How COVID-19 Affects Alcohol, Advertising Industries*
The COVID-19 pandemic is rapidly spreading across countries. As of now, the virus has spread to 198 countries and territories and has caused a total of 488,345 infections worldwide. The pandemic has affected many industries around the world.
This article investigates how the COVID-19 pandemic and its consequences are affecting the alcohol and the advertising industries. This articel is as well as illustrating some troubling emerging trends.
Alcohol industry under pressure
The pandemic has lead to political decisions that are restricting business for the alcohol industry. As people start practicing in physical distancing and as governments institute lockdown measures, restaurants and bars close up to contain and prevent the spread of the virus. A decline in alcohol consumption can be expected as availability reduces across the world.
Several major Big Alcohol companies have already adjusted their previous growth forecasts for 2020 to reflect the decline.
- For example, Pernod Ricard is now expecting a 20% organic fall for fiscal 2020 in contrast to its original expected 5 to 7% growth.
- AB InBev has forecasted a 10% decline for the first quarter of 2020.
- Remy Cointreau expects the sales in 4th Quarter to be heavily affected by COVID-19 in China and beyond.
The decline in sales and consumption of alcohol is driven by several factors related to the COVID-19 epidemic.
- People switching to work from home has challenged the marketing and sales operations of the alcohol industry as well as many other industries.
- Alcohol consumption patterns in society are changing as people start physical distancing and avoid bars and restaurants. The on-premise trade is usually highly profitable for the alcohol industry.
- Bars and restaurants are major distribution channels for the alcohol industry. With their closure sales are likely to decline rapidly (if the alcohol industry cannot find alternative options for retail).
- Extra sanitization methods and hygiene requirements due to the virus mean a longer time to produce and distribute.
- Reduced hours of sales as many alcohol outlets either close or reduce the opening times limit alcohol availability and thus sales.
- For example, in Canada, home delivery of alcohol from LCBO is reduced as people need to pick up from a public depot according to Proof of Age Requirement laws and people are increasingly discouraged to go out.
Declining sales means lower consumption of alcohol, which can reduce alcohol problems in society.
Reduced alcohol supply is specifically positive during the pandemic as alcohol is known to weaken the immune system which will make people more susceptible to infections with and complications from the virus. The World Health Organization has recommended avoiding alcohol during this period specifically to reduce risks of COVID-19.
Alcohol harm is multifaceted and could potentially be severe given the specific circumstances of this crisis, if availability and sales are not decreasing and people are not avoiding or limiting their alcohol intake.
The pressure of declining sales has pushed the alcohol industry to look for alternatives to cover their losses and protect their profits as much as possible. For example alcohol producers are turning to producing hand sanitizer and disinfectants at mass scale, finally using alcohol for the purpose it should be used as a disinfectant on surfaces. Some of the major companies who have switched their operations are Pernod Ricard, AB InBev and Bacardi. Even some small distilleries are seen to adopt this new strategy.
While providing a much needed resource is positive during this pandemic, we must be aware major corporations are doing so partly for marketing purposes, similar to the corporate social responsibility (CSR) projects conducted by the alcohol industry to build their image and maintain brand loyalty. For example, Pernod Ricard’s move to produce hand sanitizer in the United States was lauded by President Trump, which means after all, free media coverage and good PR for a company that makes health harmful products.
Advertising industry under pressure
The marketing and advertising industry is also under pressure during the COVID-19 pandemic as many marketing and ad budgets get cut off. However, the advertising industry has come up with strategies – with possible public health ramifications – to stay afloat.
One strategy used by the industry is switching to digital marketing, focusing on TV, streaming platforms, social media and gaming advertising. Alcohol industry marketing has been fast to adapt as could be predicted.
- For example, Bud Light launched its first “Bud Light Dive Bar Tour: Home Edition,” which streamed on Instagram, featuring country music star Jake Owen performing from his own home. There was a cross promotion with alcohol delivery service Drizly operating in the US and Canada, which gave people $5 off their orders with a promo code. The show drew in 4000 live viewers.
It’s already known that celebrity marketing is potent especially with younger demographics. One study showed that alcohol marketing awareness was linked with teenage alcohol consumption, and one major source of marketing was through celebrities.
Another marketing strategy used is being proactive. As mentioned above major alcohol brands have switched to producing hand sanitizer in an effort to appear proactive with the pandemic. This strategy paints a responsible, sensitive picture about companies, despite the products which they may usually sell that result in heavy health, social and economic damage.
One main strategy which the Kantar group advises companies to adopt is to keep brand loyalty going by positioning the brand as meaningful and salient so that when consumers come back to buying the products in a specific category they will choose the brand. The above examples show the alcohol industry has already adopted this strategy.
Despite the declining alcohol availability in many countries, there are certain troubling developments and trends emerging in alcohol consumption due to the current crisis situation. These include:
- Increasing alcohol use in some societies due to myths,
- Continued alcohol production in some countries,
- Alarming increase in off-premise alcohol sales and changing alcohol consumption patterns to home alcohol use, in some countries,
- Increasing alcohol delivery services,
- New alcohol industry marketing strategies through digital media and brand image building,
- Tendency for substance use to increase during crisis situations as coping strategy through self-medication, and
- Weakening of existing alcohol policy measures (and rules for other harmful substances) that are likely difficult to reinstate after the crisis.
- Looming further concentration of the alcohol market and formation of even bigger oligopols.
1. Increasing alcohol consumption due to myths
At the start of the pandemic myths about alcohol being used to fight COVID-19 circulated heavily in social media. This had dire consequences as people in societies that generally don’t consume alcohol took up alcohol intake. For example, 194 people in Iran lost their lives due to consuming large amounts of alcohol because of this myth. In Turkey, 30 people have died due to alcohol use to prevent COVID-19 infection.
Movendi International has already addressed these myths in a blog article. Human consumption of alcohol is harmful and specific to the current situation it harms the immune system. Alcohol is a powerful disinfectant, when applied on surfaces.
2. Continued alcohol production in some countries
Despite the physical distancing measures in place and most industries switching to work-from-home, the United Kingdom (UK) has given the okay to go ahead with alcohol production in factories. UK has added alcohol retailers to the essential businesses list which can remain open during the pandemic.
Bottling plants and distilleries in UK can remain open. Workers have to maintain physical distancing, while commuting to work and at work. The industry says as long as employees are happy to work then production can continue. However, recently Unite union members in Scotland have called for a halt of work at Diageo plants due to workers’ stress and anxiety. Diageo does not plan to halt operations stating they are following government recommendations for safety.
As the UK authorities have said online non-essential services can remain open during the crisis, alcohol companies will also be selling online. This will increase availability of alcohol in the country and add to alcohol problems.
3. Alarming increase in off-premise alcohol sales and changing alcohol consumption patterns to home alcohol use
In some societies, an alarming increase in off-premise alcohol sales can be observed as people started to stock up on alcohol.
- Nielsen data for the United States show, total U.S. off-premise sales for wine grew 27.6%, liquor 26.4% and beer/flavored malt beverages/cider 14% in the week ending March 14, 2020 vs. the same week one year ago.
For perspective, Nielsen points out that in the 13-week period ending January 25, 2020 wine sale was nearly flat – up only 0.6%, liquor sales were up only 3.8% and the beer/flavored malt beverage/cider category was up by 5%.
- One company, Constellation Brands, reports a 3% increase in off-premise alcohol sales.
Even more concerning is that most alcohol is being bought in bulk.
- Nielsen data show in the United States, 3 liter boxed wines are up by 53% over the previous year, canned wines were up by 95% and the 24-pack beer category is up 24%.
An underlying trend which is demonstrated from the increasing off-premise sale is that alcohol consumption patterns are increasingly changing to home alcohol use due to the pandemic. This trend is concerning as it normalizes alcohol at home, which can increase consumption as well as expose children and teenagers to alcohol at an early age.
Evidence from past crises shows that alcohol is often used for self-medication, to cope with anxiety and other mental health problems, isolation, economic distress stress. Alcohol use is strongly linked to suicide, meaning changing alcohol use patterns might increase suicide rates.
Furthermore, alcohol consumption at home is linked with violence against women and children.
4. Increasing alcohol delivery
As people are practicing physical distancing the alcohol delivery market is seeing a massive boost. The delivery service Drizly (also mentioned above for its online cross promotion with Bud Light) reported a 450% increase in sales in New York City in the 72 hours following the closure of bars in the city.
Online alcohol sales and delivery is already posing a risk in increasing underage alcohol use. These services are hard to monitor and may deliver alcohol to underage youth or already intoxicated persons. What’s worse is with the pandemic minimal contact delivery is encouraged, which means even underage teens can get alcohol delivered fairly easily. For example, Drizly offers minimal contact delivery.
5. New alcohol industry marketing strategies through digital media and brand image building
Already mentioned above is the negative impact of alcohol advertising during this time, specifically through digital media and also in brand image building which will increase sales of a brand on the long term.
The risk is significant that children are exposed to even more alcohol promotions, ads and commercials as they spend more time in front of the TV, on the internet, and in social media – all channels that are flooding minors with pro-alcohol messages.
The alcohol industry is already working on establishing alcohol consumption during working hours as a new norm. For example, Heineken:
6. Tendency for substance use to increase during crisis situations
The cannabis industry says that consumers are “closely wedded” to cannabis and alcohol just as other “necessities”. Taking alcohol consumption during the economic recession from December 2007 to June 2009 into count, analysis shows that largely consumption maintained and increased afterwards.
Joe Devlin, senior vice president with Ikänik Farms – a cannabis farm – goes as far as to say the marijuana industry is “relatively recession-proof”.
The industry believes consumers might switch to buying cheaper products or products on deals and buying lesser in quantity, but that they will continue to consume and even increase consumption during COVID-19.
This is partly due to using substances as an unhealthy coping mechanism to deal with stress and also because substances are normalized as “rewards”.
7. Weakening of existing alcohol policy measures (and rules for other harmful substances) that are likely difficult to reinstate after the crisis
As an example for an observable trend, a specifically harmful policy decision comes from California, United States, where the state government decided to weaken alcohol control laws in view of the pandemic. In a series of new orders and regulations, state authorities have eased restrictions on cannabis dispensaries and on restaurants in the alcohol business. Their reasoning is to help these businesses with the oncoming financial impact due to physical distancing.
Pot shops have been classified as essential, and allowed to remain open during the shutdown. Certain cannabis outlets have seen unprecedented increases in sales of between 150 to 400%.
Restaurants have been allowed to sell liquor on the go and sell whole bottles of unopened bottles of alcohol.
With the tendency to use substances increasingly as mentioned above due to stresses from the crisis and being confined to homes, the weakening of alcohol control policies could have serious adverse effects.
In some countries and jurisdictions, alcohol industry lobbying and corporate social responsibility have succeeded in acquiring “essential service” status, protecting alcohol retail outlets from being shut down, as all other businesses that are not essential for society’s functioning during the lockdown phase of the pandemic.
The alcohol industry is in fact using the pandemic to lobby for deregulation and weakening of existing alcohol laws, for instance requesting tax reductions and the suspension of alcohol retail restrictions.
Early reports are already showing rising numbers of cases of domestic violence, child abuse and neglect. The weakening of alcohol policy protections is likely to have severe consequences in the short- and long-term: alcohol harm might not decrease as would be expected in times of crises and it is likely difficult to reinstate the same level of alcohol policy protections after this pandemic is over.
Even before the COVID-19 pandemic healthcare systems and services were heavily burdened by alcohol harm. But now, with all available resources being diverted to the fight against the novel coronavirus, the strain that alcohol is putting on health systems is felt more severely and acutely.
For example, early observations from South Africa show that alcohol-related harm such as emergency room visits, car crashes and violence are declining after new alcohol rules were put in place a week ago.
Therefore, preferential treatment for the alcohol industry will come at high costs for society, including both public health and the economy.
8. Looming further concentration of the alcohol market and formation of even bigger oligopols
Research has previously illustrated the problems associated with increasing market concentration in the global alcohol industry.
The growth of global alcohol corporations and concentration of the global alcohol market in the hands of a small number of companies is a public health concern because it may be associated with increased population-level exposure to alcohol marketing. Alcohol oligopolies in many countries permit oligopoly profit taking, which in turn facilitates higher marketing spending and acts as a barrier to entry, thereby preserving the oligopolies,” wrote Esser and Jernigan in 2018.
Increased marketing activity, in the form of both product development and promotion, can be used to segment and target groups that have historically not consumed much alcohol. In many LMICs, this includes women. For instance, in India, Diageo, a London-based global alcohol corporation, has explicitly targeted marketing toward women.
Researchers emphasize that oligopoly organization plays such a key role in the global shape of alcohol marketing. To appreciate the extent and scale of market concentration, two examples show the reality (around 2016) in the alcohol industry: Two multinational alcohol corporations were among the world’s 500 largest companies based on revenue in 2016, according to Fortune’s Global 500 list:
- Belgium-based Anheuser-Busch InBev (AB InBev) had revenue of $43,604 million for a rank of 211, and
- Netherlands-based Heineken had revenue of $23,208 million for a rank of 459.
For comparison, the Philip Morris International tobacco corporation had revenue of $26,794 million for a rank of 398.
So far, four waves of alcohol market concentration were identified. It is likely that the coronavirus crisis is now accelerating the fifth tidal wave of further oligopolistic market organization.
Already, voices of concern are even coming from inside the alcohol industry, for example from the United Kingdom. A UK high-end liquor distributor amphasized the probability that the days of the small-scale and independent distilleries and brewers might by “numbered”, according to Just Drinks – a development that would bring further market dominance to global alcohol industry giants, especially in the beer and liquor industries.
A concentration of market power means further acceleration of the industrial epidemic that is alcohol harm. Growing market control also leads to increasing marketing presence, increasing corporate political activity (lobbyism) and the buying of science, since the purchasing power of the giant multinationals is getting ever stronger.
The Globe and Mail: “How is coronavirus affecting the wine and spirits trade?“
Market Watch: “Pernod Ricard slashes guidance on coronavirus hit“
New York Post: “From alcohol to ventilators, how coronavirus is upending business”
Wine Industry Advisor: “Pandemic Alcohol Stock-Up Skews Toward Wine“
Marijuana Business Daily: “Is marijuana ‘recession-proof?’ Industry experts say yes – to a point – and alcohol might be a guide“
The Oregonian: “The alcohol delivery service whose sales are going through the roof“
Cal Matters: “Cannabis and cocktails amid coronavirus? State says carry on“
* This article was edited, using the following sources on April 13, 2020
Just Drinks: “UK alcohol production allowed to continue as lockdown bites“