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Impact of COVID-19 on Retail Alcohol Sales

Retail sales are up while overall consumption is down
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“Want to go out and grab a drink?” quickly became “Want to do a Zoom happy hour?” during the coronavirus pandemic and its resulting stay-at-home orders for many Americans.

With on-premise dining closed, alcohol sales shifted from restaurants and bars to in-home. Compared with this time a year ago, during the week ending May 9, brick-and-mortar alcohol dollar sales were up 41%, while online sales of alcohol skyrocketed, up 339%. In fact, alcohol is the fastest-growing e-commerce department among consumer packaged goods, and weekly growth during the pandemic has continued, notes New York-based Nielsen.

This rise in sales did not come as a surprise to Lauren Johnson, CEO and president of Rudy’s Markets, which operates three stores in the Bend, Ore., region. “We know historically when times are tough financially, people drink more. This is no different, sprinkled with a whole lot of unknowns in addition to just financially,” she says.

Shift to At-Home Consumption

As consumers spend more time at home and are limited to where they can go to consume alcohol, it’s no surprise they have started buying in bulk. The percent of boxed wine sales increased more than tenfold between Feb. 29 and April 18 and 1.75-L spirits were 23 times higher, according to Nielsen. And for the week of April 18, 30-packs of beer sales were up 21% and 24-packs were up 20%, while six-packs decreased 2%.

As many states begin lifting stay-at-home mandates and restaurants begin reopening, retailers need to be aware of types of cocktails consumers typically drink for summer holidays to ensure they have the ingredients needed as many will still be celebrating these occasions at home. Tonic water and lemon and lime juice are also seeing increased sales in retail, with alcohol beverage mixers up 96% vs. a year ago, according to Nielsen, as consumers are making cocktails at home.

Cocktails, or at least the liquor needed to make them, also are selling well at Rudy’s Markets. “Distilled spirits are significantly up with people having the time to experiment with cocktails,” says Johnson. “Also it takes a lot less in the glass to get a good feeling going so purchasing has slightly shifted to the harder stuff.”

Americans Not Drinking More

While sales in grocery stores are up, the nation as a whole is not necessarily drinking more. Nielsen found that the U.S. alcohol market needs to sustain 22% volume growth across all alcohol categories sold off-premise to maintain the level of sales of closed bars and restaurants.

Accenture’s COVID-19 consumer research conducted in early April found consumption of alcohol overall (net purchases measured as a percent of consumers increasing purchasing, less the percent decreasing purchasing vs. prior two weeks) was down nearly 14%, and by early May, it was down slightly more than 12%.

“When you consider the degree to which alcohol consumption is often a social occasion, it makes sense that consumers would say they are purchasing less alcohol overall, even if they are purchasing more at grocery for their personal at-home use than they used to purchase at grocery,” says Karen Fang Grant, global research lead for Accenture, which is based in Dublin.

Anheuser-Busch’s research from May found that 45% of consumers were drinking more at home week over week as people adapted and formed new habits around in-home occasions such as meals and relaxing and new social occasions including virtual happy hours. Relaxing alone was the most popular and highest growth occasion during the pandemic peak, while socializing within the household and meals were the top three.

E-Commerce Here to Stay

As stay-at-home mandates lift and life slowly begins to return to “normal,” what can retailers expect from the category during this transition phase?

“As we enter the transition phase and the economy reopens, we expect many of the newfound in-home occasions will remain as the home becomes the new hub,” says Sara Hillstrom, senior director of category development for Anheuser-Busch, St. Louis. The company predicts that in-home consumption will continue to remain elevated as the restaurant sector will take some time to rebound. “Delivery and curbside pickup will grow as retailers invest, the experience becomes more seamless and shopper adoption continues,” Hillstrom adds.

To help foster this uptick in e-commerce, in addition to operational measures such as ID verification, retailers should customize the selection available online to fit with COVID trends and tie promotions to the new social norms of in-home meals and relaxation, Hillstrom says.

Retailers also will need to take into account the ongoing financial effects of the pandemic. “As the transition phase progresses and the possibility of recession sets in, we expect consumers will continue to shift into trusted brands, bigger pack sizes and look for affordability,” says Mike Potthoff, VP of large format sales for Anheuser-Busch.  Given the evolving occasions and the desire for simplified shopping, grocery, mass, dollar and discount channels are poised to accelerate growth, he adds.

This summer and autumn may not be like past years as fewer shopping trips with bigger baskets is expected to continue for the next several months, but consumers will continue to need alcohol for the social occasions they do engage in.

This summer and autumn may not be like past years as fewer shopping trips with bigger baskets is expected to continue for the next several months, but consumers will continue to need alcohol for the social occasions they do engage in. “People have found the people/small groups they are comfortable with and continue to hang with them be it a barbecue or backyard gathering,” Johnson says.

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