Two Top Beer, Wine And Spirits Trends For 2021

Ask an alcohol industry analyst and they’ll tell you: If making predictions was a fool’s errand before the COVID-19 pandemic, the events of 2020 have made the game of prognostication even more iffy. 

However, I don’t entirely agree with that assessment. While COVID-19 has and will continue to disrupt the beverage market in ways that make many old patterns and expectations irrelevant and future planning highly dependent on variables we can’t control, we can tentatively forecast which existing and emerging paradigms will likely carry through to 2021 and beyond. 

It’s true that unknowns like the efficacy of the vaccine, the strength of the economy, the patchwork of lockdown regulations, and even ongoing supply chain irregularities create a very uncertain picture for the coming year. But anyone with an educated opinion can reasonably speculate that certain prior and pandemic-era trends, like virtual conferences, e-commerce and direct-to-consumer sales, will last.   

Even if the best we can do is expect to remain creative and flexible to withstand whatever comes, sometimes uncertainty is the only certainty we have. 

Wine and Spirits Sales 

Will the vaccine create herd immunity or will new virus variants render it obsolete? How quickly will the economy rebound? When will people feel safe going out again? These and other questions without answers lead consultants at Kearney, who’ve done what might be the nation’s most exhaustive analysis of the wine and spirits business for 2020 and 2021, to conclude that overall sales by volume will either grow as much as 3% this year or fall as much as 5.8%.

Among approximately 30 other factors, Kearney has reviewed most of 2020’s wholesale depletions, which include the majority of sales channels yet exclude tasting room sales, direct-to-consumer shipments and self-distributed companies. They present a range of scenarios that take into account how much or little Americans will venture out to celebrate this spring, summer, fall and winter.

In what Kearney calls its “Back to the Future” predictive model, for example, “People will go back to 2019 consumption levels and live like we used to live,” said Aman Husain on a webinar hosted by the Wine and Sprits Wholesalers Association Thursday. “That means that Tuesday night glass of wine is going away.”

Despite that, in every one of their schemes Kearney consultants expect off-premises sales for at-home imbibing to keep growing at least a little bit but not at the levels we saw last year.

“I don’t think we can consume that much alcohol! And people will start to return to the on-premises,” said partner Sean Ryan. 

The on-premises, however, presents much more opportunity for volatility, depending on whether we continue our caution or release our pent-up demand. Whichever way it goes, they do expect spirits to follow 2020’s trajectory that saw them replacing wine as the preferred beverage to order at a restaurant.

“The belief now seems to be that dining out is a special occasion and people say, ‘I’m going out, I’m going to indulge. A cocktail, now, it seems, is more special than wine,” said principal Michael Ooms.

Differences in Beer Distribution

Before the pandemic, the majority of wholesalers were responding to a softening craft beer market by putting brakes on craft brands: no more selling endless beer skus and collecting and pushing niche breweries. During the pandemic and for probably the medium-term future, retailers want to play it safe by buying what they’re confident will sell, while breweries try to make up for COVID losses by sending beer to outside retailers that they would have previously sold through their high-touch taprooms. 

Post-pandemic, expect these trends to accelerate, sending more craft breweries to search harder for more favorable distribution models. As a few states finally liberalize their Prohibition-era franchise laws to allow breweries increased autonomy in self-distributing and getting out of their usually punishing distribution contracts (Massachusetts most recently), entrepreneurs are coming in to offer alternatives with more flexibility and lower barriers to entry.

American Craft Brands (ACB) is one such innovator. Offering a low-cost, limited a-la-carte service, American Craft Brands partners with what it calls “landers” who lease a warehouse and have a network of liquor-store and bar/restaurant contacts in their geographic region. ACB signs on breweries — from in-state or out — to supply product to landers as-needed. ACB files the requisite legal paperwork, and participating retail accounts can use one Internet portal to find out what that lander is selling and order what they want with just seven clicks. 

The brewery hires its own sales person in the territory — if it wants to  —  because the ACB doesn’t offer its own sales support. It does offer options like merchandising and it does partner with a relatively small trucking company to deliver from warehouse to store. 

What it doesn’t have is restrictive contracts. ACB takes a fixed cut of sales but doesn’t charge breweries any fees or require a long-term contract. 

Founder Jeff Slater says breweries that sign with a traditional distributor place a lot of burden on themselves and pay for services they’re not necessarily getting. “You sign an agreement you can’t get out of and you’ve locked your product in place before you even know if it’s going to work,” he says. “What we have done is a ‘distribution-light’ territory agreement so they only pay for what they’re using. We have taken the distribution tier apart and said, ‘What do small brewers really need and how much is that worth?’”

I asked Brewers Association (BA) President and CEO Bob Pease if the craft brewers’ trade group would turn its focus on franchise reform now that Congress passed permanent federal excise tax relief in December — arguably the BA’s top legislative priority for the past decade. He replied that while franchise reform has always been a BA priority as it’s “an access to market issue,” that kind of lobbying chiefly happens at the state level, where the BA can support but not supplant local brewers guilds.

That said, the BA does have a position statement on the subject, which reads, in part, “Franchise laws were enacted to protect wholesalers from the undue bargaining power of their largest suppliers. Applying those laws to the relationship between a small brewer and the wholesaler is unfair and against free market principles. Where franchise laws exist, the BA believes that any brewer contributing a small percentage of a wholesaler’s volume should be exempted from those laws and free to establish a mutually beneficial contract with that wholesaler.”

With the smallest breweries generally having the least amount of leverage to survive the pandemic, they’re going to need all the relief they can get.