Alcohol Distributors Continue to Suffer
Restaurant and Bar Sales Are Down
Americans are drinking at home more as the pandemic continues. However, with bars and restaurants closed or operating at limited capacity, overall alcohol sales remain lower than they were pre-pandemic.
Bars and restaurants normally buy large amounts of alcohol on a regular basis, providing an important, constant revenue stream for distributors of wine, beer, and other types of alcohol. In a normal year, about 20% of alcohol sales in the US happen on-premise, meaning at a bar or restaurant. This year, on-premise wine sales are predicted to be 50% to 60% lower than in other years. On-premise sales of other types of alcohol are also taking a hit.
Worries About Long-Term Downturn
As of September, one in six restaurants in the US has shuttered long-term or permanently. A recent survey showed that 40% of restaurant owners expect they will be forced to close by 2021 without additional stimulus from the government.
This could mean that even when consumers are ready to return to drinking at bars and restaurants because a vaccine is available, these establishments simply will not exist anymore. Though eventually more restaurants would open up to meet demand, there may be a period of low demand for alcohol that continues for several years after the pandemic.
The Impact on Alcohol Industry Stocks
Shares of Diageo PLC (DEO), which owns brands including Johnnie Walker and Baileys, have fallen about 16% so far this year. Constellation Brands (STZ), which owns SVEDKA Vodka and Modelo, has seen its shares fall by 4%. Shares of Crimson Wine Group (CWGL), a publicly traded Napa vineyard, have dropped about 35%.
Usually alcohol sales at bars and restaurants surge during the holidays, but distributors predict this will not be the case this year. On the bright side for the industry, grocery store sales of alcohol were up 17% in September compared to a year ago. Direct-to-consumer alcohol sales are also climbing. Heading into the holidays, brands are working to release new products tailored to people who will be celebrating at home instead of at bars and restaurants this year.
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