The global alcoholic beverage category is seemingly experiencing a significant post-pandemic boom, as evidenced by the recent results of major multinational drinks businesses.

For the financial year ending June 2022, global wine and spirits market leader Diageo delivered a strong performance, reporting net sales growth of +21.4% to £15.5bn, which was driven by strong organic growth across all regions. Such stellar performance was attributed to the “recovery of the on-trade, resilient consumer demand in the off-trade and market share gains, underpinned by favourable industry trends of spirits of total beverage alcohol and premiumisation”.

Across the English Channel in France, number two drinks conglomerate, Pernod Ricard, released an equally pleasing performance with Group sales reaching €10bn, an organic rise of +17%, driven by strong performances in key markets such as the US, China and India, with the latter posting +26% growth in sales over the period.

Closer to home, Distell, who is in the process of being acquired by Heineken, announced a pleasing set of results, with Group revenue increasing +20.8% alongside volume growth of +17.6% for the past 12 months across both the South African and Rest of Africa businesses. South Africa’s performance was aided, in part, by 47 more trading days compared to the prior year.

There is therefore no doubt that the alcoholic beverages category is experiencing exciting growth shoots, albeit against the backdrop of an increasing volatile macro-economic climate. Some key themes we see playing out in the liquor retail sector are

1. Return to full trading days set to boost sector recovery

Prior to the pandemic, liquor sales growth consistently performed ahead of growth in GDP, retail trade sales and disposable income, whilst subsequent restrictions on liquor trading in 2020 and 2021 had a marked impact on liquor sales growth. As illustrated by the results of the key players above, the forecasted growth for the liquor category is set to return to pre-pandemic trajectories from 2022.

 

 

2. Bar sales recovery lags

According to on-site consumption data from Statistics South Africa, bar sales from registered restaurants, take aways and catering businesses plummeted due to lockdown and restrictions in 2020 to R4.3bn and remained suppressed in 2021 at R5.1bn. Sales for January – June 2022 remained muted and far from the 2019 result of over R10bn as the hospitality sector is slow to recover. This has a significant impact on wholesalers who sell liquor to restaurants, take aways and supply the catering industry.

 

3. Liquor footprint growth double that of food for corporate retail

Liquor is typically a more resilient and more profitable format than food (the exception, of course, being during trading restrictions). Five-year corporate liquor store footprint growth at +38% is more than twice the footprint growth of corporate food stores (+17%) and the liquor category is regarded as a driver of footfall, especially over the weekends, with liquor stores found adjacent to supermarkets in many locations.

• TOPS at SPAR has the largest liquor store footprint at 852 stores, opening over 40 net new stores on average a year from FY2017 to FY2019, slowing to just 20 in FY2020 and 10 in FY2021. TOPS was further impacted by the civil unrest that has left nine stores still closed a year later.
• Shoprite Group’s liquor footprint is the second largest with 680 stores across Shoprite and Checkers LiquorShop, as well as around 100 OK Liquor stores.
• Pick n Pay Group (incl. Boxer) holds third place at 635 stores and is closing the gap on second place. Some franchise stores have moved to corporate, and some have been converted to Boxer Liquors.
• Massmart, which delivers the biggest liquor turnover of the corporate retailers, with all Makro stores selling liquor, launched a pilot standalone liquor store, Powered by Makro, in May 2021 in Gauteng, leveraging Group pricing and infrastructure.

Insights to capitalize on the growing liquor retail market

Against a backdrop of positive forecasted growth and signs of confidence in the category by retailers, Trade Intelligence will soon release its latest South African Liquor Report. In the 2022 report, we develop a refreshed category outlook which zones in on the core shopper need states driving liquor shopper behaviour in South Africa. We present an overview of retailer strategies and strategic focus areas within the category to equip our clients with powerful insights to inform their retail customer planning in a post-COVID landscape.

For more information or to order the report, click here or contact Shelley van Heerden on shelley@tradeintelligence.co.za or +27 [0] 31 303 2803.