On Tuesday, Vinepair published an article by Tim McKirdy entitled, "What's Fueling the Billion-Dollar Bourbon Boom?" In it he writes, "It's no secret that liquor sales have thrived during the coronavirus pandemic."
Not only is it not a secret, it's not true. What has thrived has been at-home drinking and hence liquor stores sales, what the industry calls "off-premise." Yes, off-premise is thriving but on-premise, meaning bars and restaurants, is dying. The one has not offset the other so overall liquor sales are down or, at best, flat.
How bad is it?
IWSR is one of the leading research companies serving the alcoholic beverage business. Back in May, they put out a press release with this headline and subhead: "Beverage Alcohol Not Expected to Rebound Until 2024. Global Alcohol Consumption Grew Last Year, However, New IWSR Research Forecasts That Covid-19 Will Push 2019 Volume Gains Back By 5 Years."
That's the real story.
They elaborate: "Total global alcohol consumption, led by increases in beer and ready-to-drink products, grew by +0.1% in volume and +3.6% in value in 2019, but losses in the months-long near complete shutdown of bars and restaurants across the world this year has not been offset by upticks in liquor retail and ecommerce. IWSR expects this to lead to double-digit declines in 2020, which IWSR estimates will take until 2024 to reach 2019 pre-Covid-19 levels (though in the UK and US, IWSR forecasts that pre-Covid-19 beverage alcohol volume levels likely won’t return until after 2024.) Global travel retail, severely affected by widespread travel restrictions, will see a particularly harsh decline in 2020 but is expected to reach pre-crisis levels by 2024."
Did you catch the caveat about the US and UK? They predict recovery some time after 2024, and they aren't prepared to say how much after. Yes, this release is from May, but has anything happened since then that would make the outlook rosier?
I got into the beverage alcohol business at about the time the American whiskey industry collapsed. For years after that, industry observers predicted a rebound was "just around the corner." It wasn't. It took about 40 years. Only now, as in 2019, has whiskey production (as in new distillate going into barrels) exceeded the previous high-water mark. As McKirdy notes, in 2019 "Kentucky distillers filled more than 1.7 million barrels of bourbon — nearly four times greater than 1999’s total. Production in the Bluegrass State ... is the highest it’s been since 1972, according to data from the Kentucky Distillers Association (KDA)."
Production in the other big production state, Tennessee, is similarly at record levels.
It's bad all over. Last month, a study prepared by the Distilled Spirits Council (DISCUS) and the American Distilling Institute showed that craft distillers have lost 41 percent of their sales, worth more than $700 million, since the shutdowns started earlier this year. Thirty-one percent of their employees have been furloughed.
Craft distillers have been hit so hard because sales at the distillery are such a big percentage of their total sales. About 40 percent of craft distillers make most of their sales at the distillery. Most craft distilleries have seen those at-the-distillery sales decline and 15 percent say their distillery store is completely shut down.
But the worst hits are happening with on-premise retail; bars and restaurants. Those who haven't thrown in the towel are struggling to survive. Millions are out of work. No one is thriving.
There is a lot of denial around this crisis, driven by partisan politics. But if you're willing to look at the facts in a clear-eyed way, it's possible to get a picture of what's really going on and what happens next. I'm lucky because I'm mostly retired. Like everyone I've lost some income streams, but most people have it much worse than I do. If I have any advice it's just this.
Be realistic.
6 comments:
On-premise isn't dying so much as it's being murdered.
Killed by its own government.
Ironically, it wasn't so long ago that the politicians answered to the liquor business, or else.
Now the politicians answer to nobody.
The business is being killed by the same thing that has killed about 200,000 of our fellow Americans. Blaming it on the government is short-sighted, small-minded, and contrary to the knowledge in the post above.
Failure to assign the part of the blame that is rightly due over the failure of "leadership" in our country is also short-sighted and small-minded. Other countries showed us how to minimize long-term risk and closures, but our country chose to maximize it instead. There are other factors, but government's actions (along with failures to act) are not as trivial as your response above would have them.
Chuck,
Very insightful. I work in the performing arts industry and the parallels between your commentary and what’s happening to us are striking... especially the denial and unrealistic thinking about what the (short-term) post-COVID world will be like. When will concert venues be able to put on shows without going deep into the red? Probably around the same time that bars will start seeing black. Some of my colleagues talk about the pent up demand for arts and people craving to get back to their old lives. I hope that’s true, but if a wine bar can’t fill it’s seats (and likely won’t for a while... vaccine or not), how can the opera, with our older at-risk concert-goers? And without the surrounding bars and restaurants open, it makes drawing concert-goers to downtown venues even more difficult. I guess we’re just going to be waiting for a critical mass of those couples who go out to dinner on a Thursday night, order the pre-fixe, a glass of a Blanton’s afterward (obviously Blanton’s), and head to the ballet. When will that happen in the US? I guess 2024 sounds like what we should be preparing for, but I’ll still be hoping for the best.
Higher end products are also not selling at liquor stores. Perhaps people are being more careful with their money and choosing cheaper options or maybe buying higher end booze created social status when shared with friends that just isn't there when they are drinking home alone.
Chuck, in Buffalo NY area have not seen any Weller products, Blantons, Eagle Rare, etc. for a long time. Now Bookers is not on the shelf.
So to me there is lack of the good stuff where I am.
Oh, I got some of the new Knob Creek 9 year old. It is way way better the NAS Knob Creek.
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