Insight into Consumption Habits During Lockdown
Source: Jefferies
June 15, 2020
An industry survey suggests the majority of people have consumed the same or less during shutdowns. The key question for the industry is whether revenue pools post lockdowns will be impacted if the on-trade does not make a full recovery. Re-openings will drive improving sentiment towards beverages, however we think soft drinks is a better way to play this than spirits given earnings that have largely been reset downwards and lower valuations.
Insights
What’s new? The International Alliance for Responsible Drinking (IARD) has published findings from a survey of 11,678 adults in Australia, S.Africa, Mexico, France, USA, Germany, UK, Japan and New Zealand. The survey relates to consumption habits during 13 to 21 May.
Majority drinking the same or less. (1) 84% of drinkers are drinking the same or less alcohol during shutdowns. (2) 11% drinking more in shutdowns, however of these 72% plan to revert to old drinking habits once lockdowns ease (3) 5% of drinkers have said their drinking has led to more problems.
Jeff view. The survey provides some balance against potential negative publicity around photos of empty supermarket shelves, with people drinking more at home given the lower cost of alcohol vs the on-trade. We believe that consumption habits during lockdown are likely to differ by region, with pre-crisis share of throat trends likely to be exaggerated during lockdown, for instance spirits performing better in USA, beer better in Europe. Although survey indicates that end consumption levels have not altered materially, we see some risk of destock in spirits. Brown-Forman pointed to US destocking in May/June and Remy has also commented on risk of shipments underperforming depletions in cal 2Q.
Life after lockdown. (1) 30% are drinking less or have stopped during lockdown. Of those, 46% would continue to drink less when restrictions eased (2) 54% of respondents miss socialising and dining out at restaurants or bars.
Jeff view. Once the pandemic subsides, we are optimistic that our innate desire to socialise will lead to continued demand for on-trade experiences. In our report on Life After Lockdown, we highlighted that if the on-trade does not fully recover and total volume consumption declines as much as -5%, the global value pool for beer/spirits/soft drinks could contract up to -10%/-11%/-7% respectively.
Rise of illicit alcohol in S.Africa. 46% of respondents in S.Africa felt regulations surrounding the sale and purchase of alcohol were too restrictive. 45% have made their own homemade alcohol and 29% acquired homemade alcohol from others.
Jeff view. The alcohol industry has consistently advocated drinking better not more, focusing on reducing harmful and underage drinking. In EMs, formal alcohol has a role to play in the trade-up from informal to licit alcohol, given it is considered as safer for consumers.