Oliver Wright is the global lead for consumer goods and services at Accenture.
The economic shock of the COVID-19 pandemic will be felt by virtually all businesses across the world for years to come. For alcoholic beverage producers in particular, the outlook is challenging. Online and off-premise sales may be soaring for some brands as shoppers are forced to refocus on home consumption during lockdowns, but this is more than offset by the collapse in on-premises sales and catering for events and large gatherings.
In fact, Accenture's research shows net demand for alcoholic beverage products shifted dramatically downwards by more than 10% in the two weeks from the start of the outbreak.
In response, companies have been focused on adapting to highly variable demand patterns, while managing severe disruptions to supply chains and workforce availability. They’ve also been thinking creatively about how to repurpose their operations to support societies as they manage the acute challenges of the healthcare emergency.
So how can alcohol companies weather the COVID-19 storm? There are three crucial areas of focus leaders should be addressing simultaneously. The first is to respond urgently to the immediate emergency and protect the business and the people it serves. For many, this is already well underway. The second is to reset and adapt the business to what will likely be a very different set of worker, customer and consumer priorities. The third is the need to renew and scale operations to support a resilient business model to help drive the return to growth once the peak of the crisis has passed.
1. Respond now to the current crisis
Until a vaccine is found, on-premise consumption trade will be impacted for the foreseeable future. The short-term commercial imperative for alcohol companies is to work to maximize the opportunities in the channels where demand is now surging. To do that, they’ll need to collaborate. That means working with on-premise outlets, wholesalers and retailers, as well as delivery partners like Deliveroo, to plug any gaps in on-trade or direct-to-consumer channels. Longer term, careful analysis will be needed to anticipate how many of these new consumer behaviors will stick and then adapting the portfolio and financial models accordingly.
Businesses have a key role to play in helping societies manage the crisis. For alcohol companies, this is a chance to live up to corporate values and purpose. We have already seen this play out with some companies thinking innovatively about how underutilized assets or manufacturing capacity can be repurposed to meet medical and social needs.
Alcohol-based hygiene products are an obvious case in point. Many local distilleries, as well as major manufacturers have shifted production to branded hand sanitizers, which they are then donating to support the fight against coronavirus.
This kind of initiative can be used to kickstart a broader responsibility or sustainability drive for the business, such as plugging manufacturing byproducts into the circular economy.
These factors were already on an upward trend in consumer priorities pre-crisis and are likely to be even more salient now.
COVID-19 also calls on alcohol companies to consider how best to support the workforce, and customers as they adapt to these unfamiliar, stressful and financially challenging times. For workers, manufacturers should be prepared to override company policies and stop non-essential work. Where needed, they should look to support people’s emotional needs as well as their physical safety, using digital collaboration tools wherever possible. The brand purpose is important here, inspiring workers with a sense of collective connection to something bigger than the day-to-day challenges.
Customers, too, need support, albeit of a different kind. Short-term flexibility is key: brands need to be prepared to extend payment terms, especially for on-trade customers whose entire businesses may be in temporary lockdown.
2. Reset your relationships and ways of working
In times like this, it is vital to invest the time, effort – and where possible, money – to deliver a positive experience and service provided across the full ecosystem of suppliers, customers and consumers. Post-pandemic, people will remember positively the businesses that were helpful and supportive. Longer term, this is an opportunity to increase brand and employee loyalty, as well as the use of online tools and platforms: accelerating the digital transformation that was already underway.
Just look at how Carlsberg is supporting bars in its homeland by asking Danes to "adopt a keg." Every time someone drinks a bottle or a can of Carlsberg at home, they scan the label and add it to their virtual keg on the Carlsberg’s website. Post-lockdown, they can exchange it for a real beer when the bars reopen.
Amid physical distancing, consumers are migrating to online channels to find new ways for human connection from the comfort of their home. We are also seeing the emergence of a new form of social occasion: the virtual.
Online happy hours, quizzes and meet ups have become more commonplace as people adapt to their new reality. There is even a new cocktail emerging online: the "quarantini." Barely had the lockdown begun and #quarantini started trending across social media. Although its recipe varies, it offers further proof of human creativity (and humor) in times of crisis.
This channel shift is an opportunity to get creative about consumer experiences. With everyone at home, many are shifting to digital channels for the first time, and the potential audience for innovative brand experiences is that much higher. Look at what brands like BrewDog are doing, for instance, with their online bar. It’s a creative way to engage with consumers and share a beer while social distancing rules are in place.
East London craft brewery Signature Brew is going one step further by taking the pub experience directly into the home. Its hand-delivered Pub in a Box service contains (most of) what you need for a night out in the pub, including a range of beers together with beer glasses, beer mats, a vinyl record, a pub quiz and pub snacks.
A side effect of the pandemic has been a shift to consumers "cocooning" and "nesting" at home. By offering a slice of pre-COVID-19 experience via virtual cocktail lessons, "meet the winemaker sessions" or tutorials on home brewing, there’s an opportunity to enhance relationships with consumers further.
And while the shift to e-commerce is accelerating substantially — so is the move to local. Local products and brands have been gaining popularity across the globe in recent years, but in the wake of COVID-19, the pace and scale of demand is increasing. The pandemic is also changing how people view the societies they live in. Almost four in five (79%) global consumers say they feel more connected to their communities.
Just look at how Highball Brands, a luxury drinks distribution company in the U.K., partnered with local bars to launch "The Drinks Drop," a cocktail delivery service, with all profits evenly redistributed to the bars taking part. Participating bars create a cocktail using the Highball Bands portfolio of spirits, which are delivered in reusable pouches, chilled and ready to drink. It's a great example of tapping into consumers’ desire for experimentation, creativity and connection, while being a part of the broader effort to support local bars.
While much attention has been given to the health and economic implications of the crisis, we can expect to see a profound impact on consumption as people look to re-prioritize what’s important to them. For many consumers, this has been a focus on their own mental and physical health as they look for a sense of connection, community and wellbeing in this time of crisis and potential isolation. Although people will continue consuming alcohol, the nature of that consumption will likely change by switching to local brands or low alcohol options.
It means that alcohol brands need to think beyond traditional tactics to authentically engage consumers. In many cases, they also need to be seen to help with the COVID-19 effort, such as Coca Cola’s "staying apart is the best way to stay united" billboard ads.
These channel shifts represent an opportunity to grow revenue and attract new consumers – creating social experiences that extend beyond pure entertainment – in the long-term lasting changes will drive portfolio revaluation across the industries. The challenge for alcohol companies is to weave between what they’re doing now and what they need to do in the future.
3. Renew for a new era of growth
Many businesses will face severe financial difficulties over the coming months. As lockdown restrictions start to ease in some markets, the reopening process for the alcohol trade will be undoubtedly complex. To ensure the return goes as smoothly as possible, collaboration will be crucial.
Finance continues to have a vital role in preserving cash in the short term and creating protective buffers for the future. Investments will inevitably need to be paused, forecasts will need to be rewritten and costs will need to be cut. But this is also a chance to review investment priorities and rebalance portfolios to help the business adapt to changing consumer behaviors and gain competitive advantage as economies start to recover.
There’s no doubt this will be the most testing period many companies will ever have experienced. But the present crisis will pass and growth will return. Leaders must therefore manage the immediate challenges while also understanding and anticipating the longer-term implications for their business models. The overarching goal is to increase agility, responsiveness and resilience. That’s how to help both the business and the societies it serves manage the crisis and bounce back stronger.