Nielsen: Impact on Bev Alc Sales in the Early Days of COVID-19

Dear Client: 

So far, more than 30 states have ordered bars and restaurants to shutter to help stop the spread of COVID-19. In several states that haven’t made that call yet, cities have given the order in TN, TX, MO, AK, AZ, ID, MT, OK, WY.

On-premise accounts for roughly 20% of volumes on average across beer, wine and spirits with off-premise accounting for the other 80% in the US, according to Nielsen. As on-premise locations continue to shut down, off-premise has seen an uptick in sales. 

Nielsen shared a look at the impact they’re seeing on bev alc sales in the early days of the pandemic. 

Looking at the week ended March 7 compared to a year ago as well as the prior two months (from January 11 through February 29), here’s how growth in dollar sales changed:

WINE. Total US off-premise dollar sales of wine increased 1.7% compared to the same period last year, in all Nielsen-measured channels. Compared to just earlier this year, the category was seeing a -0.5% average weekly decline for about the first two months of the year. 

3-liter box wines experienced the largest differential in growth rates, according to Nielsen’s Danny Brager. Meanwhile, sparkling wine sales did not grow in the most recent week, “with celebratory drinking occasions obviously negatively impacted,” he says. You’ll recall, sparkling wine has been a bright spot in category growth. 

SPIRITS. Total US off-premise dollar sales of spirits were up nearly 5% compared to the same period last year. The category also saw an increase of more than two percentage points compared to the average weekly growth rates from the start of the year.  

“The differences in growth rates were broad across price tiers and spirits sub-categories, with tequila and gin experiencing the largest growth rate differences,” says Danny. Tequila’s been a top performer, but in the week ended March 7, the category’s growth rate accelerated nearly 20%. 

But can off-premise growth offset declines in on-premise?  

Danny tells WSD that “a hypothetical volume decrease of -75% in the on-premise would need to be countered by +19% increase in the off-premise just to get back to 0% volume growth overall,” adding that overall consumer spending on bev alc “will be reduced given lower markups off-premise.”

AN INTERESTING CASE IN SEATTLE. Nielsen took a look at what happened in the Seattle market, where we saw the first confirmed case of COVID-19 in the US on January 20. 

Both wine and spirits growth rates decreased double digits for the two weeks ended February 8 and February 15, and then fell into a pattern closer to what we’re seeing nationally (i.e. trends outlined above), according to Nielsen.

COVID-19 UPDATES AT THE STATE LEVEL 

Earlier this week Pennsylvania announced the closure of its state-run liquor stores and even plans to cease online sales. The Distilled Spirits Council sent a letter to PA Gov. Tom Wolf today, urging him to reconsider the closures. 

Alabama announced plans to shutter 78 state-run liquor stores as of last night. An emergency order issued last night allows on-premise and off-premise licensed locations to sell alcohol via curbside for pick-up or takeout service, reports a local publication.

North Carolina and Virginia have scaled back their hours of operations for the state-run liquor stores.

Meanwhile, Ohio announced a liquor buyback program on Monday. The state Division of Liquor Control will “allow a bar or restaurant to return unopened high proof liquor products purchased within the past 30 days as a way to provide economic assistance to bar and restaurant owners during the coronavirus pandemic,” per a notice from the department. This also goes for events scheduled between March 12 and April 6, similar to what the TTB announced on Friday [see WSD 03-16-2020]. 

In Tennessee, the Tennessee Distillers Guild sent a letter to the governor seeking relief for distilling, brewing and hospitality businesses in the state reeling from the impact of COVID-19. 

“Shutting down all sources of revenue for four to six weeks is rough for our distilleries,” says guild president Kris Tatum. “We will have members of our family that will be forced to close down permanently if we don’t get relief soon.”

The Wine Institute is on top of what’s happening in California. The director of the California department of Alcoholic Beverage Control Jacob Applesmith confirmed that the agency will suspend enforcement of California credit regulations, allowing suppliers to extend credit to purchases without interest beyond 30 days. He also “indicated that CA ABC will be issuing additional guidance on further relaxation of regulations in light of this crisis,” per WI. 

RESPONSES FROM THE INDUSTRY

Here’s a snippet of what we’re hearing from the industry on the current impact of COVID-19 on business from new protocols to layoffs. 

From Breakthru Beverage Group chief Greg Baird: 

“Like all businesses, we are navigating through turbulent times and operating in an unprecedented environment. We are committed to be a responsible and attentive partner across our U.S and Canadian markets, putting the health and well-being of our associates, customers and supplier partners at the center of our decisions. While our off-premise accounts have been extremely busy, on-premise activity is being adversely impacted by broad social distancing and government restrictions in a growing number of markets. We are doing what we can to assist our partners, such as working with regulators and elected leaders to ease on-premise restrictions and support their business during this interim time.”

“A few weeks ago, Breakthru established a cross-functional task force to evolve Breakthru policies, prioritize activities as the outbreak evolved and to assess the implications of the rapidly-evolving situation. We have taken a number of steps within our own operations to limit the spread of this virus including restricting travel, instituting remote work policies and limiting third-party interactions. We remain in regular contact with our associates (through emails, calls and a dedicated corporate intranet page), continue to align to CDC, Public Health Agency of Canada and WHO guidelines and maintain an open dialogue with local officials for health guidance and recommendations.”

Per a statement from Southern Glazer’s Wine & Spirits: 

“We have activated our Crisis Management Center and have established an executive-level task force to coordinate our Coronavirus-related business continuity plans, monitor the situation as it unfolds, and safeguard the health and well-being of our employees and customers,” adding they’ve already suspended all air travel for SGWS employees, increased frequency of cleaning and sanitization, among other common sense hygiene practices and following recommended guidelines from the CDC. 

“We’re working directly with customers on a state-by-state basis to support their businesses based on local conditions and to ensure we are complying with all government regulations and orders related to the servicing of retailers, bars, restaurants, hotels and other hospitality-related businesses.”

“The situation evolves daily, and as such we will remain in direct communication with our employees, customers, and suppliers. Above all else, the health of everyone involved is our number one priority.”

American Craft Spirits Association chief Margie Lehrman shared what they’re doing and what many in the craft community are dealing with: 

“Our members are frankly very concerned for their livelihoods and their employees who are like their families.  Closing tasting rooms either by state directives or doing what is best for the community is beyond hard. It is tough to lay off “family” but many distillers have no options.  As you know, small distilleries rely on their tasting room revenues, particularly when starting up and building a consumer base. It is devastating for many and touches most. We are polling members to determine the extent of closures. On the flip side, with a more positive note, we are also polling to see how many within our industry are either producing or have plans to produce hand sanitizers and/or sanitizing solutions.  We’re in touch with both TTB and FDA to ensure regulatory compliance. We’re looking at all ways our community can jump in to make a very big, very real difference.  We’ve put together a COVID-19 working group to look at the many issues confronting the craft producers and will soon be releasing guidance and best practices during these troubling times.”

If you have any responses, insights, and/or best practices to share, send to sarah@winespiritsdaily.com

WSD BRIEF:

TAUB FAMILY SELECTIONS ADDS MASTROBERARDINO TO PORTFOLIO. Fine wine importer Taub Family Selections has added Mastroberardino estate to its portfolio of Italian producers. TFS will be the sole importer for Mastroberardino’s US range, effective immediately, adding Aglianico Irpinia DOC, Greco di Tufo DCG and Fiano di Avellino DOCG to the US market. The wines were previously imported by Winebow.

Until tomorrow,
Sarah

“It is during our darkest moments that we must focus to see the light.” – Aristotle     

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