Booze Hangover

The Economist Business Schumpeter| “Closing time”. “Farewell for now to a golden age of drinking”

Until the COVID-19 lockdown high-end craft-booze was peaking but several factors now suggest the party will be ending.

“Thanks to artisan devotion, in recent years the $1.5trn booze business has become a gilded one”. During these times, we have been drinking less but consuming more of the higher-priced craft beers and locally distilled spirits-gins, mescals and whiskies. Feeling the impact, the volume leaders InBev and Heineken increased revenue and margin by acquiring boutique brands.

With the COVID-19 lockdown the high-margin restaurant and bar distribution channels came to a full and immediate stop. Increased sales from retailers helped partially offset losses but even with the anticipated re-opening “Schumpeter” cites reasons why the “golden age of booze is probably over”. Demand and margin will fall due to continued social-distancing, fear of crowds, fear of travel, the coming economic decline and demographic changes-the Millennials are beyond peak drinking age and Gen Z prefer socially distant pot smoking to drinking in bars.

To adapt to market conditions, makers and distributors will exercise logical options of promoting lower cost/lower margin bottles and exploring alternative channels like direct-to-consumer.