The Covid pandemic continues to infect thousands of people every day around the world and take thousands of lives too. And even if lockdowns have been relaxed, in many places they are being re-imposed. At any rate, most people are now preferring to stay home for fear of contracting the virus.
There’s one product category that is created for social consumption and social occasions. But in a time of social distancing, how is it faring? And what can the industry do to help people stay in good spirits and celebrate, without seeming like they are encouraging solo consumption?
I am talking of the wines and spirits industry, of course. One that has been badly hit by lockdowns and the near-shutdown of bars, restaurants, travel and hospitality industries. People are still able to buy their favourite tipple at stores and online, but it is not enough to make up for the losses from on-premise consumption.
According to the IWSR (International Wines and Spirits Record), the global wines and spirits industry grew by a measly 0.1% by volume and 3.6% in value in 2019. According to this Fortune article which also cites IWSR data, most of the slow growth is being attributed to increased trade tensions and increased tariffs. Indeed, according to the Scotch Whisky Association, exports of Scotch Whisky were down in the last quarter of 2019, thanks to a 25% fall in the US market alone and almost all of it is attributed to increased tariffs of 25%.
Worse is to come for the industry. According to IWSR, the global wines and spirits market is likely to contract by double digits in 2020, thanks to the covid-19 pandemic and its impact on the economy. The saving grace might be that China is the world’s largest market by value, and given its economic recovery, the country might offer wines and spirits companies some hope. The US is said to be the biggest market by volume and I would imagine that the affluent and wealthy classes there would still be buying and consuming wines and spirits, even through the pandemic. Of course, with bars and restaurants and the travel and hospitality industries closed or operating at very low capacity, it still makes for a gloomy forecast for the industry. In fact, the IWSR forecasts that the global wines and spirits market will not return to pre-2019 levels before 2024.
There is no doubt that with so many related industries adversely affected, regular consumption of alcoholic beverages will be down. Even social get-togethers will be fewer and smaller, during a time of social distancing. That said, I think the industry should expect the following changes in consumption patterns over the next few years:
- The premium and luxury end of the market will tend to be a little more resilient and there would even be some trading up to this segment thanks to a greater concern around health and quality issues. The bigger and better-known brands stand to gain from this, purely on assurances of product quality.
- The lower end of the wines and spirits market by value will see cuts in consumption because of economic reasons. These consumers will probably be regular drinkers and the most price-sensitive. Therefore, job and economic uncertainty will force most to cut back on consumption and there will definitely be trading down as well.
- The middle segment which probably is the largest segment both by volume and by value, is likely to be the most impacted. That is because this segment is perhaps most exposed to on-premise trade which, as we know is down.
- The middle segment is also what accounts for most of the world’s consumers and presents companies and brands with huge challenges for the next few years.
Irrespective of whether it is a whisky, gin or vodka, companies and brands will have to find ways to stay engaged with their consumers, without seeming to promote solo or excessive drinking at home. Having worked on this industry before in my years at Ogilvy and Ambience (now Publicis) in Delhi, I know that solo drinks consumption, sans company, is not encouraged as industry practice and therefore, even brand communication always focuses on social settings for consumption.
But what is one to do in the days of social distancing, when social gatherings might be few and far between? And with people not entertaining or going out much, it can be a real dampener for the wines and spirits business. At the same time, wines and spirits companies and brands cannot afford to stay out of sight, and consequently out of mind for long. Besides, we know that the festive season is approaching and that is when the industry is said to do around 40% of its business in normal times. Of course, these are anything but normal times, and it requires some fresh thinking.
There’s one new beverage that is fast catching on in the US and becoming a lifestyle trend, according to IWSR. Hard seltzers, or fizzy drinks in refreshing flavours that are also considered good for health because they are zero-calorie and zero-sugar, are the new craze, with even Budweiser and Corona introducing Seltzers.
Here are some ideas I think might help during the pandemic-related slowdown:
- Encourage online-shopping through e-commerce channels and offer doorstep delivery. Even small wine merchants can offer home delivery to just make the purchase of wines and spirits easier and more convenient, when people are not stepping out much.
- Form clubs of drinkers for a direct marketing and customer engagement programme.
- Some companies might want to run promotions through their wine merchants on bulk orders, or through their direct marketing programme, especially during the festive season.
- Use social media to engage more with consumers. For example, run a promotional campaign on cocktails that people can try and make at home and share with their friends at a gathering, even a virtual one. This can also take the form of a contest for best cocktail recipe.
- Lead up to fun branded virtual parties that companies can ask consumers to hold on weekends with their friends. Or on Halloween and Thanksgiving that are coming up in the festive calendar.
- Be present in media through editorial coverage in leading newspapers and magazines.
- Run specific festive gifting campaigns, for individuals and corporates
- Organise special cultural events, music concerts, films and plays or art exhibitions (which many companies already do) that consumers can stream and watch.
In other words, be in touch with consumers and encourage the human and social connection around wines and spirits, in keeping with the brand’s overall strategy.
Having visited the Champagne house of Perrier-Jouet which belongs to Pernod Ricard during my days at Ogilvy Delhi decades ago, I have put down my thoughts and ideas for the brand. It is not with the Covid pandemic situation in mind that I created the brand strategy and campaign, but with a view to growing the market for Champagnes. Perrier-Jouet faces stiff competition within the Champagne category, from many brands and much bigger Champagne houses, notably Dom Perignon and Moet Chandon from LVMH. However, the brand has many distinctive features to its advantage and I believe it can leverage them to build a stronger Champagne brand for itself.
Critical to the strategy is the Champagne drink itself and how it is consumed. It is a bubbly beverage very different from all others in that it is always a celebration drink. Consumed and served only to celebrate occasions, I thought of how to extend this realm to wider consumption. Instead of a small and niche brand like Perrier-Jouet tryin to fight Moet Chandon or Krug, I thought the brand stands a better chance of competing by making even smaller events and moments worth celebrating. In short, the strategy is to create more consumption occasions and increase depth of consumption helping to grow the market. You can take a look at the brand strategy and campaigns I have created and recommend for Perrier-Jouet, by clicking on the link below.
Somehow, I am not that fond of beer anymore at my old age. But September is usually the month for Oktoberfest, a big beer-drinking garden festival held in Munich every year. Apparently it’s been cancelled this year. However, the IWSR predicts that beer will have it easier than other spirits through the pandemic and perhaps a faster recovery.
Whatever your tipple, let’s drink to that. Cheers!
Featured image of a Christmas dinner at the start of the post is by Anthony Cantin on Unsplash