immunity to the coronavirus.

The past year has confirmed that India is squarely a brown spirits market. Whisky absorbs two-thirds of consumption in this market; brandy – with a strong presence in the south – takes 20%; and rum takes around half of that. In a total market that has shrunk by around one-fifth, whisky declined only slightly less than brandy and rum, which fell around one-quarter. Beer and RTDs suffered precipitous falls, deprived of many of the venues and occasions that had driven consumption forward. All clear spirits witnessed steeper declines in consumption than dark spirits: in each category, sales of domestically produced brands bottled in India (BII) fell away faster. Even allowing for the experimentation evident in categories such as Irish whiskey, consumers sought out brands that they knew, had earned equity and had consistent quality. In short, they sought out certainties.

Two other fundamental shifts have also occurred. Firstly, the premiumisation trend – evident before the pandemic – saw some importers shift their focus to retail, increasing its offering of high-end brands, which were previously targetted at Duty-Free and at the on-trade. Disposable income spent on going out to eat and drink before the pandemic was instead often redirected to premium-and-above products for at-home consumption. Secondly, as a corollary to this and confirming the pressure on the mainstream, was down-trading out of Indian-made foreign liquor (IMFL), either bottled in origin (BIO) or BII.

Budget-conscious consumers instead chose either country liquor or illicit alternatives, having long been deprived of licensed outlets in which to purchase their nips.

The on-trade closure has also impacted routes to market and the supply chain and it increasingly determines choice. When all outlets closed, some states permitted home delivery, which many thought heralded the long-expected rise of the e-commerce channel. In reality, this was an expedient option for retail outlets: e-commerce has not seen a consequent increase in regulation or investment since. On the contrary, drinks ordering apps, such as Hipbar, appear to have been actively discouraged.

The effects of a six-week shutdown of alcohol supply lasted long after it ended: restocking and logistics issues extended out-of-stock occurrences well into the summer months. Importers often found it difficult to source supplies as exporters were reluctant to ship to trading partners in an uncertain economy, not least because they wanted to avoid passing on rising logistics costs to consumers.

One of the responses, driven by leading country liquor suppliers, has been the emergence of intermediate or medium liquor produced locally: this refers to a price band of distilled liquor sold under licensed quota in certain states – presently Rajasthan and Uttar Pradesh only – competitively priced between country liquor/IMIL (Indian-made Indian liquor) and IMFL. Commonly the price, set by the state, is at a 25% premium to the country liquor price, a similar proportion lower than IMFL pricing.

This system has the additional benefits of almost guaranteeing state excise income and reducing the occurrence of country liquor-related health issues through better-quality product. In theory, this model should be attractive to many more states. In practice, its implementation may be limited by the relative scarcity of country liquor distillers able to produce medium liquor of the requisite quality. Nevertheless, with investment and a little covert encouragement from the states, that provision will doubtless evolve over time.

In a decentralised India, the domestic beverage alcohol industry relies on a relatively small number of states for its success. The top three states – Uttar Pradesh, Maharashtra and West Bengal – account for one-third of India’s population. The top six states account for half of the population. West Bengal is the only corporate state: the beverage alcohol industry is regulated directly through a state body. By contrast, the five largest states in the south are each home to beverage alcohol corporations.

This complexity and large size of India means that there are very few companies that are truly national. Even those that are considered national – thanks to a contract bottling network – still retain large regional brands in their portfolios. There is a small number of multinationals twinning domestic production with imports that are focussed on urban distribution shared among importers and wholesalers. India has a larger number of local distillers aspiring to convert their regional origins into a multi-region or national presence; and there are many smaller distillers, the majority of whom supply locally. Most distillers, therefore, will only be trading in one or two jurisdictions and navigating one or two bureaucracies. For the larger players, these challenges are manifold.

The second half of 2020 saw the Indian beverage alcohol market emerging quickly and largely unscathed from Covid-19 and lockdown. Leading spirits companies in particular were reporting quarterly revenues and volumes that had recovered to pre-pandemic levels. This was in spite of the on-trade remaining stifled, e-commerce failing to expand and the regulation and excise duty rises imposed by most states. However, by the second quarter of this year – the beginning of the new financial year for most corporations – this initial optimism about rapid recovery has somewhat evaporated.

The picture, though, is mixed. India’s federal state model shows up the inconsistencies between states: decisions can often be arbitrary, poorly thought through and political rather than practical, but a successful model in one state can be swiftly adopted in another. On the one hand, the Delhi state government’s legislation lowering the legal drinking age from 25 to 21 is positive for the industry. On the other, Andhra Pradesh will join Bihar, Gujarat and some other smaller states and territories to prohibit alcohol for around 250m people, which is nearly one-fifth of the population.

It cannot be overstated how the pandemic and its effects demonstrated the importance of beverage alcohol revenues to individual states’ budgets. Some state governments recognise this and are approaching their beverage alcohol policy with pragmatism by listening to the industry more attentively.

The key issues revolve around the temporary and permanent changes brought about by the pandemic. Office work may have changed permanently, calling into question whether or not urban on-trade lighthouse accounts will recover. It is uncertain when occupancy rates in on-trade venues rise above the current 50% constraint. The medium liquor system may see expansion into further states. It is also questionable whether premiumisation will persist or the second Covid-19 wave will dent consumer confidence fundamentally.

The wider economy, of course, is a determining factor. Declining disposable income has particular relevance for beverage alcohol spend. The industry is circumscribed by its investment in advertising and promotion. The pandemic has sharpened the senses of many executives and players, but left others close to collapse, unable to survive further uncertain events. States have pursued short-term solutions throughout the pandemic and it is unknown if this approach will persist. However, it is likely that the distilling capacity of the domestic industry will not grow. This has implications for all, given the contract-bottling model that has enabled the largest players to become truly national.

General Forecast Assumptions

On-Trade – In some states, the on-trade had re-opened up to 85% of its former capacity by Q1 2021. However, the occupancy restriction to 50% remains, so the real throughput is also likely to be at 50%. This will continue to affect beer and RTDs. Furthermore, on-trade sub-channels are re-opening at different rates.

Restaurants opened faster than bars; and bars faster than night venues. Whilst this appears to affect wine and premium spirits in higher-end outlets, the impact will be mitigated by the flexibility of suppliers, many of whom have switched attention to retail and targetting wealthier consumers.

Medium Liquor – Consumers in some states are now being offered a wider choice. Those who had traded down to country liquor may choose medium liquor instead of IMFL. Currently this is available in Rajasthan and Uttar Pradesh, but more states may institute this. A significant number of consumers may prefer the taste and the brands on offer in the category to IMFL.

E-commerce – When three of the larger eastern states – West Bengal, Chhattisgarh and Jharkand – permitted home delivery of alcohol, it was thought e-commerce would, at last, be stimulated by the lockdown conditions. They were soon joined by Orissa and Maharashtra. However, steep delivery charges, regulatory uncertainty, a reluctance to invest and a poor delivery-logistics framework continue to hamper growth, as well as the nature of Indian e-commerce defined on the invitation issued by the West Bengal authorities as “handling the electronic ordering, purchase, sale and home delivery of alcoholic liquors from licensed food [and liquor] outlets”. Retail competitors required to pay for annual licences have lobbied against the channel as well. Some significant platforms – Amazon, Flipkart (Walmart), Big Basket, Swiggy, Zomato and the mobile app Hipbar, reportedly backed by Diageo and, in Mumbai, Living Liquidz – responded to state-level invitations to get involved after the Supreme Court ruled in favour of home delivery from licensed retail. However, it has become clear that any bureaucratic encouragement of home delivery has primarily been one of a range of responses to the crowds that gathered outside liquor shops last year and, while recurring lockdowns may help to accelerate e-commerce, the channel will not significantly impact the industry for the foreseeable future. Informal delivery, where customers call up the liquor store and get an order dropped off by moped, already existed and will continue.

Regulation – Uttar Pradesh, India’s most populous state, had previously imposed a cess of 20 per bottle of beer. West Bengal, the fourth most populous state, increased consumer tax by 30%. Rajasthan, the sixth most populous, enacted both, adding20 per bottle and imposing a 10% increase in consumer tax. Their approach is unlikely to change. Additionally, the election in Bihar state did not return a government willing to reverse prohibition. Andhra Pradesh’s government was unable to enact prohibition but has discouraged some national players by making trading there problematic. However, it is assumed there is no foreseeable regulatory movement throughout the forecast period.

Consumer Base Expansion – India’s population is approaching 1.4bn, with less than half being of legal drinking age. The actual number of alcohol consumers is believed to be closer to 160m, only 7.5% of whom are women. Per capita rates for beer and RTDs remain low at around 1.2 litres for men and 150ml for women, re-calculated at 10 litres and 1.25 litres on estimated drinking population numbers. Wine has similar rates to RTDs, spirits are 1.8 litres per capita and nearly 15 litres on a re-calculated basis. There are more younger consumers joining the potential drinking population every year. Uptake by women reportedly increased during the pandemic.

At-Home Consumption – This trend is likely to persist beyond the pandemic. Wealthier consumers of premium spirits and imports spend for indulging at home and for gifts. The wedding industry will revive: most wine suppliers are focussing on higher-end offerings, educating consumers about its accessibility and suitability during meals, as well as drinking before and after. Beer and RTDs will find difficulty switching as their core message is based on going out and socialising rather than at-home consumption, and most consumers have insufficient refrigeration space at home.

Key Market Factors

Cultural – The legal drinking age varies from state to state. In most states it is 21, but 25 in the populous states of Haryana and the Punjab. In Maharashtra it is 21 for beer and wine, and 25 for liquor. Bigger states with a drinking age of 18 include Rajasthan in the north and Kerala in the south. Delhi is about to lower its LDA from 25 to 21.

Three states with larger populations prohibit alcohol. Gujarat has been dry for the longest, with Bihar and now Andhra Pradesh having imposed prohibition more recently. Outcomes are mixed, with Bihar and Andhra Pradesh reportedly having some of the highest per capita consumption rates for beverage alcohol nationally once illicit alcohol is factored in.

Demographic – A key driver of consumption has been urbanisation, particularly among younger LDA drinkers. The lockdown appears to have reversed this, with young office workers returning to their parents’ houses in smaller cities, towns and the countryside.

The overall population is nearly 1.4bn and grows by 15–20m or more every year. The drinking population is considerably smaller: at least half can only afford very cheap country liquor, which is largely unbranded alcohol with an estimated market of 250–285m cases.

The rapidly growing middle classes, who can afford premium-and-above, may number more than 150m. However, 98% of middle-class women and more than 20% of men are said not to drink for philosophical, religious or cultural reasons.

Some 49% of the population is aged under 19, and few drink, although younger consumers are generally more willing to consume alcohol than many of their parents. This leaves a market of between 25m and 30m people with the inclination and resources to drink IMFL.

Economic – There is little state support in India and wellbeing is the individual’s responsibility. With livelihoods uncertain but a young population inclined to optimism, the second Covid-19 wave may hit confidence hard and a volatile economy will see more cautious expenditure. Excise rates vary substantially from state to state even before the pandemic, which exacerbated the difference when states imposed cess payments to make up fiscal shortfalls.

A number of observers mention a shift to modern retail. This is consistent with state governments looking to secure the revenues they can expect from beverage alcohol and also with consumer expectations around improving retail venues.

Trade – Difficulties with the supply of stock have been widespread. It is reported that lack of supply inhibited sales, especially of premium products. The pandemic hindered logistics and rendered delivery more expensive. Brand-owner allocations have also reduced the agility to respond to demand.

A further element is that the phenomenon of medium liquor in Rajasthan and Uttar Pradesh offers more settled revenue for states and gives consumers an alternative to IMFL. One leading country liquor supplier reports now selling twice as much medium liquor as it does country liquor per month. India is unusual in that spirits demand is significantly more developed than demand for beer. While there is some interplay between the two with bang-for-buck consumers keen to maximise alcohol content per rupee delivery, there were some signs that demand for beer was beginning to develop separately.

However, strong beers of 8.5% ABV still represent more than 82% of demand. The first lockdown also affected trade, and was both severe and ill-timed – six weeks without sales, just before peak season for beer and RTDs. The on-trade revived in the second half of 2020 with near full re-opening in some states, but night and weekend curfews, combined with 50% capacity limits, continue to constrain this channel. The uncertainty of lockdown and the unavailability of liquor drove some consumers back down to country liquor, although not in the south where it is banned in five large states.

There was more limited up-trading by wealthier consumers. However, mainstream products, brands and players have been affected with some of the less financially secure domestic players closing for some months. In some of the larger states, competition in the beverage alcohol category is relatively open. In more there are state corporations set up as wholesalers and frequently as retailers too. In all states, beverage alcohol participants must navigate a web of licences, quotas and taxes, and sometimes incentives.

In certain key states, the regulatory authorities that control pricing have rationalised their price lists. In Delhi, Rajasthan, Madhya Pradesh and Haryana the correction has been downwards for higher-priced imports.

It is reported that there is shift to modern retail. This is consistent with state governments looking to secure revenues from beverage alcohol and also with consumer expectations around improving retail venues.

Political – Breweries have been investigated by the Competition Commission of India (CCI) which has now resulted in fines for collusion and operating a cartel. The reputational impact is more serious than the financial cost.

The Struggle with Counterfeiting in Spirits Industry: Coming out of Covid Crisis

Spokesperson: Mr. Ankit Gupta, Gov Body Member, ASPA (Authentication Solution Providers’ Association)

What has been the counterfeiting scenario in the spirits industry during the Covid crisis?

During the Covid crisis, alcohol in India has emerged as the sector with the largest number of counterfeiting incidents. This includes adulteration, trademark infringement, fake liquor, fraud, and other ways to copy products. According to ASPA counterfeit news repository study, alcohol continues to be in the top five sectors in 2018, 2019 and 2020 facing these risks. The same trend continued through 2021. Alone in Uttar Pradesh officials had seized approximately 12.57 lakh litre illicit liquor till November 2021 (Source: Aabkari Times, December 2021).

Despite being one of the most regulated sectors, in normal circumstances also alcohol industry is one of the biggest victims of counterfeiting and illicit trade. During the pandemic the industry was hit badly as sales through restaurants, hotels, etc. was adversely affected. Drinking at home became more acceptable and picked up but was still not enough to substitute the lost revenues. While the industry was struggling with low demand, criminals exploited the demand-supply gap to sell more quantities of counterfeit liquor, creating an even bigger threat to human well-being.

Why is the alcohol industry one of the top targets for counterfeiters and illicit trade?

Criminals are attracted to the alcohol industry because of various reasons e.g. high profitability, evasion of taxes, low consumer awareness, lack of universal pricing in India as well as high demand. In addition to this, the easy availability of raw material Methyl Alcohol, which is widely used for industrial purposes is another reason.

The margins for criminals are considerably huge and despite regulations, the task of counterfeiting and illicit trade is not being made challenging enough for them. During lockdowns, restricted access to and availability of good quality liquor gave a bigger push to the sale and purchase of counterfeit or illicit liquor. In some cases, it was observed that people saw the acquisition of liquor in difficult times at higher rates as social status or public image booster.

The danger has increased as criminals are using more reckless methods of producing and smuggling alcohol. For instance, many incidents of liquor being produced from sanitizers or ethyl alcohol or spirits from petrol and diesel mixed with colour being sold in copycat or discarded packaging surfaced across the country. These products are hazardous.

How can counterfeiting be controlled effectively post-pandemic?

Development of a solution always starts with recognising the problem and assessing its magnitude. Counterfeiting has been underestimated and this has prevented the development of a robust strategy and solution to curtail it. The fight against counterfeiting and illicit trade needs to be fought from three fronts – policy, brand, and consumer. A policy framework that guides support and nurtures an ecosystem which strong against counterfeiters. It should protect businesses and consumers against counterfeiting malice while enabling effective law enforcement and effective punishment to those who commit the crime.

Being an integral part of the system, brands should take solid steps to protect their products by building an adequate defence of anti-counterfeiting solutions and traceability infrastructure. For instance, multi-layered protection through packaging by implementing anti-counterfeiting solutions which make it almost impossible to copy – one-time break seals and sleeves. Supported by smart solutions such as tax stamps, digitally readable labels, QR Codes, etc. Made more effective by awareness which educates consumers about how they can safeguard themselves from counterfeit products.

Consumers can play an important role in the fight against fakes, they are their first line of defence. A little bit of carefulness and attentiveness on their part while buying liquor can save them from getting cheated.

Can the online sale of alcohol be a welcomed trend? Can it help in curbing the sale of counterfeit liquor in the country?

The pandemic crisis has encouraged discussions about the online sale of liquor in many states. According to a survey by YouGov National survey findings, almost 60% of consumers are eager to purchase alcohol online. Safety and convenience have been cited as key reasons to prefer the e-commerce channel to buy alcoholic beverages. While the online channel offers consumers more choice leading to innovation within the category and incremental revenue opportunities for state governments, we need comprehensive regulations and safeguards for selling liquor online and need to tread with a lot of caution. The process and compliance regulations for alcohol delivery will vary from the delivery of groceries or essentials. Moreover, the possibility of alcohol being seized during transit and the adulteration of alcohol by criminals cannot be ruled out either. The authentication industry can offer technology-enabled packaging and anti-counterfeiting solutions that can plug these risks and challenges. The digital footprint cn help in traceability and if done with proper provisions it can ease the process of identifying and catching frauds.

No discounts or offers on Alcohol in Delhi says Excise Department

Following complaints of congestion outside vents and the ongoing danger of COVID-19, the excise commissioner of Delhi advised liquor outlets in the city on Monday to cease giving discounts and rebates on alcohol brands. In an order, the government urged licensees to stop offering concessions, rebates, or discounts and threatened action against shops that did.

Crowds were observed thronging the vends as booze stores offered discounts and incentives such as ‘buy one get one free.’ There were also reports of law-and-order difficulties, and police were sent in to quell the mob. People in Jagatpuri, where a liquor store refused discounts, had lately resorted to throwing stones, breaking the shop’s glass panes, and injuring the employees.

“It has been brought to the notice of the excise department that as a result of discounts being offered by the licensees through their retail vends, instances were reported of large crowds gathering outside the liquor stores leading to law-and-order problems and causing inconvenience to locals,” the order by the excise commissioner stated.

As a result of liquor retailers lowering prices on various brands of alcohol by up to 40%, many consumers began acquiring and storing significant quantities, believing that the programmes would be discontinued at the end of the current fiscal year. According to the ruling, the Excise Department also learned that the programmes and discounts given at liquor stores were contributing to “unhealthy” market practises. The Covid pandemic is not ended, and the risk of infection remains, according to the directive, which adds that large crowds are expected to exacerbate the issue in Delhi.

“Commissioner Excise hereby orders that all L7Z licensees shall neither give concession, rebate or discount on the maximum retail price of liquor and hereby directs all L7Z licensees to strictly abide by Rule 54(3) of Delhi Excise Rules 2010. If any such instance of discount/rebate/ concession is brought to the knowledge of the undersigned, action as per Rules and Act as well as penal action as per tender document will be taken against defaulting licensees,” read the order.

The intent of the government in allowing discounts by retailers was to promote consumer choice and healthy competition and determination of price by market forces, it said. “The discounting of this nature was not the objective of the government while permitting the discounts in the new excise regime. The licensees are seen indulging in various promotional activities through social media and banners, hoardings outside the stores which is a non-permissible activity under the Delhi Excise Act, 2009 and Delhi Excise Rules, 2010.”

Last year, the Delhi Government adopted the Excise Policy 2021-22, as well as the terms and circumstances for the award of several kinds of licences. On November 17, 2021, the policy went into force. According to the Excise Department’s tender document for issuing 849 retail liquor licences, licensees are permitted to provide a rebate/discount/concession on the maximum retail price of liquor set by the Excise Commissioner. According to the ruling, under clause 15.2 of the tender document, the Department of Excise may, in its sole discretion, but without any obligation to do so, update, revise, or supplement the information in the tender document issued last year.

John Distilleries bullish despite hiccups

Covid has been challenging but John Distilleries is ready to bounce back thanks to the success of its Single Malt Brands. Being based in the South the company has also got its South strategy right. Paul John, Chairman and Managing Director, John Distilleries Pvt. Ltd., outlines the strategy to pave the way for the company’s bright future.

How has 2021 been for John Distilleries?

2021 was a challenging year, however we maintained resilience, built a growth in share points of our core brands in our stronger markets and expanded into new markets with our luxury portfolio.

What is the strategy for this year given Covid 3 and post Covid?

To stay positive and drive our internal strategy of prioritising channel mix and segment mix to deliver growth, this strategy has been working well for us over the past few years.

What has been the overall response to your premiumisation strategy?

The response has been very promising especially with our single malt portfolio garnering popularity across the country and the globe. In the domestic arena we’ve recently launched Roulette Premium Whisky – a peated whisky that stands apart from other whiskies in its segment/category, and expanded Fireball Cinnamon Flavoured Whisky into new markets, along with our BIO portfolio – Sazerac Rye and Buffalo Trace.

Are you looking at moving to the brandy segment given that the South is a strong market?

With Paul John XO we’ve already established a presence in the luxury brandy segment in the South as well, along with Roulette brandy which is popular across South markets.

What has been the impact of Covid on the company’s fortunes?

The impact has been tough as with most companies, and these past couple of years have been transformative in several ways for every industry with demands to adapt and evolve, but it has not deterred our zeal to deliver high quality products and maintain an innovativeness with consumer interest as priority.

Do you see a strong comeback for the company post Covid?

We believe in constantly and consistently delivering premium quality products for our consumers, and our efforts over the years have been recognised and appreciated. We will continue to dedicate our efforts to deliver the best and this gives us the impetus to keep moving forward.

How is the IMFL Division faring?

IMFL is a competitive segment, our core brands in this segment in the South are doing significantly well. We are now slowly expanding to newer markets with new brands and the initial feedback is very encouraging!

Has the success of the premium brands had an effect on the growth of regular brands?

Definitely. The success and popularity of our premium brands has had a positive rub-off on our new brands with the halo effect encouraging consumers to try our new offerings in the market.

What are your plans for sourcing raw materials for your single malts?

We’ve been producing single malt for the past 12 years, the major ingredient in the production of single malt is malted barley. We have annual contracts with different suppliers across India and we shall continue to source our raw material from these suppliers in future as well.

What are your expansion plans for 2022?

Our focus will be to build the footprint of our existing and recently launched brands especially our luxury portfolio, across markets.

Prohibition, Illicit Alcohol and lessons learned from Lockdown

The highly contagious and lethal nature of Covid-19 forced governments worldwide to rapidly implement measures to stem the spread of the virus. In pursuit of social-distancing objectives, closing large parts of economies, implementing work- and school-from-home restrictions, and even imposing personal stay-at-home quarantines quickly became the new normal. At the same time, governments were challenged to keep alive industries that they had locked down, buoy the economy and maintain employment for millions of people who might otherwise be forced into the already swollen ranks of the unemployed.

Achieving public health goals while avoiding the economic and social consequences clearly presented a paradox to policymakers rarely if ever witnessed before.

Within this mixed bag of emergency measures is the case of forced restrictions on the production, sale and consumption of alcoholic beverages, otherwise known as dry laws and collectively a modern version of prohibition.

Supply restrictions incentivise illicit markets and criminal activity

Sudden restrictions in access to legal alcohol create a downward shift in supply that causes increases in the demand for illicit substitutes and incentivises illicit suppliers to enter the market to meet that new demand. In the case of outright bans/dry laws, consumers are prevented from purchasing legal products and pent-up demand has no other option than to shift entirely to illegal markets.

This report provides evidence on both consequences. For example, customs and police officers in India reported a significant increase in consumers’ demand for illegal liquor and an uptick in seizures of illicit product. This trend repeated in Mexico, India, South Africa, Panama, Colombia, Namibia and Sri Lanka, all of which imposed prohibition measures on alcohol.

Furthermore, in South Africa the Institute for Security Studies reported an increase in criminal activity and that criminal networks active during the pandemic had added illicit alcohol to other illegal products they offer clandestine customers, such as narcotics. This trend was repeatedly observed in most places where dry laws were imposed, consequently, boosting criminal activity and shifting markets further into the control of illicit actors.

Beware of associated consumer health risks

Perhaps the most alarming consequence of alcohol prohibition measures was the exposure of consumers to health risks associated with toxic illicit alternatives. Beyond the fact that these illicit substitutes do not comply with sanitary, quality and safety regulations, the most hazardous are contaminated with toxic chemical additives.In the worst cases, people died from consuming illicit beverages as a substitute or as a perceived remedy to Covid-19.

In other cases, they were driven to engage in harmful behaviours, such as alcohol looting and panic buying, all of which undermine social distancing objectives and their exposure to the Covid-19 virus.

Therefore, the sombre lesson about prohibition and illicit alcohol is found in the collective harm, serious injury and reported death counts.

Prohibition reduces tax collections and constrains budgets

Taxes collected on alcohol at various points along the legitimate supply chain are traditionally an important source of revenue for many governments. Consequently, a fiscal priority is to stop the revenue leakages associated with the sale and consumption of untaxed illicit alcohol.

During the pandemic, tax and revenue authorities from India, South Africa, Colombia, Sri Lanka, Mexico, United States, and Kenya, for example, all reported significant drops in taxes collected on alcoholic beverages.

Consequently, the lesson learned from lockdown is that governments that implement draconian supply restrictions on the alcoholic beverage sector end up depriving their own treasuries of much-needed fiscal revenue. While it is difficult to imagine that Finance Ministers would be surprised by this result, perhaps this situation highlights the need for Finance Ministers and Health Ministers to improve coordination, consultation, and joint impact assessment of proposed laws.

This report also finds that in addition to the immediate drain on treasury revenues, negative impacts on future fiscal collections can be significant. The longer legal businesses are sidelined, the greater is the opportunity for illicit traders to capture market share and fortify demand for their untaxed, unregulated products. Under these circumstances, regaining revenue losses can take years, especially if there follows a period of economic depression and high unemployment.

In all cases, reduced tax revenue resulting from a government’s own alcohol prohibition laws puts extra burdens on its ability to pay for policing criminal activity, including cross-border smuggling activities, that underpins illicit trade. Mounting expenses in the face of declining revenues put considerable strain on government budgets at a time when fiscal stimulus is needed most.

Prohibition sidelines legitimate businesses and depresses formal job opportunities

Emergency restrictions on alcohol production and sales have had an outsized impact on legitimate industry, jeopardizing long-term employment and growth, while fuelling a parallel underground market that further harms the legal sector’s ability to rebound once restrictions are lifted.

While it is challenging to evaluate the full effect of prohibition laws on an industry that employs millions of people in primary and secondary sectors, any job losses – especially those lost via a government’s own alcohol bans – are particularly debilitating in countries where the overall unemployment rate is already high. Taking South Africa as an example where prohibition measures have had severe impacts, it is estimated that over 165,000 South African jobs were lost during the first alcohol ban.

A few words about the post-pandemic recovery

As governments move from crisis management to recovery planning, the findings from this report suggest that valuable lessons from alcohol prohibition can usefully shape the most constructive and inclusive ways to build back economic activity, employment and growth.

The alcoholic beverage sector and its multiple and varied secondary industries are significant contributors to GDP and employment – and tax revenues – in virtually every economy worldwide.

Because of this, the sector will be an important part of the recovery. But governments should think twice about sudden increases in excise taxes levied on alcoholic beverages as a means to replenish budget shortfalls. A quick fix approach could end up being as reckless as the imposition of prohibition laws, resulting in lower consumption of legal beverages, smaller pools of tax collections and an increase in demand for untaxed, cheaper illicit alternatives.

Moreover, policymakers would be wise to note that this sector and the people who work there have already been particularly hard hit by prohibition measures. Governments must anticipate that prohibition sidelines legitimate businesses and depresses formal job opportunities.

There are a great number of alternatives to increasing excise taxes, and consideration should be given to a portfolio of time-proven regulatory measures that can complement taxes, not undermine them.

Ensuring accessibility of regulated taxable products will generate legitimate and significant levels of tax revenues. Governments cannot collect taxes on products that are not sold or on illicit products that exist outside of tax regimes.

Imposing sanctions on the bad actors that supply markets with fakes or smuggle contraband across borders will help plug fiscal leakages by disincentivising the supply of illicit, untaxed products.

Increasing consumer awareness about the harms of illicit alcohol is an important measure that governments can use to steer people away from harm and into the legal, regulated and taxable marketplace.

In all cases, the result can be greater tax collections on a larger pool of legal, taxable product – with the knock-on value of economic growth and reduced consumer risk.

Government actions need to be carefully considered and finely balanced in dealing with the challenges associated with Covid-19.

The conclusions of this report, for example, delineate four lessons for avoiding the negative consequences associated with the imposition of alcohol prohibition laws. They also suggest the value to Finance, Trade and Health Ministers of improving coordination, consultation, and joint impact assessment of proposed laws.

There is also a role for private and public partnership dialogue on ways to prevent illicit trade. If new restrictive measures are being considered, governments should consult and cooperate with industry to ensure that any restrictions are temporary in nature, proportionate and sustainable. Any such measures should be accompanied by appropriate public health messaging and reinforced by responsible retail standards.

Governments must also ramp up implementation of enforcement measures to ensure that illicit trade activities caused by the pandemic do not become permanent features of the post-pandemic economy. All stakeholders have an interest in stamping out illicit trade in alcohol and all benefit from collective action.

In the face of a health pandemic, such as Covid-19, it is recommended that governments: Avoid prohibition laws as emergency response measures to protect people from the spread of virus. The benefits are conjectural, while the negative consequences are many and counterproductive to interdependent health, employment, and economic objectives.

Ensure availability and access to legitimate products that conform with social-distancing objectives without inducing demand for illicit substitutes.

Avoid the imposition of “emergency tax” increases on alcohol. A quick fix approach could end up being as reckless as the imposition of prohibition laws, resulting in lower consumption of legal beverages, smaller pools of tax collections and an increase in demand for untaxed, cheaper illicit alternatives.

Ramp up implementation of enforcement measures to ensure that illicit trade activities caused by the pandemic do not become permanent features of the post-pandemic economy.

Hotel industry recovers faster than expected post Covid 2.0: ICRA

While the first few months of FY2022 were impacted because of Covid 2.0, the industry witnessed faster-than-expected ramp up in Q2 FY2022, because of lower restrictions, increasing pace of vaccination and pent-up demand, which resulted in revenge travel.

The industry is expected to clock at least 45-50% of pre-Covid revenues in FY2022. Further, it is also likely to report operating profits in the current fiscal, aided by improved operating leverage and sustenance of some of the cost-optimisation measures undertaken in FY2021. However, the situation is still evolving and remains contingent on the efficacy of vaccines and a potential third Covid-19 wave.

The industry has raised about `660 crore of equity in FY2021 and has announced `3,300 crore of equity/fund raising plans in FY2022. ICRA expects further equity fund raising/asset monetisation to support capital structure improvement going forward.

The hotel industry demand has recovered at a sharper pace post Covid 2.0 compared to last year’s lockdown, aided by the easing of restrictions in Q2 FY2022. Partial lockdown as well as travel restrictions in many states in April and May 2021 post the onset of Covid 2.0 resulted in the ICRA sample of companies reporting a 56% decline in revenues on a QoQ basis, in line with the ratings agency’s estimates. However, the revenues are expected to improve by 85-90% sequentially in Q2 FY2022.

Occupancy has picked up, with the August-21 Pan-India premium hotel occupancy at 44-46%. For 5M FY2022, the same is estimated to be 32-34% (up from 13-15% in 5M FY2021) vis-à-vis 46-48% in Q4 FY2021. The Pan-India ARRs are estimated at `3,850-3,950 for 5M FY2022 and still remain at a 25-30% discount to pre-Covid levels, although some high-end hotels and leisure destinations have even seen ARRs return to pre-Covid levels in Aug-21/Sep-21. Travel during the festive season will act as a key demand booster for the industry in Q3 FY2022.

Giving more insights, Ms. Vinutaa S, Assistant Vice President and Sector Head, ICRA Limited says, “While the first few months were impacted, the industry witnessed faster-than-expected ramp up in Q2 FY2021, because of lower restrictions, high vaccination pace and pent-up demand, which resulted in revenge travel. Demand in the last few months has come from staycations, weddings and travel to driveable leisure destinations, and from special purpose groups. There is the new trend of biscations (which is working from a resort) that is picking up. Business travel pickup has been mainly to project sites/manufacturing locations from specific sectors. The Covid-related demand which was prevalent April mid to June mid, waned from July and we are seeing real demand pick up. The situation is evolving, and sustenance of demand will depend on efficacy of vaccines and a potential third Covid wave. The industry is currently cautiously optimistic.”

Most markets reported over 50% occupancy in Jul-21 and Aug-21, the key markets – Jaipur, Goa, Delhi, Mumbai and Hyderabad displayed healthy occupancies whereas Bangalore and Pune lagged behind. The ARRs in leisure destinations were above pre-Covid levels in Jul-21 and Aug-21. Going forward, ARRs will be a function of sustenance of demand.

The demand recovery pattern has different from other crises, with properties with affiliated strong brands and in the luxury segment standing to benefit, as trust and safety are paramount. Drive-to leisure, staycations, social MICE/weddings and special purpose groups are expected to drive revenues for hotels for the next one year at least. International traffic arrivals will take time to pick-up and in the intervening period, demand will be supported by domestic travel. Hotels/cities dependent on business travel/foreign tourist arrivals (FTAs) will also take considerable time to recover.

In terms of supply, in the immediate term, temporary shutdowns are possible in affected regions, if there is a third wave. Acquisitions and industry consolidation are the way forward, and rebranding in the midscale and upscale segments will add to share of organised supply. Over the medium term, a part of pre-Covid supply may be permanently shelved, while there could be new properties coming up in leisure destinations.

“The hotel industry is expected to clock at least 45-50% of pre-Covid revenues in FY2022. Further operating profits in the current fiscal will be aided by improved operating leverage and sustenance of some of the cost-optimisation measures undertaken last fiscal. However, pre-Covid revenues and profits are likely only by FY2024. As a result of sustenance of some cost-saving measures, the breakeven is expected to reduce and hotels are likely to report pre-Covid margins of 85-90% of revenues going forward. Nevertheless, the situation is still evolving and as the estimates are contingent on timelines tied to the pandemic,” added Ms. Vinutaa.

Moratorium and ECLGS provided the much-needed financial support during Covid-19. About 70% entities in ICRA’s hospitality portfolio availed moratorium during the first wave, though it was only 39% of rated debt. Some companies also raised funding through equity and debt tie-ups before ECLGS announcement. However, debt metrics are expected to return to pre-Covid levels only over the medium term, while RoCE is expected to remain sub cost-of capital at least for the next few years.

ICRA continues to have a negative outlook on the Indian hotel industry, as the sustenance of the demand pickup in the recent months remains to be seen. A potential third wave and its impact on travel and hotel occupancies cannot be ruled out. Further, the RevPAR is still significantly lower than pre-Covid levels. About 63% of ICRA’s ratings are also on negative outlook currently.

According to new forecasts from IWSR, global beverage alcohol is showing positive signs of recovery, and is projected to grow in volume by +2.9% by the end of 2021.

Total beverage alcohol volume decreased by -6.2% globally in 2020, impacted by the near complete shutdown of bars and restaurants around the world. Though an unprecedented downturn, the -6.2% decline was less than previously forecast, as several factors ultimately helped the industry last year, such as: acceleration of e-commerce (up +45% from 2019, to reach US$29 billion in 2020), growth of RTDs, strong at-home consumption in key markets, and resilience and growth in the US and China.

Another pre-Covid trend that will continue to accelerate beverage alcohol recovery is product premiumisation. Though the economic impact of Covid-19 has led to restricted spending for some, alcohol is an affordable luxury for those willing to spend. IWSR forecasts that premium-and-above wine and spirits will increase by +25.6% in total volume 2020-2025 (compared to +0.8% volume growth over the same period for brands in lower price tiers).

By 2023, IWSR expects total beverage alcohol consumption to return to pre-Covid levels, with consumption steadily increasing through to 2025. Recovery will be boosted by the industry pivoting rapidly in key markets, the momentum of e-commerce and RTDs, and increasing sophistication of the at-home occasion in many markets. The two fastest-growing categories, according to IWSR forecasts, are no-alcohol spirits and RTDs.

“In many global markets, Covid-19 accelerated the impact and growth of key industry drivers, such as the development of e-commerce, premiumisation, the rise of the ‘home premise’, moderation, and the need for convenience in product formats,” says Mark Meek, CEO, IWSR. “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.”

As a result of the lockdown in India last year, total alcohol volume plummeted 30%, but the market is expected to rebound to more than 8% volume (CAGR 2021-2025). Spirits are predicted to rise by nearly 5% over the four-year period, while beer will increase by 13%.

Whisky sales in India declined by 16%, but the IWSR noted that ultra-premium-and-above Scotch witnessed growth, along with Irish and Japanese whiskies, where were boosted by rich consumers.

IWSR’s analysis of the outlook of the global beverage alcohol market also shows:

Tequila overtakes rum to become the third-largest spirits category in the US

The global tequila category grew by +9.6% in 2020, driven especially by gains in the US (the world’s largest tequila market) where tequila is now the third-largest spirits category in the country (behind vodka and whisky). Also, thanks in large part to the success of tequila, consumer awareness and interest in mezcal has also lifted that category, and agave-based spirits overall are expected to grow +4.7% (volume CAGR 2021-2025).

Whisky sub-categories have been more impacted by Covid-19, but show long-term resilience

Global whisky experienced a -10.7% volume decline in 2020, but the category is forecasted to rebound in 2021 and continue on its growth path, bolstered by the US and India. Whiskies are among the fastest-growing sub-categories of spirits: Irish whiskey will be aided by the return of the on-trade and strength of new entrants; growth in Japanese whisky and US whiskey will mainly come from both of their respective home markets. Most of the growth for Scotch whisky will come from delayed recovery in the key market of India and eventual revival of global travel retail, especially for premium Scotch.

Gin grows, vodka remains flat

Gin is forecasted to increase +4.5% CAGR 2021-2025, driven notably by Brazil, South Africa, and Russia, and also by brands priced premium-and-above (with this segment projected to grow +11.4% CAGR 2021-2025). Global vodka volume was flat last year and is expected to remain so through to 2025. In Russia, the top global market for vodka, consumers are trading down from premium vodka as a result of the impact of Covid-19, however in the US (the second-largest market for the category), vodka is projected to grow. In total, spirits are expected to grow +0.6% globally this year, and +0.8% CAGR 2021-2025.

Many consumers in key markets chose still wine as their go-to drink at home during Covid-19

Though wine consumption has been in decline, consumers in markets such as the UK, Australia, Brazil, Canada, and the US have lifted wine volumes. In Brazil alone, still wine grew by +28% in 2020, driven by a rise in higher-quality imports and increasingly accessible prices. Conversely, imported wine in China has experienced a steep decline which will contribute to an expected decrease in wine volume in the country 2021-2025.

RTD volume projected to increase by almost +27% in volume this year

RTDs posted double-digit global growth in 2020, resonating with consumers across all demographics, and driven by the trend for convenience, refreshment, and flavour. IWSR projects that RTD volume will increase by +26.6% in 2021, and +10.2% CAGR 2021-2025, driven primarily by growth in the US and Japan, as well as Australia, Canada, and China. In the US, where the hard seltzer sub-category of RTDs grew by +130% in 2020, RTD volume is already larger than the total spirits category, and by the end of this year, RTD volume consumption there will be larger than that of wine.

Top beer markets forecasted for growth

Beer was the most exposed category during lockdown, losing -7.1% volume globally in 2020. However, beer volume is forecasted to grow by +2.5% in 2021, and continue on its growth path over the forecast period (2021-2025). Except for the US, where RTD competition has considerably impacted beer sales, all of the top-10 global beer markets (by volume) are projected to show growth into 2025.

Radico Khaitan to launch 3 Premium Whiskies in the next two years

Liquor manufacturer Radico Khaitan’s performance has been exemplary in these difficult times, highlighted by record sales and earnings. With the expectations of continued earnings and growth, the company is on course to better its performance in these difficult times. The Chief Operating Officer of Radico Khaitan Limited, Mr. Amar Sinha gives an overview of the company’s performance in these Covid times.

Is Radico focusing on premium brown spirits for growth?

Amar Sinha (Sinha): Yes. Radico Khaitan offers a wide array of products – 15 organically-grown brands including 5 millionaire brands – hence, we have something for every age group and in each category. The company, while enhancing the products in the white spirit category, is also focusing on the premium brown spirits while identifying India-specific consumer preferences in the category. In fact, among our successful premium offerings in the brown spirits category, we have 8PM Premium Black Whisky which is a master’s selection for the true connoisseurs of fine taste. 8PM is the flagship brand of Radico Khaitan and 8 PM Premium Black Whisky is a notch above offering which reflects the true essence of quality drinking.

Another essential driver of Radico’s growth in the brown spirits category is Morpheus Brandy (only brandy in the premium and super premium segment) which commands over 65% of the market share in the country. In the rum category, 1965 Spirit of Victory has been doing phenomenally well in the premium rum segment. Our most recent offering, Rampur Indian Single Malt Whisky, which was launched in the Indian market in February 2019 was rated amongst the top 5 world whiskies by “Whiskey Cask Magazine” US even before it was launched in the domestic market.

Which are the new products in brown spirits you are planning to launch?

Sinha: As a country, India has majorly been a brown spirits market. Though people are now open to experimenting more and showing an inclination towards white spirits, the brown spirits segment is continuing to dominate the world over. Of late, there has been a significant shift in people’s consumption pattern with many switching to more premium liquor because they have been mostly home-bound for over a year now which boosted savings to a large extent and that allowed them to move towards premiumisation. To cater to the consumer demands, Radico Khaitan is on course for the launch of more brands in the premium brown spirits space during FY2022 across categories. There are at least 3 Premium Whiskies in the brown spirits category that are currently on the drawing board which would be launched over the next 2 years. These are one segment above each other and with very high contributions in terms of price positioning. Radico has a history of launching at least 12 successful brands in the last decade and half.

What are the plans for 8PM this fiscal?

Sinha: RadicoKhaitan’s primary focus for the brand will be to take 8PM Premium Black Whisky pan India as it is currently available in 16 States. An extension of 8 PM Whisky – a flagship brand of Radico Khaitan – 8PM Premium Black Whisky successfully touched 1 million cases in March 2021, within just 2 years of its launch in the Indian retail market. This brand has been on the growth trajectory paved by its parent brand 8PM Whisky, which itself was a runaway success. It has been named the 5th Best Indian Whisky by the Spirits Business Brand Champion. We have introduced a pocket pack for 8PM Premium Black Whisky in West Bengal, Rajasthan, Telangana, Assam and Uttar Pradesh, which will soon be launched in other markets across the country. This is the first hipster pack in a glass bottle in this segment. 8PM Pocket pack is an innovative 90 ml pack size in look and feel and gives the feeling of a hip flask in glass bottle. The pack is launched to lure the consumer with its modern style and promote trial amongst new consumers.

In this digital age, what is your campaign strategy?

Sinha: While focusing heavily on brand expansion, we will also be launching campaigns with the brand ambassador Tiger Shroff to promote and celebrate the positioning of the brand. The Bollywood actor is extremely popular among the youth and is full of energy and vigour – traits that completely sync with the brand; hence we believe that the launch of the campaigns will further strengthen 8PM Premium Black’s positioning and take it to the next level. We are actively eyeing the digital medium for engaging with the brand loyalists and curating exciting digital campaigns across all social media platforms in order to enhance brand visibility.

Covid-19 Impact and Recovery to 2030

Spirits Global Market Report 2021: Covid-19 Impact and Recovery to 2030 provides strategists, marketers and senior management with the critical information they need to assess the global spirits (distilleries) market as it emerges from the Covid-19 shut down.

Major companies in the spirits market include United Spirits Ltd (A Diageo Company); United Breweries Ltd (UB); Radico Khaitan Ltd; Globus Spirits Ltd and GM Breweries Ltd.

The global spirits market is expected to grow from $143.31 billion in 2020 to $150.87 billion in 2021 at a compound annual growth rate (CAGR) of 5.3%. The growth is mainly due to the companies rearranging their operations and recovering from the COVID-19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The market is expected to reach $208.84 billion in 2025 at a CAGR of 8%.

The spirits market consists of sales of potable liquors, ethyl alcohol, grain alcohol and spirits by entities (organizations, sole traders and partnerships) that distil and blend liquors. The companies in the distilleries industry process raw materials into potable liquors, ethyl alcohol, grain alcohol and spirits, package and distribute them through various distribution channels to both individual customers and commercial establishments. The spirits market is segmented into whiskey; vodka; rum; tequila; gin and other spirits.

Asia Pacific was the largest region in the global spirits market, accounting for 58% of the market in 2020. North America was the second largest region accounting for 22% of the global spirits market. Middle East was the smallest region in the global spirits market.

Spirits manufacturers are now offering ready-to-mix hybrid beverages to cater to changing consumer tastes and preferences. Hybrid beverages are a blend of alcoholic drinks from multiple beverage categories. They are prepared by using unique flavour combinations, ingredients and production methods from multiple drinks. For example, producing spirits or beers in a wine barrel, to give them a distinct taste.

Hybrid beverages are particularly evident in the spirit category, with products such as beer mixed with rum and tea mixed with vodka. Some of the popular hybrid beverages include Malibu Red (rum and tequila), Kahlua Midnight (rum and Kahlua) and Absolut Tune (vodka and sparkling wine).

World population is growing and is expected to reach 10 billion by 2050. Increase in population creates more demand for alcoholic-beverages. Crop production, farming activities and trade volumes will have to increase in order to meet increased population. Therefore, companies in this market are expected to benefit from rising demand for spirits manufacturing (distilleries) products due to rising population, during the forecast period.

Global premium alcoholic beverages market is expected to register a CAGR of 8.43% during the forecast period, 2020 – 2025.

There is a growing trend that prefers low-alcohol beers, which is attributed to the growing awareness of alcohol unit consumption and the customer’s willingness to try new beverages. This shift in trend is witnessed in the demand for low alcohol drinks in the United Kingdom, where the sales of off-licenses and supermarkets have soared to a record high.

In most mature and some emerging markets, consumers are starting to drink ‘less-but-better’ alcohol, generally with higher barley and malt contents. The major players operating in the market are expanding their product portfolios, with strategic acquisitions of breweries, in order to spread their footprints across the world, and tap the premium alcoholic beverage market.

Scope of the Report

Global premium alcoholic beverages market is segmented by type which is classified as beer, wine and spirits. By distribution channel, the market is segmented into on-trade and off-trade. Moreover, the study provides an analysis of the premium alcoholic beverages market in the emerging and established markets across the world, including North America, Europe, Asia-Pacific, South America, Middle East & Africa.

As the impact of the ongoing pandemic on the global beverage alcohol market continues to come into focus, IWSR has identified six key macro trends that are driving and shaping the industry: Digital and E-commerce; Sophistication and Premiumisation; Evolving Traditions; External Pressures; Health and Ethical Consumption; and Social Drinking Experiences.

As part of the newly released IWSR Global Trends 2020 Report, IWSR analysts assess the impact that Covid-19 will have on these macro trends in the short, medium and long term, and across key global markets. Here, we highlight three of the macro trends:

Sophistication and Premiumisation

The search for authenticity and status, enabled by consumer knowledge and spending power:

Premium-and-above spirits are forecast to increase their global volume market share to 13% by 2024 as consumers continue to favour quality over quantity, including cocktails and high-end sipping spirits.

By value, China is the world’s largest premium-and-above market for wine and spirits, although, by volume, the US trails it closely.

In both countries, premium-and-above brands are forecast to increase their volume market share by approximately one percentage point between 2019 and 2024, as the premiumisation trend continues to influence market developments.

Evolving Traditions

Generational shifts in consumer behaviour encouraged by globalisation or emerging as a reaction against it:

Local products and experiences – accelerated by travel restrictions and closed borders during the pandemic – will continue to gain popularity as consumers rally behind symbolic and job-sustaining producers.

Adapting to bar and restaurant outdoor dining restrictions and closures has forced consumers – especially among younger LDA generations – to form new drinking habits that will likely persist into the future, with portable/convenient beverages such as canned wine and RTDs well-poised for this.

Spirits categories that are expected to continue to ride the globalisation trend include premium-and-above tequila (which has grown 15% year-on-year between 2015-2019), and spirit aperitifs (which after the Covid-19 slump, due to on-trade closures, should return to healthy growth by 2021, with volumes increasing by almost 16% from 2019 levels).

Health and Ethical Consumption

Increasing focus on personal health and wellness, and the impact of choices on the environment and society at large:

Health-conscious drinkers generally adopt a policy of moderation, cutting back in volume or reducing occasions. These consumers are likely to trade up to a higher-quality drink or one they perceive as healthier when they do choose to drink. Regular drinking occasions are also changing, thanks to the growing profile of better low- and no-alcohol alternatives.

In the top countries for low- and no-alcohol products, no-alcohol beer is set to grow its share of the beer category to 4.45% by 2024, as sober and moderating consumers embrace newly improved products across a wide range of occasions.

The top organic wine markets as of 2019 are Germany, France, the UK, the US, Sweden and Japan. Here and elsewhere, broad consumer-and state-led shifts toward health and/or sustainability are likely to continue in the wake of the Covid-19 pandemic. This will have implications for the whole beverage alcohol industry, from production and packaging to distribution and administration.