The ongoing COVID-19 pandemic and its associated effects, such as stockpiling, home seclusion and channel shifts, have had a sizable impact on the trajectory of all non-alcoholic drinks categories in 2020. In addition to changing when and how Canadians shop, these factors are altering the product attributes consumers seek. While the duration of the pandemic remains uncertain, it is clear its impact on drinks will be felt for years to come.
Data from Euromonitor International shows a net decline in sales of non-alcoholic drinks in 2020. While public health guidelines that pushed consumers to stay home resulted in stockpiling, this growth in retail sales was easily offset by the on-trade sales decline in cafés, bars and restaurants. During the early months of the pandemic, many hoped that this fall in on-trade sales would quickly reverse, especially in 2021. However, spikes in COVID-19 cases during the early months of fall have cast the chances of a speedy recovery in a much different light.
Now, it seems likely that closures impeding on-trade sales will persist well into next year. But perhaps more consequential than temporary closures is the likelihood that many businesses will permanently shutter after going through a prolonged period of inactivity. Euromonitor estimates that away-from-home availability of soft drinks in 2020 is at only 63% compared to previous years. Whether that limited availability becomes permanent depends highly on the pandemic’s trajectory over the next few months.
As home seclusion continues, on-trade closures have had the multi-pronged effect of driving stockpiling and channel shifts such as the replacement of on-trade consumption with drinks that can be enjoyed by consumers at home. Stockpiling has benefitted retail sales of soft drinks almost universally. Categories such as juice drinks (24% or lower juice products) have seen volume growth for the first time in more than a decade. This success holds true across bottled water as well, while many carbonated categories are seeing much slower declines than they have in previous years.
Exceptions to this growth do exist, however. Emerging categories just gaining traction have faced challenges in 2020 as many consumers opt for products with which they are more familiar. Carbonated ready-to-drink teas and kombuchas, for example—which are still new to many Canadians— have seen slower growth.
Lastly, soft drinks did benefit from channel shifts, but not to the same extent as hot beverages. As trips to cafes are replaced with options prepared at home, ground coffee, pods and whole beans have seen large increases in growth, and most tea categories have also improved their performance.
While stockpiling, home seclusion and channel shifts have had a large impact on 2020, we do not expect their reach to extend far beyond 2021. Instead, some of the most indelible results of the pandemic may be trends in product attributes and retail channel distribution. Concerns over contracting COVID-19 have ramped up existing interest in foods and drinks that benefit various types of immunity. As the pandemic subsides, interest in functional drinks that promote immune system health may remain, benefitting a wide swath of categories from juices and tonics with added probiotics to medicinal and herbal teas. The success e-commerce has experienced in 2020 will likely also endure over the next five years, as home seclusion has led to buying drinks online and improved distribution networks for internet retailing.
For now, the pandemic has had a dampening effect on overall drink sales in Canada, and the prospect of full recovery does seem more distant than initially expected. On-trade channels, especially, will take years to recover to levels experienced prior to 2020, and off-trade growth is not compensating for this loss. Nonetheless, opportunities exist as certain categories see growth through channel shifts and new trends in product attributes develop.
Alexander Esposito is a senior research analyst at Euromonitor International, an independent provider of strategic market research. Euromonitor.com