2020 Hindsight: How the Alcohol Industry Landscape Changed
From channel shifts to changing regulations, this is how 2020 changed the alcohol landscape — and how those effects will persist into 2021
Just as it altered every aspect of life in 2020, the pandemic had a profound effect on the beverage alcohol landscape in the U.S. As markets across the United States enacted shutdowns and people limited their ventures out of the house, consumer alcohol purchasing behavior shifted significantly.
With on-premise establishments closed or heavily restricted, consumers stocked up on retail alcohol purchases and discovered the convenience and access that e-commerce provides. Even as an economic downturn loomed, consumers reallocated their budgets to higher-priced bottles as travel and dining spending diminished, and new categories and formats found increased value as gatherings moved outdoors amidst safety restrictions.
Looking back, how did 2020 transform the alcohol industry landscape — and what will be the long-term effects going forward?
Significant Channel Shifts
The alcohol landscape changes were particularly dramatic for online sales, as bars and restaurants closed and consumers limited in-person shopping trips.
“There are two main aspects I can think of in terms of impacts,” says Danny Brager, a beverage alcohol industry consultant and the former senior vice president for Nielsen’s beverage alcohol practice. “The first was massive channel shifting from on-premise to off-premise. Second was the explosion of e-commerce. That is going to be, in my opinion, enduring and pervasive. The world’s not going to go back.”
According to a recent consumer behavior study conducted by The IWSR, alcohol e-commerce adoption has been steadily increasing since 2018. 2020, however, brought a step change. Of all e-shoppers surveyed, nearly half (44 percent) began purchasing alcohol online for the first time in 2020. IWSR further predicted that e-commerce alcohol sales would increase 80 percent in value in 2020 compared to the previous year, and that online sales would reach 1.6 percent of total off-premise volume in 2020.
Drizly sales data confirm the spike in online shopping. Year-over-year, sales surged 350 percent in 2020 and even surpassed a 1,000 percent increase during peak pandemic time periods.
“Overall, the growth last year points to increased consumer awareness of alcohol delivery as a legal option, as well as an overall shift in consumer purchasing behavior toward online ordering and delivery,” says Liz Paquette, Drizly’s head of consumer insights. “From the retailer perspective, online sales and delivery became an increasingly important sales channel amidst lockdowns and social distancing.”
Changes from Pandemic-Related Legislation
As on- and off-premise businesses dealt with the impacts of Covid-19 in March and April, from diminished foot traffic to mandated closures, pandemic-inspired regulation changed alcohol sales across the country.
As a wave of shutdowns rolled out around the country, many states deemed alcohol retailers “essential businesses,” allowing them to continue to operate under safety restrictions. Meanwhile, many cities and states newly allowed restaurants and bars to sell alcohol to-go as a means of revenue generation, some of which have made the changes permanent.
Some states recognized the value of alcohol delivery for both consumers and businesses, such as Georgia and Oklahoma, which both legalized alcohol beverage delivery to consumers’ homes for the first time in 2020. Oklahoma’s model only allows retailers’ employees to make deliveries, while Georgia’s permits retailers to work with third-party providers such as DoorDash.
Legislation for both states is likely to remain in place beyond the pandemic as retailers shift their long-term business models toward e-commerce. Other states, such as Oregon, loosened restrictions to widen the hours for delivery, and there’s more to come ahead.
“For 2021, there are several other bills on the table for new cities and states to legalize alcohol delivery,” says Paquette, “including Las Vegas, Alabama, Arkansas and others.”
Trading Up and Taking Comfort
In 2020, many consumers took the opportunity to splurge on higher-end products. “If you just look at the off-premise numbers, there’s no question that we’re trading up,” notes Brager. “The highest growth rates for beer, wine, and spirits are coming from the more premium — and in some cases, as for spirits — the ultra-premium segments.”
Along with premiumization, Drizly saw a move toward “comfort” brands. “Throughout 2020, we saw a combination of both of these trends,” says Paquette. “As consumers shifted to celebrating occasions at home, trading up made them feel special. However, with customers spending less time tasting new brands and products in stores or on-premise, familiar brands like Josh Cellars benefited from customers turning to their tried-and-true favorites.”
As the pandemic extends into 2021, adds Paquette, both trends are likely to continue. Amidst ongoing restrictions on activities such as travel, dining out, and concerts, consumers who traded up on alcohol last year are unlikely to scale back.
Bringing Cocktails Home
With visits to bars and restaurants largely restricted, crafting cocktails at home emerged as a major 2020 trend. Liquor categories like tequila spiked in sales, and demand for cocktail ingredients surged. Drizly sales of liqueurs, cordials, and schnapps surged 549 percent year-over-year in 2020 versus 2019, and sales of mixers, syrups, and bitters grew 668 percent year-over-year.
Drizly’s Best-Selling Liqueurs, Cordials, and Schnapps SKUs, 2020
- Baileys Irish Cream Original
- Grand Marnier Cordon Rouge
- St-Germain Elderflower Liqueur
- Disaronno Originale Amaretto
At the same time, consumers found new affinities for ready-to-drink (RTD) cocktails, embracing the convenience and quality of RTDs as replacements for their favorite bar concoctions. Sales of RTD cocktails boomed, growing more than 1,088 percent in 2020 compared to 2019.
The success of RTD cocktails was boosted by changing norms for consumer socialization. Rather than gathering around a table and passing around a pitcher of sangria or margaritas, consumers increasingly valued single-serve beverages that were conducive to socially distanced, low-touch get-togethers.
In fact, demand was so high for the summer’s blockbuster RTD cocktail, High Noon (a spirits-based beverage marketed as a hard seltzer), that many retailers had trouble keeping it in stock. Though the product shortages were not advantageous for retail sales, they did allow brands like Cutwater Spirits and Fisher’s Island to pick up sales share.
Drizly’s Best-Selling RTD Cocktail SKUs, 2020
- High Noon Hard Seltzer Variety Pack
- Skinnygirl Margarita
- High Noon Pineapple Hard Seltzer
- High Noon Watermelon Hard Seltzer
- High Noon Grapefruit Hard Seltzer
- High Noon Peach Hard Seltzer
- High Noon Black Cherry Hard Seltzer
- Jose Cuervo Authentic Lime Margarita
- Cutwater Tequila Margarita
- Jose Cuervo Golden Margarita
Persisting Impacts for 2021
While alcohol sales for the first and second quarters of the year may look sluggish compared to the pantry-loading surges of the spring of 2020, Q3 and Q4 have incredible potential, according to Brager. “Q4 could be a fantastic quarter, because if the vaccine is here people are going to feel liberated,” he says. “It could be the roaring ’20s all over again, because people are going to be so happy and relieved to get back to life as normal.”
Even as pandemic restrictions lift in response to vaccines, it’s likely that the trends and shopping behaviors consumers adopted in 2020 will extend into 2021 and beyond. “The pandemic has shifted the way consumers shop across the board not just for alcohol,” says Paquette. “In Drizly’s June 2020 consumer survey, 72 percent of customers said they expect to make the majority of their alcohol purchases online in 2021. Many customers will continue to turn to the value they found in shopping online and getting deliveries at home.”