Above image credit: ecoSPIRITS
It should have come as no surprise, but the alcohol industry has proven to be remarkably resilient, even as Covid-19 casts a long shadow over businesses big and small alike around the world.
What was definitely not a surprise however, has been the multitude of ways the scene has adapted to suit the newly established norms with which individuals and businesses are now interacting with alcohol.
While the past 2 years of living with the pandemic has been a brutally realistic wake up call for businesses, 2022 is likely to be the year where the fruits of transformation and change will be reaped – at least for those who have sown their seeds to cater to a new breed of drinkers. Below, we list down seven key trends, adapted from research by drinks market analysts IWSR, and give our own spin on the factors that will dominate the alcohol beverage industry throughout the New Year.
[Read more: Asia Pacific alcohol industry to return to pre-Covid levels by 2025]
New luxury segments
What was considered niche and novel will stand to gain appeal as a new form of luxury good. From agave-based spirits like tequila and mezcal, to new forms of whiskies from the US, Ireland, and Japan (which all registered absolute growth in 2020), increasing levels of wealth among more discerning consumers in developed markets will continue to underpin growth.
As new consumers who are less price conscious enter the scene looking for new status products to consume and to complement their search for the less ordinary, the craft luxury segment will stand to gain from this greater market diversification. In other words, people are willing to experiment and spend top dollar on something, no matter how unestablished, as long as they resonate with it.
Entrenchment of no- and low-alcohol products
What started as a trend is now a functional part of the beverage industry. Low- and no-ABV adult beverages have carved out their own piece of the pie, with demand driven largely by two types of consumers: ‘substitutors’ and ‘blenders’.
‘Substitutors’ are those who consume these products in place of full-strength alcohol for certain occasions, such as during Dry January, and account for most of the demand. Meanwhile, ‘blenders’ are those who switch between consumption of normal alcohol and no/low beverages on the same occasion, as a way to reduce overall alcohol intake.
Not just about offering complexity of flavour for adult drinkers, developments in the no/low space are also enabling producers to create alcohol-free products that offer mood-enhancing or functional benefits. These focus on how ingredients will make consumers feel, and are seen as an alternative way to enjoy traditional alcohol occasions.
Blurring of e-commerce lines
Online sales modes have undoubtedly been a winner throughout this crisis. The value of e-commerce has increased by almost 43% in 2020 across 16 key markets (including the US, China, and Japan), up from an increase of 12% in 2019. By 2025, e-commerce is projected to represent about 6% of all off-trade beverage alcohol volumes, compared to less than 2% in 2018.
This rush towards online has blurred previously clear lines. “For example, omnichannel retailers are establishing logistics partnerships with on-demand services in order to offer faster delivery; on-demand platforms are using ‘dark stores’ to improve delivery times and so become more like marketplaces; and marketplaces are establishing networks of physical stores,” states the IWSR report.
This means that as the e-commerce space matures, for businesses to be relevant to consumers, the need to know and understand the most frictionless means of transacting with their customers has become ever more important.
More astute drinkers
People have been drinking a lot more from home the past two years. With that comes broadened palates and more experienced consumers, who now know more about their own preferences, as well as the options available to them, than before. Importantly, alcohol retail prices have become much more visible, and are often cheaper than bar prices. This gives rise to consumers being more aware of the true value of the beverage being served to them.
People tend to pick better quality drinks as well when drinking in their own homes. So even though people are drinking more in their abodes, the missive here isn’t that people are going to drink less outside, but rather, that as people return to bars once more (the allure of drinking at bars remains resilient), they are going to be requesting for better drinks while being well aware of the price value the premise is really offering.
Premiumisation of RTDs
Though nothing new, especially given the rapid growth of convenient ready-to-drink options the past 2 years, RTDs have become a class of their own thanks to at-home drinking being a new norm. Coupled with the fact that people are drinking better products overall, RTDs too have begun their ascent into craft or premium territory.
Spirits-based RTDs (i.e. cocktails in a can or bottle) are leading the charge in premiumisation, as there is the perception that properly done cocktails are seen as being of higher quality compared to packaged beverages of other types. RTD wines, for instance, grapple with the view that canned vino are of lower quality than their usual 750ml bottle counterparts.
Real sustainability, not lip service
The conversation surrounding sustainability now leans heavily towards action. With talk seen as cheap, consumers are looking at real practices and policies adopted by businesses that have actual positive impact on the environment. From zero waste movements at bars to usage of ecoSPIRITS distribution systems rather than single-use bottles, these tangible acts provide great brand value on top of their positive environmental impact.
Closely linked to sustainability is the impetus towards supporting local. Not only is it better in terms of reduced carbon footprint due to lesser logistical maneuvering, supporting local is seen in the same vein as sustainability as being pro-community. Consumers also tend to view pro-environment and pro-local initiatives as a means to do their part for the world.
New normal environment
Beyond the consumer-driven factors discussed above, a slew of issues ranging from rising costs of packaging and logistics, supply chain disruptions, and the impact of climate change, will increasingly affect the alcohol beverage industry in ways big and small. Importantly, these troubles aren’t part of a passing phase, but rather, persistent factors that must be taken into account as part of everyday operations.
Also, while the past 2 years saw a big shift in the ways consumers purchased alcohol due to travel restrictions, 2022 will likely see a slight return to pre-Covid purchasing habits as countries open up more and more. While the need to cater to domestic markets was rightly given high priority by businesses in 2020 and 2021, the New Year is the time to see an uptick in spending from travellers once again.
Check out the full IWSR report.
[Read more: Should alcohol businesses keep their e-commerce arm post-pandemic?]