Covid 19 and the Impact on Global Craft Beer in 2021
PACRIM Distributors Conversation
We’re officially 10 months into the Covid-19 lockdown - give or take depending on where you call home - and things are at least starting to settle into the new normal in craft beer markets around the world.
Bars have closed, and re-opened, and then closed yet again despite changing precautions by heath authorities - and yet, people are still drinking craft beer and finding new ways to purchase and consume our favourite beverages.
There have been moments of sheer desperation amidst the Covid-19 panic, and yet (not surprisingly given the character of most of our distributors), also moments of pure joy as we see the dawn of new perspectives of what’s important in life.
Moments with young children, good friends, and old forgotten music seem to have taken center stage, and quite frankly, we’re okay with this. This was long overdue. This newfound balance was indeed needed.
Business too, has changed. There are some new realities we’re seeingin market and new ways to combat impending challenges for new and old beer companies alike. After speaking with most of our nearly 20 distributors around the world via Facetime - we’re starting to see some stark truths emerge, and we figured it was best to share them with you in hopes that they provides a healthy dose of both optimism and reality as you navigate your own journey in craft beer.
Innovate your business model
First and foremost, this market climate, particularly in beverage alcohol, will last for some time and you will need to innovate the way you operate. The cocktail of severe and open ended market disruptions, coupled with the loss and radical reimagining of occasions will necessitate new strategies in craft beer.
Further, mounting macroeconomic challenges and lingering long term effects of the crisis will reshape drinking rituals and priorities in countries from Canada to Thailand.
Even if/when the health emergency is over, the economic ripple effects and aftershocks will hit hard across the world. You will need to prepare, and fast, if you haven’t started already.
Specifically, you will need to navigate three new realities; (1) find a way to access the consumers which are trading down, (2) access the rise of virtual communities and occasions, and (3) find a method to capture the stratospheric rise of the off trade in coming months as craft beer buyers continue to stock up.
KEY TAKEAWAYS:
Add volume plays and additional price tiers to your portfolio. New SKUs don’t always mean additional marketing costs - sometimes buyers and consumers are just looking for cheaper alternatives.
If you’re not selling online, link up with local delivery providers and outsource menu delivery - online is key, even if it’s just Uber for the time being. If you need help, ask us and we can refer you to local providers.
Get on the attack. Retail is one of the few channels doing very well right now, and consumers are stocking up to avoid going back to the store. Call your local buyer and pitch. Constantly. Believe us (we go direct in many markets), they’re buying.
Don’t plan on a V-Shaped recovery in craft beer
Despite what your stock portfolio looks like, or what business pundits tout on television, craft beer is a fundamentally different business to most of the S&P, and will respond a lot slower than traditional markets. Lockdowns will continue to last for months at a minimum and will be ultimately global, even if in waves.
When the dust settles, this will look a lot more like a K shaped recovery with large scale exits from the business while the well funded (or increasingly determined) craft beer providers clean up the pieces. Distributors need to find a way to either secure additional funding for their business, or adapt, at least temporarily, to drive sales where consumers are purchasing.
KEY TAKEAWAYS:
Knowing that on-trade will be tough for the significant future, focus and deploy your energy where the juice is. The collapse of on trade channels across the majority of markets means retail is doing well. Stockpiling is your friend.
Cash is king, and sales are a vital lifeline right now. Reconsider your sales terms - perhaps even 120 day terms will be needed to necessitate sales. Borrow against the tenders if short term liquidity is needed, and then pay to insure your sales with a local bank to guarantee you’re being paid. Most banks will insure up to 90% for as little as 1% of sales.
Streamlining innovation, whilst offering multipacks and economy variants are key. Get the larger pack sizes, and discount product opportunities to market, and you will win. Fish where the fish are.
Have Empathy
Covid 19 has unleashed a trove of financial issues for nearly everyone in this business. The economic ripple effects will be unprecedented, disruption will be prolonged, and discretionary incomes will be under severe pressure for the foreseeable future. Empathy is the medicine the world needs right now.
This is not a fun environment for even the largest of suppliers, so try to exercise a little extra patience and love with everyone you meet. This is a people business at heart, and right now we’re all hurting. Take the time to support the industry and the industry will support you.
KEY TAKEAWAYS:
Be a good person. Not for business, but for yourself. This pandemic should give you ample opportunity to do things for people and be the right type of person you truly believe and want yourself to be. Use it wisely.
Supporting communities in need and nurturing virtual and online occasions for craft beer will be essential to your business over the next 12 months.
Realize that this new normal still present opportunities
It’s said that adversity can be turned into opportunity simply by adjusting your perception and your attitude - this is a hyper narrative in 2021. The combination of the traumatic effects of long periods of social distancing and a recessionary new normal will usher new trends that you need to acknowledge, today.
First, while premiumization is still a viable strategy, in this market environment a transition from premiumization to trading down and polarization is more likely. This speaks to the idea of offering additional price tiers we spoke about earlier.
Second - doubling down on ‘home-tainment’ led solutions and the rise of new occasions makes complete sense as Covid reshapes the alcoholic drinks industry. Looking online, you’ll notice key, iconic brands like Glenlivet, Talisker and the Buffalo Trace Distillery have already embraced virtual tours and immersive online experiences, and this will only accelerate further as consumers actively engage with such platforms while savoring escapist opportunities.
Third, social remains a viable means of hitting your consumers, at home. Community ingenuity and bottom up creativity will continue producing a plethora of Twitter and Instagram led live tastings and an ever evolving and expanding network of digital pioneers pushing the boundaries of occasions. Companies and key brands will need to support and nurture them as the “new normal”.
KEY TAKEAWAYS
Reasses your budgets to properly allocate penetration to where the consumers are. An in-store LTO at a lower margin to drive volume may make more sense than in bar promotions.
A localized campaign on social in your area driving to store in a creative way may bring people out in support of your brand, assuming you’ve got the right pack sizes and pricing to support their purchasing decisions.
Conclusions
It’s a trying time for everyone, and there are no clear solutions - only tactics that seem to work in evolved and disciplined consumer markets. It is within this context that nations with higher on-trade penetration rates might at first glance appear more vulnerable to the impact, at least in the short term and as channels are either severely impacted or completely shut down for extended periods.
However, as Covid begins to loosen it’s grip on the industry, the capacity and capability to quickly and efficiently transition to online sales, alongside the economic fundamentals that will allow discretionary incomes to minimize losses, will prove most important to craft beer distributors.
In terms of category focus in all of our international markets, there are no clear winners and losers, and initial stockpiling estimates with all the statistical noise that they inevitably incorporate showcase a jump in sales across the board. Anecdotally, we have seen significant wins in RTDs in Taiwan, as well as larger pack size gains in Singapore.
Saying that, anecdotal information and historic learnings point to trading down, out and across a trend that will only accelerate further as the economic effects start to bite and thriftiness and polarization replace premiumization as key trends.
We all have a chance here. To become better business professionals, better marketers, better commercial leaders, better people. It’s the companies that prove quicker to accept and navigate this new normal who will rise as the winners in the medium to long term.
We wish you all the best of luck, and please reach out to the PACRIM Distributors team if you need any help at all. Market research reports, sales decks, custom marketing materials, discounts, better terms, more efficient routes to market - we’re all in this together.
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Garett Senez is an award winning marketer, with 15 years of sales and marketing experience for leading consumer brands. A dynamic leader, he brings a competitive edge and outstanding brand communications expertise to global companies looking to scale.
In his last leadership roles at LUFF Brands, Emerald Health Therapeutics, SABMiller and L’Oreal, Garett has consistently proven his capability to lead diverse teams of practitioners worldwide to a common goal; while successfully demonstrating astute budgetary and project management skills. A strategic thinker, Garett thrives in competitive work environments and has a passion for storytelling.
More recently, Garett was a Partner at PACRIM Distributors, a Global Affairs Canada and Canadian Trade Commission partner organization. PACRIM Distributors supports the long run growth of the Canadian craft brewery industry by distributing 9 Canadian craft beer brands in 19 international markets.
Garett has a Bachelor’s of Business Administration in Marketing from Simon Fraser University and a Global MBA from the University of Victoria.
PACRIM Team