Lockdown measures and social distancing restrictions have greatly inhibited Australians’ ability to socialise and go out, which has driven substantial revenue losses for restaurants and other nightlife venues. The Restaurants industry’s revenue is anticipated to decline by 2.3% per year over the three years through 2021-22, while the Pubs, Bars and Nightclubs industry is expected to decline by 3.7% per year over the same period. These trends have contributed to a fall in per capita alcohol consumption among Australians. The Wine Production industry has also struggled during the COVID-19 pandemic, partly due to declining demand from hospitality industries. However, this trend has not negatively affected all alcohol-adjacent industries, with differing trends in the Spirit Manufacturing industry.
Spirit manufacturing
During the initial stages of the COVID-19 outbreak, spirit manufacturers faced difficult trading conditions. Revenue declined by 4.4% in 2019-20, as the closure of pubs, bars, nightclubs, restaurants and other licensed venues greatly reduced demand. However, consumer purchase habits pivoted to retail outlets as more people were drinking at home, offering a substantial revenue opportunity for manufacturers. As a result, revenue for the Spirit Manufacturing industry is anticipated to rise at an annualised 0.9% per year over the three years through June 2021-22, to over $2.2 billion. Increased demand from retailers has prompted strong revenue gains in the Liquor Wholesaling and Liquor Retailing industries, which have risen at annualised rates of 3.2% and 2.0% respectively over the three years through 2021-22.
The breakdown of key spirits buyers has also changed as a result of the pandemic. Unsurprisingly, retailers and liquor wholesalers have risen as a share of revenue, as hospitality businesses and export markets have declined. Retailers and wholesalers are forecast to account for over 75% of revenue in the current year. Spirit exports have declined sharply during the pandemic, falling at an annualised 5.2% over the three years through 2021-22.
Wine production
While offering a similar product to spirit manufacturers, wine producers have faced increasingly difficult conditions. The Australian Wine Production industry’s revenue fell sharply during the initial stages of the COVID-19 outbreak. Revenue continued to decline at an annualised 3.4% over the three years through 2021-22, to $6.9 billion.
Wine consumption at hospitality venues has declined dramatically due to COVID-19 restrictions, while strong competition from New World wine producers has also limited demand. Additionally, a growing consumer preference for spirits over ciders (which are also included in the Wine Production industry) has further reduced demand. Wine producers’ exposure to overseas markets has also contributed strongly to falling revenue.
Exports are anticipated to account for 32.5% of the Wine Production industry’s revenue, whereas exports for are forecast to account for 6.5% of the Spirit Manufacturing industry’s revenue. This difference indicates that wine producers are much more vulnerable to changes in overseas markets. For example, the Chinese Government imposed import tariffs on all Australian wine in November 2020, which has drastically affected wine exports. This factor, coupled with the effects of the COVID-19 pandemic, is expected to reduce export revenue at an annualised 10.4% over the three years through 2021-22, to $2.3 billion.
Outlook
Both the Australian Spirit Manufacturing and Wine Production industries are forecast to grow strongly over the next five years. The Wine Production industry is projected to surpass pre-pandemic performance by 2026-27, to achieve $7.9 billion in revenue. Similarly, the Spirit Manufacturing industry’s revenue is forecast to continue growing at an annualised 2.6% per year over the five years through 2026-27, to total $2.5 billion. The containment of COVID-19 and the associated economic recovery is projected to substantially boost demand from pubs, bars, nightclubs and restaurants, restoring demand from the key downstream hospitality market. Export revenue is also anticipated to recover and grow as a share of revenue for both industries, reaching 34.2% for wine producers and 7.0% for spirit manufacturers.
IBISWorld industry reports used to develop this release:
Pubs, Bars and Nightclubs in Australia
Spirit Manufacturing in Australia
