COVID-19 negatively impacts Q1 alcohol and dairy sales in China

Euromonitor released a report revealing that both alcohol and dairy sales have suffered as a result of the extended quarantine in many Chinese cities during the first quarter of the year.

Alcohol fared better in the first quarter of 2020 than dairy as consumers stocked up for personal use and partially offset the losses experienced in the restaurant and bar sector. Retail sales of alcohol were buoyed by consumers stocking up before the Spring Festival and during the outbreak. However, Euromonitor noted that closures of bars and restaurants were “severely impacting alcoholic drink sales, ” which accounted for 46.7% of volume sales in China in 2019.

Consumers also altered how they purchased alcohol. In 2019, e-commerce accounted for only 8.8% of alcohol sales in China but that sales channel registered significant growth in 2020. Although final growth numbers have yet to be recorded, the Euromonitor report predicted it will be “significant” and “may partially cushion the loss in both on-trade and off-trade channels.”

Spirits and wine represented the majority of the affected sales in the alcohol segment. Negative effects of COVID-19 on beer sales will remain “minimal” due to the first quarter of the year being the traditional off-season for beer. Euromonitor noted that sporting events in the second and third quarters of the year traditionally see enough volume to offset sales losses from the first three months of 2020.

If the epidemic continues, the negative impact on alcohol sales will be amplified and continue a downward trend that has been developing. Already, Euromonitor statistics show that alcoholic drink volume sales in China have been shrinking between 2014 and 2019.

Dairy sales, on the other hand, have been growing with a CAGR of 98% during the same time period. However, COVID-19 stopped this industry growth in its tracks with detrimental ramifications. Much of the growth in dairy was due to the rise of milk tea shops and specialty coffee bars, which have been shuttered for the large part of the first quarter of the year. Although there has been continued strong demand from retail as authorities advise Chinese citizens to consume dairy to boost immunity, it will not be enough to counterbalance the effects of lost foodservice revenue. Euromonitor predicts “the fresh milk sales loss in foodservice during Q1 will be difficult to compensate throughout the year.”