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Beverages

Demand for Alcohol Strong Amid COVID-19 Outbreak

Market has not seen major disruptions due to coronavirus, Cowen report shows
Beer sales
Photograph: Shutterstock

NEW YORK — The U.S. alcohol beverage market has not experienced any major disruptions because of the COVID-19, or coronavirus, outbreak, industry experts said, and consumer demand for alcohol remains strong.

New York-based Cowen Inc. held a COVID-19 Virtual Conference Series with experts such as Lester Jones, chief economist for the National Beer Wholesalers Association, and Sarah Barrett, executive editor for Wine & Spirits Daily. Cowen’s report of the conference showed the supply chain is uninterrupted (at least for now), off-premise bumps are expected and timing remains the biggest question moving forward.

Distributors have supplied the requisite amount of product into their respective channel and should be able to efficiently balance the mix between core alcohol beverages and other need-based products moving forward, the report said.

Consumer demand for alcohol remains strong, evident in high traffic and velocity in off-premise. There is no firm timeline on when social-distancing measures will end, resulting in consumers loading their pantries with alcohol.

“This should provide a near-term bump in off-premise alcohol sales and help to partially offset the lost consumption that will be felt in the on-premise channel, which typically accounts for 18% to 20% of total volumes,” the report said.

Sales on alcohol delivery platforms haven risen. Boston-based mobile ordering app Drizly has seen a sales increase of 300% to 500% since January in cities such as Boston, Chicago and Seattle, and the average basket spend was about 30% above normal levels, according to the report.

It’s difficult to predict when the COVID-19 situation will end, analysts said, and estimates and guidance for the publicly traded alcohol companies will need to be reset. The first quarter of the year is normally the lowest-volume quarter of the year, which provides opportunities for the following higher-volume months to in part normalize the recent disruption to the category.

Constellation Brands, maker of Corona, Modelo, Funky Buddha and other beers, is among the most at-risk due to its exposure to California and New York, where major cities are under self-imposed lockdowns; however, major metro areas also have the best infrastructure for at-home delivery of alcohol, analysts said.

The Victor, N.Y.-based company released a statement Feb. 28 that said Corona sales remain strong, despite “unfounded concerns” about the spread of the coronavirus affecting its business. 

Companies will also need to revisit their advertising strategy because they can no longer focus on sporting events, which have largely been canceled due to the virus, according to the Cowen report.

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