Ask an alcohol industry analyst and he’ll tell you: If making predictions was a wild ride before the COVID-19 pandemic, the events of 2020 have made the prognosis game even more uncertain.
However, I do not fully agree with this assessment. While COVID-19 has and will continue to disrupt the beverage market in ways that make many old models and expectations irrelevant and future planning heavily dependent on variables we cannot control, we can tentatively predict which existing paradigms and emerging will likely be applied to 2021 and beyond.
It is true that unknowns such as the effectiveness of the vaccine, the strength of the economy, the patchwork of lockdown regulations, and even the ongoing problems.supply chain irregularities create a very uncertain picture for the coming year. But anyone with an informed opinion can reasonably assume that some past and pandemic trends, like virtual conferencing, e-commerce, and direct-to-consumer sales, will continue.
While the best we can do is stay creative and flexible to withstand whatever happens, sometimes uncertainty is the only certainty we have.
Sale of wines and spirits
Will the vaccine create herd immunity or will new viral variants make it obsolete? How fast will the economy rebound? When will people feel safe to go out again? These and other unanswered questions direct Kearney Consultants, who did what could be the the most exhaustive analysis of the wine and spirits business for 2020 and 2021, to conclude that overall volume sales will increase by up to 3% this year or fall by as much as 5.8%.
Among about 30 other factors, Kearney looked at most of the 2020 wholesale runouts, which include the majority of sales channels but exclude tasting room sales, direct-to-consumer shipments, and self-distributing businesses. They present a range of scenarios that take into account how many or how few Americans will venture out to celebrate this spring, summer, fall and winter.
In what Kearney calls his “Back to the Future” predictive model, for example, “People are going to go back to 2019 consumption levels and live like they used to,” Aman Husain said during a webinar hosted by Wine and Sprits Wholesalers Association. Thursday. “That means Tuesday night’s glass of wine is going.”
Despite this, in each of their programs, the Kearney consultants expect offsite sales for home consumption to continue to grow at least a little, but not to the levels we saw last year.
“I don’t think we can drink so much alcohol! And people will start to return, ”said partner Sean Ryan.
On-premise, however, presents many more opportunities for volatility, depending on whether we continue to be cautious or release pent-up demand. Either way, they expect spirits to follow the 2020 trajectory that saw them replace wine as their favorite drink to order at a restaurant.
“The belief now seems to be that dining out is a special occasion and people say, ‘I’m going out, I’m going to have some fun. A cocktail now, it seems, is more special than wine, ”said director Michael Ooms.
Differences in the distribution of beer
Before the pandemic, the majority of wholesalers were responding to a slowing craft beer market by curbing craft brands: no more selling endless beer skus and collecting and pushing niche breweries. During the pandemic and possibly in the medium term, retailers want to play it safe by buying what they are sure to sell, while breweries try to make up for losses from COVID by sending beer to outside retailers they have. previously sold through their highly tactile taprooms.
After the pandemic, expect these trends to accelerate, sending more craft breweries in search of more favorable distribution models. While some states are finally liberalizing their prohibition-era franchise laws to allow breweries greater autonomy to self-distribute and get out of their usually punitive distribution contracts (Massachusetts more recently), entrepreneurs offer alternatives with more flexibility and lower barriers to entry.
American Craft Brands (ACB) is one such innovator. Offering limited and low cost a la carte service, American Craft Brands partners with what it calls “landers” who rent a warehouse and have a network of liquor stores and bars / restaurants contacts. in their geographic region. ACB signs on to breweries – inside or out – to supply products to landers as needed. ACB files the required legal documents and participating retail accounts can use an internet portal to find out what this lander is selling and order what they want with just seven clicks.
The brewery hires its own salesperson in the territory – if it wishes – because the ACB does not offer its own sales support. It offers options like merchandising and partners with a relatively small trucking company to deliver from warehouse to store.
What he doesn’t have are restrictive contracts. ACB takes a fixed share of the sales but does not charge any fees to the breweries and does not require a long-term contract.
Founder Jeff Slater says breweries who sign with a traditional distributor put a lot of burdens on themselves and pay for services they don’t necessarily get. “You sign a deal that you can’t get out of and you’ve locked your product in place before you even know if it’s going to work,” he says. “What we have done is a ‘light distribution’ territory agreement so that they only pay for what they use. We separated the level of distribution and we were like, “What do small brewers really need and how much is it worth?” “”
I asked the President and CEO of the Brewers Association (BA), Bob Pease, if the Craft Brewers Trade Group would focus on franchise reform now that Congress has passed permanent tax relief. federal excise in December – arguably the BA’s top legislative priority over the past decade. He replied that while franchise reform has always been a priority for the BA as it is a ‘question of market access’, this type of lobbying occurs mainly at the state level, where the BA can support but not supplant the local brewer’s guilds.
That said, the BA has a position statement on the matter, which reads, in part, “Franchise laws have been enacted to protect wholesalers from the undue bargaining power of their larger suppliers.” The application of these laws to the relationship between a small brewer and the wholesaler is unfair and contrary to free market principles. Where there are franchise laws, the BA believes that any brewer contributing a small percentage of a wholesaler’s volume should be exempt from these laws and free to enter into a mutually beneficial contract with that wholesaler.
With the smaller breweries usually having the least influence in surviving the pandemic, they will need all the relief they can get.