Nov 18 2020
As COVID-19 restrictions are eased across Australia, demand for alcohol is on the rise across pubs, nightclubs, bars and restaurants. However, although per capita alcohol consumption is expected to rise in 2020-21, it is not expected to return to the levels reached prior to the COVID-19 pandemic.
‘Australian average per capita alcohol consumption was in long term decline prior to COVID-19, falling from 10.84 litres per year in 2008-09 to 9.48 litres per year in 2018-19. Per capita consumption fell by 3% in 2019-20, primarily due to COVID-19, and is only expected to recover by 0.9% in the current financial year,’ said IBISWorld Senior Industry Analyst, Matthew Reeves.
Following the outbreak of COVID-19, Australians are expected to adopt healthier drinking habits. Although total alcohol consumption is expected to rise at an annualised 1.1% over the next five years, this increase is only attributable to population growth. On a per capita basis, alcohol consumption is expected to decline at an annualised 0.2% over the same period, to reach 9.2 litres per year in 2025-26.
‘The temporary closure of hospitality establishments has given many Australians an opportunity to break unhealthy drinking habits, especially for social drinkers. In addition, rising health consciousness is expected to continue to drive per capita consumption lower over the next five years,’ explained Mr Reeves.
Most alcohol consumption down, but Ready-to-Drink is rising
Most categories of alcohol products have seen a decline in consumption over the past five years, with cider experiencing the largest fall. In volume terms, this equates to a fall from 0.3 litres per person per year in 2015-16, to an estimated 0.2 litres per person per year in 2020-21.
‘While some of the fall in demand for cider has come from weaker demand for imported cider from Sweden and the United Kingdom, growth is also slowing for domestically produced cider as well. The Cider Production industry is only expected to grow at an annualised 1.6% over the five years through 2025-26,’ said Mr Reeves.
However, spirits, including pre-mixed ready to drink (RTD) products, have bucked the trend.
‘Consumption of spirits and RTD products has increased from 1.83 litres per person per year in 2015-16 to 1.86 in 2020-21. This has been driven by demand for locally distilled craft spirits, including gin that incorporates native botanicals such as lemon myrtle and pepperberry. Providing there are no more significant lockdown periods, revenue in the Spirit Manufacturing industry is expected to grow at an annualised 2.6% over the next five years,’ said Mr Reeves.
RTD products, such as whisky-and-cola and gin-and-tonic, are also becoming increasingly popular. A new arrival in the RTD portfolio over the last 12 months has been alcoholic seltzers, which is seltzer water mixed with a spirit.
‘After taking off in the United States during that country’s 2019 summer season, Australian alcoholic beverage manufacturers have been keen to launch their own varieties out here, hoping to capitalise on the growing demand for low-alcohol products,’ said Mr Reeves.
Beer manufacturer Lion was the first out of the gate with its Quincy range in October 2019. Since then, other major brewers, such as Asahi and Carlton and United Breweries, followed with their own Actual and Good Tides brands. In October 2020, Lion introduced White Claw, a leading brand in the United States, to Australian retailers’ shelves. Although it still remains to be seen if alcoholic seltzer will be the summer hit that it was overseas, Woolworths announced that sales of seltzer at its BWS stores tripled during the first week of September.
Alcohol manufacturing recovery
As restrictions on licensed establishments are continuing to be relaxed around the country, alcohol manufacturers are set to recover. Craft beer manufacturers rely significantly on sales from their own breweries and brew-pubs. As a result, manufacturers will benefit greatly from the easing of restrictions. Industry revenue from Craft Beer Production is anticipated to grow by 4.5% in 2020-21, and at an annualised 7.0% over the five years through 2025-26. While beer consumption has declined on a per capita basis, demand for craft beer has grown strongly over the past five years.
‘Pale ales are the most common type of craft beer and are expected to remain so over the next five years, including the relatively new variety, XPA. Consumer preferences are also expected to continue to shift towards seasonal, fruit flavoured ales, as well as gluten free options. A number of breweries are also beginning to release kombucha beer blends’ said Mr Reeves.
The Wine Production industry is also expected to recover from the COVID-19 pandemic over the next five years. The closures of cellar doors and restaurants hit the industry hard at the end of 2019-20, and as establishments re-open, demand is expected to increase. Overall, the industry is expected to grow at an annualised 2.9% over the next five years.
‘Sales of the sparkling wine variety prosecco, both from international and local producers have grown strongly over the past five years, and has been one of the winners during the COVID-19 pandemic. Sales took-off in May around Mother’s Day, as most states eased some restrictions on group gatherings. Demand has been particularly strong for rose prosecco. With Christmas holidays fast approaching, this is set to drive demand further’ explained Mr Reeves.
China threat looms
However, the greatest threat for wine producers resides in the export market. In particular, rising trade tensions with China pose a serious concern to industry operators. In August 2020, the Chinese Government launched an investigation into whether Australian wine producers were exporting wine into the country below cost (dumping). This investigation may lead to the imposition of import tariffs on Australian wine, which had gradually been eliminated since the enacting of the China-Australia Free Trade Agreement in 2015.
‘China accounts for over 36% of Australian wine exports, and 15% of Wine Production revenue, so the introduction of any new tariffs would likely have detrimental short-term effects. However, as of November 18, China is yet to announce any new tariffs’, concluded Mr Reeves.
IBISWorld reports used to develop this release:
- Cider Production in Australia
- Craft Beer Production in Australia
- Beer Manufacturing in Australia
- Spirit Manufacturing in Australia
- Wine Production in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647