Total Beverage Alcohol Overview – March 2020

The March edition of bw166’s Total Beverage Alcohol Overview was released yesterday. 

The market has changed dramatically during March.  Some highlights include:

  • Pantry loading is evident in March with the Total Beverage Alcohol Index increasing 3.0% over the last twelve months – typically, this increases at an annual rate of 1.2%.
  • Off-Premise channels increased Beverage Alcohol sales by volume between 24% and 27%.
  • Volumes in On-premise Eating and Drinking Places declined by just over 50%.
  • On-Premise employee wages declined by 38%, which will continue in April.
  • In April, volume sold through the On-Premise will continue to decline between 80% and 90% versus April 2019.  The Off-Premise will likely make up this volume.  However, margins will contract as; generally, On-Premise has higher margins.

Recovery from the COVID-19 crisis will not be quick.  Some form of social distancing will likely be mandated until either a viable treatment is available or a vaccine is widely available.  The extension of social distancing implies that Off-Premise sales will be bolstered from reduced On-Premise consumption.  Considerations for the On-Premise include:

  • Limited seating, probably at 50% of standard capacity, will be the norm, challenging many restaurants to be profitable. 
  • Consumers will be hesitant to frequent restaurants immediately upon opening, so even building to 50% of capacity may take months.
  • Beverage Alcohol needs On-Premise for a healthy and vibrant market.  Suppliers and wholesalers need to support the slow recovery of the On-Premise.
  • Rumors have circulated of laying off or furloughing On-Premise staff at wholesalers or suppliers.  Companies should consider the short term benefits versus the long term challenges of hiring, training, and building relationships.
  • Wholesalers should reconsider supplier-dedicated teams in the On-Premise during this recovery to improve operational efficiencies and streamline the sales process for those accounts.
  • As the On-Premise opens to customers again, Wholesalers and Suppliers need to establish reasonable expectations given the slow recovery that will occur as well as be mindful of what is in the best interests of On-Premise operators during this phase.
  • On-Premise accounts will have low initial order quantities, which may lead wholesalers to limit deliveries or move to Tele-Sales.  While this may minimize expenses in the short term, wholesales must also consider the long term importance of building and maintaining relationships.

There is no doubt that Beverage Alcohol will not return to the old normal once this crisis has passed. Instead, a new normal will result, and a healthy and vibrant On-Premise market needs to be part of that norm.

For more details please subscribe to the bw166 – TBA Overview.