The alcoholic beverage industry and its offerings have long been linked with social gatherings, parties, and occasions. The COVID-19 lockdown, which began in late March, had a significant toll in all areas, and our industry is definitely no exception. For the first time in independent India's history, the nationwide lockdown caused by the COVID-19 pandemic resulted in a full prohibition on the sale of alcohol for 41 consecutive days. The pandemic and accompanying lockdowns, along with social distancing norms, resulted in a 35-40 percent decline in business and a 15 percent drop in consumption globally. Bars and restaurants have also been adversely impacted owing to the complete shutdown.
People's drinking habits have shifted significantly during the COVID-19 pandemic with consumption migrating from pubs and restaurants to their homes. Governments' often announced severe policies to restrict the virus's spread have been usually effective in keeping people at home. The alco-bev sector has had its fair share of challenges in terms of development, sustainability, and the shift in consumption patterns from pubs to living rooms. Alcohol is an important part of many people's social lives, which was substantially affected.
To put it simply, consumer behavior has dramatically shifted. Premiumization, on the other hand, is supporting industry growth, which is an excellent sign for manufacturers. Customers are actively preferring quality over quantity when it comes to making an experience out of their alcohol consumption, and this trend has accelerated during the lockdown. People are increasingly willing to pay extra for high-quality alcoholic beverages. This creates opportunities for manufacturers to offer premium price points.
With lockdown in the country, consumers' at-home drinking habits have clearly changed, and they are no longer looking for basic servings. They miss their more complex cocktails, and because they've been confined to their homes, they've had the chance to learn how to prepare beverages they miss.
We have also observed an interesting shift in consumer behavior where they are now willing to experiment with their consumption while being at the comfort of their homes. They are trying out alcohol which they might not have tried before, such as craft whisky, craft rum, and craft gin, which is interesting to see. Due to the closure of pubs and bars, home consumption has grown, and many Indian consumers are keen to try high-quality imported as well as home-grown Indian products. Consumers are looking for products, services, and experiences that bring value and meaning to their everyday lives.
How is Alco-Bev Industry Dealing with these Challenges?
The pandemic-induced national lockdown and social distance limitations, on the other hand, had a severe influence on the business. However, every storm has a silver lining, and the pandemic's gloomy clouds have compelled companies and governments to adapt to the changing dynamics of the system.
The liquor industry has been a significant source of revenue for the state. Several states began home delivery of alcohol during the lockdown to decrease crowds and foster social distancing norms, as the ban had a direct impact on state government revenue. The manufacturing units have now resumed operations, but they need to be functional and efficient in order to meet the market's continuous demand and supply chain. Due to the current scenario, the alcohol and beverage sector has been issued a set of rules by FSSAI that have secured safety measures and social distance to ensure that the workers are protected and the product that is being manufactured is also consumer-friendly.
The industry is still in recovery, although an increasing trend in the liquor business was seen in January-March 2021. In 2020, the national alco-beverage industry achieved an astonishing US$ 18,791 million in sales in the whiskey category, with yearly market growth of 8.5 percent projected (CAGR 2020-2023). As the global beverage alcohol market continues to be affected by the continuing pandemic, IWSR has highlighted six important macro factors that are driving and influencing the industry: Sophistication and Premiumization, Evolving Traditions, External Pressures, Health and Ethical Consumption, and Social Drinking Experiences. This will continue to evolve as we move forward in 2021.
Alcoholic drinks are seen as a rising sector due to their great development potential and growing societal acceptance. Rising income and societal acceptance are projected to promote the expansion of India's alcoholic beverage market. The alcohol business is changing, and luxury, ultra-premium products are increasingly being drunk at home. There will be more private parties in the future, as well as more opportunities to experiment with DIYs, which frequently results in intriguing consumer behavior shifts.
Businesses must adopt digital transformation in order to continue meeting customer needs. Going digital in the alcoholic beverage industry is important for reasons other than the pandemic. It is a permanent new reality, not a passing trend or phase. From now on, alcohol e-commerce will have a long-term, if not permanent, boost. Despite the fact that many nations have begun to gradually relax lockout restrictions, consumers remain suspicious and unwilling to resume drinking in bars, pubs, and restaurants. It doesn't help that on-premise outlets will be responsive to possible distancing norms, which will significantly reduce capacity.
Digital transformation is entering every industry, creating a network of new connections and increasing market segment awareness. It has definitely been difficult for the alcoholic beverage industry to engage in a social media conversation, which has become a crucial component of today's marketing. Fortunately, the introduction of new digital capabilities has given us ways to adhere to all applicable age regulations while still engaging in the full range of social media. Now that the doors to social media have been opened wide for alcohol manufacturers, brands can share their identities in a variety of new and effective ways. Moreover, people are now more openly talking about alcohol and its offerings which was a quite uncommon practice earlier.
The restrictions produced a one-of-a-kind situation in which more than 1.3 billion individuals were confined to their houses. The year 2021 offers greater hurdles because there is so much more to learn and accomplish but it is obvious that with time and careful planning, this industry will return to its former glory.