Alcohol, COVID, and data:
A surprising cocktail

American drinking habits can change the industry. Jason Gingold, our Executive Strategy Director in the U.S., shares his findings from his report on the current state and future of alcoholic beverages.

On one delightfully warm Seattle evening, Jason Gingold sits at a table with his wife and their two friends with their drinks of choice: a beer, a glass of rosé, and two of Sauvignon Blanc from a label they’re maybe more than a little obsessed with at the moment. The conversation is light, easy. Catching up over drinks is always nice. But this time is different because the Wi-Fi keeps getting snagged and the audio dropped a few times, which puts a dent in the flow of conversation. You know how it goes.

To so many people, this would have seemed like science fiction before March 2020. Now it’s a pretty common occurrence, which is an astonishing rate of change and adaptation. At Sid Lee, this triggered a good deal of thought about how people are making shifts, necessary or not, to their everyday behaviors during this time of social distancing. In conversations with colleagues, we found ourselves taking stock of scenarios like the one described above. How was it that we’d all come to change our social habits so quickly, and without too much deep consideration? Furthermore, we began to think not only of the shifts in public and personal behaviors, but with an end to this quarantine nowhere in sight, we wondered what that would mean for the multi-trillion-dollar alcoholic beverage market as an industry. 

Clearly, what used to be an off- AND on-premise business was now wholly off-premise, and what used to be all about public socializing has become a lot more intimate and solitary. In addition to Zoom happy hours, we’ve noticed and noted new behaviors in how, why, and when people get together over drinks, as well as where and which categories and brands of alcoholic beverages were being purchased. Some of these occasions will be temporary and disappear when local policies relax regarding gatherings again. But some will undoubtedly stick, like a breakthrough of ritual, value, and personal satisfaction that feels like it should have been in our lives all along but until quarantine created the need for reassessment, we just never knew it. We had questions. We had examples. We had hypotheses. And we decided we needed data to help make sense of the role of behavior, brands, products, and opportunities in this new normal.

Sid Lee has a symbiotic relationship with Concentric, a predictive analytics company based in Cambridge, MA, and together we set out to better understand the deceptively simple question, “What is the new normal for at-home drinking occasions?”

In partnership with Concentric, we built a “digital twin” of the U.S. marketplace; a concrete forecast built on a set of definitive inputs (industry sales data, marketing spend, distribution data, social listening, etc.). We formulated a hypothesis, outlined provocative scenarios, and ran the simulation.

Our findings genuinely surprised us. And while we aren’t giving everything away here, we hope that what follows might stir insightful conversations within your organization, or better yet, help some of you to better weather this particularly tricky chapter in history.



All hail the $80-billion-dollar industry of New Sobriety
The biggest and most surprising new behavior of the pandemic is people choosing to “do nothing,” meaning to stop drinking altogether. Taken into context, it is easy to see the seeds of this planted over the past decade, as society has been in pursuit of all forms of wellness. It is understandable that in this moment of quarantined re-evaluation, people might take that a step further and make a decision to abstain from alcohol. But we were certainly not prepared for numbers at this scale and volume. 

In fact, those who fit into this “Do Nothing” group stand to put a hole in the alcoholic beverage industry over the next three years, to the tune of nearly $80 billion. That’s right: 80 billion. How the industry responds to this will be interesting to see, as the New Sobriety poses a delicate question: do you encourage people’s choice of teetotaling or push harder on a product they might no longer be interested in?

“Drink safely” is the new “drink responsibly”
For years, alcoholic beverage brands have signed off their ads with the benevolent “drink responsibly.” But the extreme swing of all restaurants and bars shutting down followed by a reopening period with inconsistent guidelines pushed one singular concept forward as the key to people coming back to public drinking moments. That concept is Safety. Our forecast clearly shows at every turn that safety is literally a binary indicator of on-premise sales success: if your environment is safe, sales will go up; if it is not deemed safe, sales will plummet.

While restaurant and bar owners are working to ensure mandated protocols are in place, brands can help their cause tremendously by revamping the role of sales teams to not just push product, but teach bar owners how to operate safely throughout these ongoing shifts in public social policy. Companies and brands that can take ownership of this can take advantage of it in the public eye. Who will be the first holding company to be known for promoting safe drinking?

Online happy hour is an open bar
Like a lightbulb that simply needed to be turned on, the idea of combining technology and social drinking to unite friends across geographies has been a welcome aspect of the new normal. While it isn’t shocking to see off-premise alcohol purchasing during quarantine, the fact that off-premise purchases (and presumably, behaviors) are forecast to stay above their pre-COVID levels points to a future in which some of the new experiences and behaviors that consumers have developed in quarantine are simply going to stick. As discussed, for some that means not drinking at all. For others, we have reached a moment of newly established enduring behaviors. This shift in balance and permanence leaves a gaping opportunity for alcoholic beverage companies and brands: who will find a way to endorse, brand or own the at-home drinking experience?
On-premise spirits might not recover from COVID-19
There’s no sugarcoating it. Of the six occasions analyzed, on-premise spirits are the only ones currently forecasted not to return to a sales metric at pre-COVID levels. This isn’t set in stone, but if the marketplace were to continue on without some effort to shift or change this scenario, on-premise spirits will be in the red until at least the end of 2022. This is going to require focused resources for branding, messaging, and marketing, and some modified on-site presence and programming.

Twenty-somethings are longing to let their hair down
Young audiences who ordinarily revelled in the weekend ritual of partying are showing a great deal of pent-up demand for on-premise spirits. Our name for this occasion segment is “Drink and Be Merry.” It is born out of the proven trope that sometimes a person just needs to let loose and go after it. And yes, we generally associate this with younger drinking ages and audiences. And those audiences didn’t let us down.

There is a forecasted increase in demand in the “Drink and Be Merry” occasion segment that proves this audience will be ready and eager to go out when going out is possible. If a brand can create an attractive and safe moment of freedom and festivity, they can capture sales that would have waned with this occasion's audience.

Let’s be clear: alcohol is an inherent part of our cultural fabric and social customs. Whether it’s a cold beer at the ballpark, a bold red, or an Old Fashioned with an old friend, we’re in. That’s right up our alley. Our desire to understand what this moment in time means for a category of such long-standing passion served as the driver behind this revealing piece of future forecasting. There’s a lot to unpack and a lot to think about. We believe that brands and organizations that are able to respond to these takeaways stand to gain a competitive advantage, make a long-lasting cultural impact at this critical juncture, and even save businesses that in some cases are not going to survive this pandemic. No matter what you choose to do with it, we’re looking forward to a time when we can sit down and toast getting through this whole thing. Until then, we’ll have to raise a glass from the home office.