USA and COVID-19: Overall Alcohol Consumption Declines

Overall alcohol consumption in the USA during COVID-19 shows a declining trend according to new data. Despite some media reporting people hoarding alcohol during the initial stages of the coronavirus crisis, new data shows overall alcohol consumption has actually reduced in the U.S. This development puts pressure on the alcohol industry, especially Big Beer that faces collapsing profits. But the trend also means that some forms of alcohol harm might be further aggravated.

Despite some media reporting people hoarding alcohol during the initial stages of the coronavirus crisis, new data shows overall alcohol consumption has actually reduced in the U.S. This is primarily due to halting of on-premise alcohol sales such as restaurants, clubs and bars which were largely closed to curb the spread of the virus.

The trend in reducing alcohol use was however already existing in the U.S. prior to the coronavirus outbreak. This was largely driven by health and wellness conscious millennials and the Gen Z.

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Now with the pandemic having killed over 120,000 people in the U.S., and the fact that alcohol increases the risk of contracting the virus and further COVID-19 complications, it is predicted alcohol consumption will reduce even further.

This is bad news for Big Alcohol. As IWSR Drinks Market Analysis reports, 2019 was probably the last “normal” year for the alcohol industry. Alcohol sales are set to decline over the next four years and for even longer in the U.S.

However, with the increased interest of the younger generation in health and wellness, non-alcoholic beer and spirits sales keep growing. It is still a small segment overall at less than 2% of the U.S. beer market, but it is forecast to grow by a third in 2020, according to IWSR. Big Alcohol’s only choice is to expand non-alcoholic varieties to suit the consumer trends.

Many alcohol companies have already started doing this. Heineken has introduced the Heineken 0.0, Molson Coors released non-alcoholic Coors Edge in the U.S. and AB InBev released Hoegaarden Soft Brew.

Several craft beer companies which only produce non-alcoholic beer have also sprung up in the U.S. For example, Athletic Brewing Co and WellBeing Brewing. Other craft beer breweries have also started launching non-alcoholic variations of beer. For example, Brooklyn Brewery’s Special Effects beer.

The trend of non-alcoholic beverages is slowly catching onto the liquor industry as well. For example, Seedlip which was the first distilled non-alcohol brand was bought by Diageo recently.

The alcohol-free trend is catching on in the U.S. and COVID-19 seems to have accelerated this trend further.

But the developments in the alcohol industry are complex. As overall alcohol consumption might be declining, other data shows other trends.

Most liquor categories grew by 30% in U.S. off-trade

Almost every liquor category grew by 30% or more in the U.S. off-trade channel in the week ending June 20, according to latest Nielsen data.

The new data show that the liquor category once again led off-trade alcoholic beverage sales in the U.S., growing 39.5% compared to the same week in 2019. Wine sales grew by 23.7%. Beer, flavoured malt beverages and cider collectively rose by 21.2%.

The liquor category’s sales continued to be led by ready-to-drink cocktails (up 172%) and Tequila (up 82%), as reported by The Spirits Business.

Importantly, spikes in the alcohol off-trade are not nearly enough to offset the fact that alcohol on-trade has closed during the lockdown and shelter-at-home period over the past three months – even though many states weakened alcohol laws to permit take home alcohol and home delivery.

Consumer spending on alcohol declines, Big Beer struggles

On balance, people in the U.S. are not necessarily purchasing or consuming more alcohol. But they are moving their purchases to off-premises shops and at home alcohol consumption – which brings with a host of problems, including using alcohol as harmful coping tool, domestic violence, mental ill-health, exposure of children to alcohol use, more frequent alcohol use without social control, etc.

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Notably, some stats suggest that the overall quantity of alcohol sold remains roughly even with sales levels prior to the current public health crisis, the amount of money spent to buy alcohol has declined compared to 2019, according to Forbes.

Consumers are spending significantly less on alcohol because of the closures and restrictions to the on-premise space. People are just transferring their purchases, not buying more alcohol in total,” said Danny Brager, senior vice president of beverage alcohol at Nielsen, as per Forbes.

According to Nielsen projections, off-premise volume sales would need to grow by at least 22% over the same time period last year to make up for the temporary loss of the on-premise alcohol trade if the U.S. remained in full lockdown but allowed to-go sales from bars and manufacturers. While liquor and wine sales volumes have grown in that extent, the beer, cider and flavored malt beverages category has grown, on average, only 17.5% for the 12-week period ending May 23.

Consumer spending on alcohol has collapsed by double digits, compared to the same period in 2019.

According to Nielsen, on-premise sales account for approximately 45% of total beverage alcohol sales in dollars. If on-premise dollar sales have fallen 90%, as Nielsen figures show, off-premise sales would need to grow by a consistent 73% to make up the difference, reports Forbes.

While off-premise value growth has been strong, it has not even approached that level,” said Mr Brager, according to Forbes.

A side effect for the beer industry is that 10 million gallons of beer have not been used since March 16 and 17, 2020 when lockdowns were instituted and are now going band, across the U.S. according to the National Beer Wholesalers Association. The inevitable returns and keg dumps will further hit the beer industry, according to Forbes.

These effects on the alcohol industry are already being used by Big Alcohol lobbyists to push for more weakening of existing alcohol laws, in order to reduce “the regulatory burden” as the alcohol industry lobbyists call it.

USA: Big Alcohol Uses COVID-19 to Change Alcohol Laws