The COVID-19 pandemic appears to have boosted wine sales in British Columbia, Canada’s third largest provincial market. And like their U.S. counterparts, BC residents have expanded their consumption of wine at home since the outbreak began.
Based on data from the British Columbia Liquor Distribution Branch (LDB), the province’s sole distributor of alcohol, wholesale sales (including those to its own retail stores) grew by 5% in volume during the second quarter versus the same period in 2019. Surging sales to store accounts (up 18%) more than offset a collapse in sales to restaurants and bars (down 79%). Sales were flat in dollar terms due to the shift in channels.
Covid-19 containment measures included the closure of bars and restaurants during April and the first half of May, though pick-up and delivery were permitted under certain circumstances. Conversely, liquor stores were deemed essential and remained open throughout the lockdown.
The solid second quarter gain builds on a strong first quarter as British Columbians began stocking up on wine in March. The pandemic-driven splurge denotes a resurgence in wine demand, as sales have flattened in recent years.
Nonetheless, wine lagged both spirits (up 13%) and refreshment beverages (up 35%) in second quarter volume growth. It did, however, outperform the beer category (down 6%) by a wide margin.
Consumer preferences for wine styles and regions don’t appear to have been materially altered by the pandemic, though the overall sales mix has been impacted by the abrupt decline in the on-premise market.
Growth in rosé continues to outpace both reds and whites in the still wine category, a trend that was well established prior to the virus. However, sales of sparkling wines – also outperformers in recent years – fell by 6% due to a greater dependence on the on-premise channel. Champagne sales were especially hard hit: they plunged by 28%.
BC wines (including those made from local grapes and bulk imports bottled in British Columbia) benefited most from pandemic buying, while import volumes dropped 4% in the second quarter on a year-over-year basis. Italian wine sales, in particular, have suffered from the decline in restaurant business.
Looking ahead, visibility remains poor as both the path of the virus and the strength of the economic recovery are difficult to forecast. Nonetheless, the pandemic boost to wine sales is almost certain to begin to wane – and growth in the second half of the year is likely to fall far short of the 8% pace achieved in the first – regardless of the trajectory of the virus and economy.
That said, there are some potential positives for wine demand over the longer-term as the pandemic may accelerate the liberalization of provincial liquor policy. For example, BC is temporarily allowing alcohol sales with takeout and delivery orders (if a meal is purchased) and has rescinded a markup above “wholesale” that most of its hospitality customers have been required to pay. If made permanent, these measures could stimulate growth in on-premise wine sales.
Given the unprecedented pace of change in the economy and wine market, it is more important than ever for wine-related businesses to take a strategic and data driven approach to their decisions. Visit the Vintage Economics website at www.VinEconomics.com to learn more about us and how we can help.
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