The Impact Of COVID-19 On The European Beverage Market
To provide an overview on how beverage companies in Europe see any adjustments to their beverage strategies due to COVID-19.
The beverage industry was severely hit by local lockdowns during the COVID-19 pandemic. Restaurants and Hotels closed their doors and while the former have switched their business offer to takeout and delivery, they largely miss out on in-house drink sales.
Below we present some first findings on what has been the impact of COVID-19 onto the European beverage market.
- Coca-Cola experiences a 25% decline in global volume terms as out-of-home outlets remain closed. In Spain and Portugal the decline was 1.5% with respect to the same period of the previous year. In Italy and Central Europe, the out-of-home market represents 35-40% of its sales, according to Coca-Cola HBC.
- Alcohol producers, considering the closure of restaurants, hotels and bars, turned to producing hand sanitizer and disinfectants at mass scale. Pernod-Ricard, Diageo and Anheuser-Busch redirected their production lines to manufacture sanitizer, helping alleviate the shortage. BrewDog in the UK announced that it will be manufacturing its own hand sanitizer in Europe the BreGel Punk sanitizer. A similar strategy was followed by the London-based Gin distillery. 58 Gin
- When the pandemic crisis started in Europe, Natalies Orchid Island Juice Co started offering a sales code for its online store for its juices. The company claims that its juices have health benefits as they help to boost the immune system.
- Major beverage companies offered help by donating products or money to the people needed. Coca-Cola in the UK donated more than 1.5 million drinks to front line workers, food banks and the NHS Nightingale Hospitals across the country. Moreover, along with Coca-Cola European Partners and The Coca-Cola Foundation, the company offered the equivalent of nearly two million healthy meals and one million drinks to vulnerable people, via its network of more than 11,000 charities and community groups across the UK.
- The Coca-Cola Company announced that the company has a clear strategy to continue to service its on-premise customers while also
ensuring that its off-premise clients have sufficient levels of inventory to meet
The company has also increased its
investments in e-commerce to support both retailers and meal delivery services, while at the same time sought to new partnerships with food aggregators to ensure there is an option to add its products to online orders. The new strategy also includes a shifting towards package sizes that are more suitable for online sales.
- PepsiCo donated $600,000 to Red Cross in Italy, Spain, and France to help the most vulnerable groups in society, particularly seniors and children.
- Moreover, PepsiCo is cutting its media budget, especially for non-essential products, focusing on brands that fit better to its stay-at-home policy. Two of the brands under this category are Frito and Quaker brands. According to a company's statement, non-essential advertising will lose out to product investment for the foreseeable future, as PepsiCo aims to boost its financial performance in 2020.
- Heineken N.V. decided to withdraw all guidance for 2020 due to COVID-19 crisis. For the first quarter of 2020, Heineken expects a total volume decrease of around -4% organically with beer volume around -2%, with the second quarter to be more negative. Some of the biggest alcohol companies have changed their previous growth forecasts for 2020 to reflect the decline.
For instance Pernod Ricard is now expecting a 20% organic decline in 2020 in contrast to its original expected 5 to 7% growth.
On the other hand, AB InBev predicts a 10% decline for the first quarter of 2020.
- Heineken N.V. focuses primarily on the health and safety of its employees. To provide additional security to its employees, the company announced that until the end of 2020, it will not carry out structural layoffs, as a result of COVID-19.
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