Alcohol adspend in 12 key markets will grow by 5.3% in 2021, ahead of the 4.9% growth of the ad market as a whole, as brands recover from a much steeper drop in 2020, according to Zenith’s Business Intelligence – Alcohol: Beer + Spirits report, published today. Alcohol advertising will then grow roughly in line with the market, with 4%-5% annual growth in 2022 and 2023.
The 12 markets included in this report are Australia, Canada, China, France, Germany, India, Italy, Russia, Spain, Switzerland, the UK and the US, which between them account for 73% of total global adspend. It covers advertising of all types of beer and spirits in these markets.
The pandemic has forced the alcohol brand experience to move online
Alcohol brands are often not permitted to directly encourage extra consumption. Alcohol consumption is in any case deeply embedded in the culture of each country, and is not subject to rapid change. Instead, brands have grown through a process of premiumisation – getting consumers to drink better instead of drinking more. This is something spirits brands have been more successful at than beer brands. The consumption of both beer and spirits remained essentially static between 2016 and 2019, according to Euromonitor International, but the value of beer sales grew by 3% a year, while spirit sales grew by 7%.
Premiumisation means persuading drinkers to trade up to higher-value products that provide better experiences, by building brand image and experience through mass-reach communication. Alcohol brands, therefore, rely heavily on television and out-of-home advertising, spending twice as much on television as the average brand and nearly four times as much on out-of-home. Alcohol brands devoted 49% of their budgets to television in 2020, compared to 24% for the average brand, and 19% to out-of-home advertising, compared to 5%. This tactic has become less effective as audiences shift to digital media, though, particularly the young consumers most likely to visit a new bar and try out a new drink.
Alcohol brands have historically been slow to commit to digital advertising, devoting less than half as much of their budgets to it than the average brand in 2020. That’s changing rapidly now. The closure of hospitality venues meant that brands needed a new route to market. Breweries, distilleries, bars, and restaurants diversified into direct-to-consumer shipping and takeaway drinks, facilitated by ecommerce and advertised heavily on digital media, particularly social media. Alcohol brands increased their spending on digital media from 21% of budgets in 2019 to 24% in 2020. Seeking to create compelling brand experiences at home instead of at the bar, drinks companies invested in owned assets such as brand websites and educational content. Spirits brands were particularly prominent, using influencers and trade partners to teach consumers to mix their own cocktails, for example.
“Spirit brands have surpassed beer brands in terms of sales value by offering more premium experiences and rituals around their product and serve,” said Ben Lukawski, Global Chief Strategy Officer, Zenith. “With the pandemic taking audiences away from the on-trade we have seen a greater emphasis on bringing these premium experiences in home through owned digital content.”
Consumers are now much more aware of the available options for buying alcohol online, and alcohol brands now have distribution networks in place to supply them. Zenith expects brands to expand their digital advertising to support alcohol ecommerce even after pubs and restaurants are fully open, fuelling 9.2% annual growth in digital adspend between 2019 and 2023, when digital advertising will account for 30% of alcohol advertising budgets.
Zenith predicts alcohol brands will reduce their expenditure on television by 2.4% a year to 2023, compared to the 2019 baseline, as traditional broadcast audiences continue to shrink. Out-of-home advertising, by contrast, will grow by 1.1% a year, even taking into account the pandemic-induced reduction in foot and road traffic. Television’s declining reach makes out-of-home’s ubiquity even more valuable.
Alcohol advertising to recover from 2020 decline by 2023
Alcohol advertising shrank nearly twice as fast as the overall ad market in 2020, falling by 11.6% compared to 6.4% of the market as a whole, Brand finances were squeezed by reductions in consumption volume, the average price per drink, and profit margins. With bars, pubs and restaurants closed, consumers drank less alcohol, and bought the drinks they did consume from shops where they cost less, with a much lower mark-up. Brands cut back their marketing sharply to protect their bottom lines, and their combined adspend fell from US$7.6bn in 2019 to US$6.7bn in 2020.
Brands are now bringing money back into the market as vaccine programmes have consumers socialising in person again, and the hospitality industry has begun to reopen. But the return to normality will be slow, and alcohol adspend will still be 8% below the 2019 level by the end of 2021, at US$7.0bn. Zenith does not expect alcohol advertising to exceed the pre-pandemic peak until 2023, when it will reach US$7.7bn.
Western Europe to enjoy fastest recovery after suffering steepest downturn
Zenith forecasts Spain, the UK, Germany and France to be the stand-out growth markets, with annual growth rates between 2020 and 2023 of 28%, 21%, 10% and 8% respectively. That’s because these markets, where drinking in bars, pubs or restaurants is an engrained aspect of normal social life, suffered the steepest drops in spending when lockdowns were imposed. During 2020, alcohol advertising fell by 52% in Spain, 48% in the UK, 22% in Germany and 23% in France. Their rapid recovery will return them to roughly where they were in 2019 by 2023.
“The alcohol industry has suffered more from the pandemic than most, and that was reflected in the steep drop in adspend last year,” said Jonathan Barnard, Head of Forecasting, Zenith. “The recovery won’t be as dramatic as the downturn, but investment in digital communication will drive steady growth in alcohol advertising for the next few years.”