While 2020 saw unprecedented upheaval in Americans’ lives, it did not slow their taste for alcohol. In fact, the year posted the largest volume gain in the US in nearly twenty years. According to the findings in the recently released IWSR Drinks Market Analysis, total beverage alcohol volume in the US was up +2.0%, the most significant increase since 2002. The report highlighted trends in each category and offered insights into where the industry is headed in the near future.
“A key driver of US beverage alcohol consumption is flavor,” says Brandy Rand, IWSR’s COO of the Americas. “Flavored subcategories – from beer to vodka to US whiskey – are significantly outperforming traditional non-flavored subcategories. Flavor is also the top consumer driver of the fast-growing ready-to-drink (RTD) category, and that’s likely creating a halo effect on total alcohol as well.”
The report also stated that consumers’ thirst for alcoholic beverages is not slowing down as the country returns to normal. It is accelerating with year-to-date 2021 performance trending higher than 2019, with projections to end at +3.8% in volume.
One area where the pandemic caused dramatic shifts in consumers buying patterns was the emergence of e-commerce, something IWSR does not see slowing soon. “Covid-19 has acted as a trigger for alcohol e-commerce in the US. Last year, the beverage alcohol e-commerce channel experienced three to five years’ normal development in just six months. This continued growth will be a result of penetration – 44% of US alcohol e-shoppers only started buying alcohol online in 2020, compared to 19% in 2019,” says Rand. “E-commerce alcohol sales in the US are expected to increase rapidly from their low base, significantly outperforming the wider drinks market. Ecommerce alcohol sales in the US are expected to see average annual growth of nearly 45% in value over the next four years. Put into the wider market context, this means that online alcohol sales will jump to 1.6% of total off-premise (retail) volume in 2020 and reach 7% by 2024.”
The leading driver of the upward trajectory was the sprits category which logged its biggest volume increase since 1990, finishing the year up a white-hot +4.6%. While vodka is still the top seller, it is projected to be overtaken by whisky by 2022. That is due to whiskey growth outpacing vodka on the back of growth of +4.9%. Not every segment was up in 2020. Single malt Scotch was down -6.1% down due to tariffs, and Irish whiskey was impacted by on-premise closures finishing down -0.5%. But those declines were more than covered by growth in Japanese, Indian, and American brands.
Another indicator that Americans are looking for flavor was the tremendous growth of agave-based spirits finishing up +15.9% and Cognac/Armagnac logging volume gains of +20.1%. These numbers highlight consumers’ desire for higher quality products.
“The long-term premiumization trend in spirits will continue with people trading up and spending more on quality brands,” says Rand. “From this perspective, spirits percentage value growth in 2021 will be almost double that of volume, compared to 2020.”
The year saw a reversal in the volume declines from previous years seen in the wine category. It finished up 0.7% in volume. While imported wines grew +2.5%, the tariffs placed upon certain EU states by the Trump administration saw growth from markets not affected by them. It was led by Chile, Italy, and New Zealand. One area of interest was low-alcohol wines which doubled their volumes in 2020, with many major brands entering the category.
The lockdowns and closures helped ensure that the beer market continued its annual volume decline finishing the year down -2.8%. While the domestic beer category finished the year down -4.4%, the import side continues to attract consumers finishing the year up 3.1%. This led to imported beer finishing the year at a market share of 21.8%, up +1.2% from 2019. The non/low alcohol beer segment did align with the trends shown in the other categories with forecasts to grow with a compounded annual growth rate volume of +23.6% from 2021 to 2025.
One of the main items highlighted in the report is the rapid ascension of the RTD market, poised to become the second-largest alcohol category in the US in terms of volume consumption by 2021. RTDs grew +62.3% by volume in 2020, led by hard seltzers, which grew +130%. Hard seltzers represent a 56.7% share of the total RTD category in the US, followed by flavored alcoholic beverages (FABs) (25.9% share) and ready-to-drink cocktails/long drinks (6.9%).
Their prominence is driven by consumers’ continual search for new and exciting products. “When we ask RTD consumers what factors influence their beverage alcohol purchase decision, the #1 response we hear is ‘flavor’,” says Rand. “People are eager to try new brands, especially those that offer a unique or interesting flavor. While this is particularly prevalent with RTDs, we’re also seeing significant growth in flavors in beer and spirits as well.”
Who knows what the future will bring but for now, consumers are ready to reenter the world with a beverage in hand, which bodes well for the entire alcohol industry.