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Forecasting 2021: WSWA Outlines Multiple Scenarios For The Recovery

January 21, 2021

With a tumultuous 2020 now in the rearview mirror, the U.S. drinks industry is hedging its bets on how 2021 will unfold, given various unknowns like the rapidity of the vaccine rollout and ability to widely reopen the on-premise.

A study by the Wine & Spirits Wholesalers of America (WSWA) and the consulting firm Kearney projects that wine and spirits market volume growth will slow somewhat in 2021—after experiencing an off-premise driven surge in 2020—potentially growing by up to 3% or contracting by as much as 5.8%. Even in the best case scenario, it appears unlikely that the beverage alcohol business will match 2020’s 7% volume expansion, the study found. The presentation used data derived from consumer surveys as well as from WSWA’s SipSource.

The study employed scenario-based forecasting to lay out several possibilities for the new year. “We knew we were never going to be right, exactly, if we predicted one future, so we had to predict multiple, with the idea that it’s better to be approximately right than precisely wrong,” said Sean Ryan, lead partner at Kearney’s consumer products sector. The group gamed out projections based on varying scenarios, including the relative effectiveness of the Covid-19 vaccine and the strength of the economic recovery.

If the vaccine is highly effective and the economic recovery strong, 2021 could bring a “Champagne-poppin’ recovery,” with the off-premise building on its 2020 growth and the on-premise able to operate without restrictions by July. SipSource’s data indicates that this scenario would result in the industry being up 3%, with the on-premise growing by 24% and the off-premise up by 1%, with the latter lapping its robust double-digit growth in 2020. The group’s “Covid hangover” scenario pairs a weak vaccine rollout with a strong economic recovery, forecasting growth for the off-premise but substantial challenges for the on-premise amid continuing restrictions. The overall industry would be up around 0.5% in this scenario, including 1.4% off-premise growth and a 9.8% decline for the on-premise.

Kearney also modeled two scenarios assuming a weak economic recovery: “Back to the future” and “the double-shot recession.” In the first, a strong vaccine meets a weak economic recovery, allowing the on-premise to return but with high unemployment and little government assistance (overall volume down 5.8%, with the off-premise falling 11.8% and the on-premise rebounding 60.6%). The final scenario, as its name suggests, pairs widespread on-premise restrictions throughout the year with negative GDP growth and government gridlock (-0.4% overall, with the off-premise up 0.6% and the on-premise declining 11.7%). Regardless of which future plays out, the WSWA does not see consumers returning to the on-premise at pre-pandemic levels in 2021.—Shane English

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