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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.