The Covid-19 pandemic is set to cause a ‘deeper and more long-lasting impact’ to the global drinks industry than the 2008 financial crash, according to International Wine & Spirits Record (IWSR), with the on-premise and global travel retail both suffering a ‘severe’ impact.

The 2008 financial crash and the global economic downturn that followed prompted major changes to consumer demand and to the shape of the beverage alcohol industry. While every downturn has its own characteristics, IWSR has looked at the impact of events which took place in 2008 and have assessed whether similar patterns are likely to unfold in the wake of the Covid-19 pandemic.

“While the pandemic and its economic consequences may share some common aspects with the downturn of more than a decade ago, such as increased at-home consumption, price stagnation and falling beer sales, there are also marked differences,” said IWSR.

“These include not only the enforced closure of the on-trade and severe restrictions on international travel, but also the fact that the BRIC markets are less likely to prop up demand this time, and the likely disproportionate impact on smaller and craft producers.”

Brand sampling opportunities at airports could be a thing of the past.

TRAVEL RETAIL SALES DROPPED 8% IN 2009

Travel retail sales suffered in 2009, with wine and spirits volumes dropping by 8%, but recovered in 2010, rising by 12% as the worst of the crisis passed.

This time around, however, there is continued uncertainty about social distancing at airports and on board aircraft, and many airlines are in severe financial trouble.

“It is very hard to see a recovery as quick as last time until a vaccine is widely available,” said IWSR CEO, Mark Meek. “This will have long and deep ramifications for the whole travel retail channel and the relationship between suppliers, operators and landlords.”

The speed and extent of any recovery – which came relatively quickly following the 2008 crash – will depend on the path of the virus, how quickly restrictions can be lifted and the impact of any future Covid-19 surges.

High-end products will likely remain stable and could even grow, especially as an investment, insists IWSR.

BRIC ‘SILVER LINING’ OF 2008/2009

IWSR recalls that during the global economic downturn of 2008/2009, the BRIC markets provided a much-needed ‘silver lining’. While global alcohol consumption in 2009 was essentially flat, it would have fallen by 2% without the contributions of the BRIC nations, where consumption volumes rose 3.7% in 2009, according to IWSR figures.

“China is likely to provide a boost, especially if no further outbreak occurs, but Russia, India and Brazil will likely not provide as much of the demand this time around,” said Meek .

“The new ‘BRIC’ is Africa and I suspect that this region will be heavily affected by the low price of oil and the impending Covid-19 crisis likely to develop across the continent.”

IWSR notes that in 2008 and 2009, standard-priced wines and spirits declined and growth for premium-and-above flattened, with a clear shift to low price and value brands.

The research company says we can expect history to repeat itself as the economic consequences of the pandemic shrink disposable incomes, with consumers gravitating to value products, the wealthy still treating themselves and standard representing the squeezed middle.

High-end products will likely remain stable and could even grow, especially as an investment, insists IWSR.