Alcohol industry in high spirits about future

By Terena Chetty, 1Africa Consulting Head of Strategy. The alcohol industry remains one of the hardest hit sectors affected by the COVID-19 global pandemic. Strict bans on alcohol sales and consumption resulted in major losses across the industry, amounting to GDP loss of around R51.9 billion in 2020. Kurt Moore, chief executive of the South African Liquor Brand Owners’ Association (SALBA), terms the situation a “national socio-economic disaster”, highlighting the sheer scale of impact on the South African economy.

Impact of alcohol bans

Amidst the South African lockdown alcohol bans reminiscent of US Prohibition laws of the 1920s, the illicit liquor market took hold. A 2021 report commissioned by SALBA, the Beer Association of South Africa and Vinpro found that the illicit liquor market grew by 10% from 2017 to 2020. The total share of illicit alcohol was estimated at R20.5 billion for 2020 alone. Following the lifting of bans and subsequent “normalising” of markets, the liquor industry, like most retail sectors, still faced challenges such as loadshedding; and a consumer market with a far reduced disposable income, particularly for lifestyle and entertainment spend.

Industry forecasts

• While the industry is still in recovery, forecasts show conservative market growth ahead. Current 2023 revenue in the alcoholic drinks market sits at 10.78 million US Dollars. Statista projections show an expected 8.5% annual growth rate between now and 2027, with the largest segment being beer sales. 2027 projections also predict that 15% of this spend will be through ‘out-of-home’ sales (i.e. in restaurants and bars).
• According to the Liquor Industry in South Africa 2023 report, as customers become ever more discerning, particularly young affluent consumers, premium brands will grow faster than their more affordable counterparts. South Africa will also see more of the global growth trend when it comes to low-alcohol and non-alcoholic options.
• Even for consumers with a budget, quality remains a key factor. Customers approach alcohol purchases based on perceived value for money. Caroline Short, research and advisory services lead at Trade Intelligence explained, “Driven by acute economic pressure, value is seen by shoppers as a necessity.” Consumer research data shows that 79% of shoppers surveyed stated that they would purchase the best they could afford, while a massive 61% said they would drink less of their preferred drink before switching to something cheaper.

Brand growth tactics

Based on various factors, including an evolving consumer market, customer experience must be a core consideration for brands. This includes research into understanding what resonates with end-users, including an increased level of commitment to responsible drinking. Brands can tap into these behavioural insights to deliver products and experiences customised to current and future market preferences. Natasha Maharaj, director of marketing at Distell, shares some insight on some consumer trends she believes will persist when it comes to the alcohol industry:

• Brand purpose: Over and above the call for responsible alcohol consumption, consumers are more attuned to brands’ credible societal impact, including environmental concerns and a consideration for locally sourced products and services.
• At home consumption: Driven in some part by the health pandemic, more people now opt to indulge at home. This includes celebrations and splurging on high-end products such as premium champagnes, cognacs and sparkling wines.
• Gender-neutral socials: Linked to Covid restrictions and the increase in at-home consumption, there has been an increase in mixed gender social drinking, with spouses, partners and mix-gender friends spending more time together.

Advertising, product development and service delivery are all influenced to different degrees by these customer expectations, and alcohol brands would do well to employ robust research methodology when approaching this retail market. With consumers growing increasingly health conscious, it would be interesting to see how the non-alcoholic beverage segment develops in the short and long term.

Regardless of alcohol percentages, responsible consumer behaviour is certainly something to cheer about.

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