Against the backdrop of a global decline in consumption of 6.5%, Brazil posted more growth than any other of the 20 leading beverage markets
Much has been said about the pandemic boosting consumption of alcoholic beverages in different countries. Stuck at home and unable to travel, socialize or frequent restaurants, many people turned to wine as their preferred company. But why did the pandemic have such a positive effect on consumption in some places and not so much in others?
A closer look shows us that there was no global pattern and that, despite some similarities, each market reacted in its own way. The global market posted a decline of -6.5% in the consumption of wines, -7.1% in beer and -6.2% in aggregate total consumption of alcoholic beverages for the year 2020 in relation to 2019, according to International Wine & Spirit Research (IWSR). Over the same period, the market in Brazil grew most in wines, with a growth of +28%, and even beer showed a certain resiliency, with a growth of +1.7%.
It is important to note that this is the result of a combination of factors. It is simplistic to attribute this growth to just a couple of aspects: as if merely confining people to their homes would make them consume more.
Another important distinction is to separate the factors that contributed to this success from the factors that were already present. In other words, to discern structural and long-term trends from occasional forces with the potential for shorter-term effects. In such an uncertain scenario, this helps us to develop strategies since the restrictions imposed by the pandemic have been loosened.
Let’s look at 5 structural trends that help to explain the growth of the Brazilian wine market in 2020, in the context of the pandemic and social distancing:
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1 - Expanding consumer base
Our routine surveys reveal that the base of regular wine consumers in Brazil grew by about 17 million people over the last decade. In 2010, 22 million of those surveyed declared that they drink wine regularly and by 2020 this number had risen to 39 million—we are talking about adding the entire population of Holland or almost twice the population of Portugal as regular consumers of wine. The growth in consumption of types of wine that are easier to drink, with higher residual sugar content, for informal occasions, are proof of this. In 2015, for example, rosés accounted for only 2% of total market volume, while today they represent 6%, according to IWSR.
The base of regular wine drinkers in Brazil increased substantially since 2018, in over 7 million people (Source: Wine Intelligence)
2 - Digital Natives
Brazilians have been quick to adopt digital platforms. Today, Brazil has the fourth-largest number of Facebook users (130M), third-largest number of Instagram users (99M) and ranks second in number of downloads of the wine app Vivino (4M). The popularity of e-commerce for wine was already high in Brazil before the pandemic, with over 1/4 of consumers using online channels to purchase wine—this places the country third in absolute numbers of online buyers (10.6M), behind only China and the United States.
Brazil is the third largest market for wine online sales and 1/4 of its drinkers already purchase through this channel (Source: Wine Intelligence).
3 - Low on-trade exposure associated with the development of regional retailers
On-trade distribution channel (restaurants, bars and hotels) penetration of the Brazilian market, in terms of total consumption of beverages, remains relatively low. According to IWSR, around 16% of wine volume is sold to hotels, bars, restaurants and catering (HoreCa). The penetration of the channel is still low when compared to more mature markets like Portugal (37%) and Spain (45%). In addition, there is considerable sophistication in the supply and promotion of wines on the shelves of supermarkets throughout the country, particularly in regional retail networks. Without being able to frequent restaurants, consumers still had access to their preferred labels of a wide variety of styles, origins and price points.
4 - Consumers more interested and open to novelty
One of the behavioral characteristics that stands out among wine consumers in Brazil is their openness to trying new styles and types of wine—70% of consumers agree with this approach versus 51% of American, 47% of Chinese and 43% of English consumers. In addition, the percentage of Brazilian consumers classified as highly involved with the beverage rose from 26% in 2017 to 30% in 2020 (Wine Intelligence Brazil Landscapes 2021). This was another structural factor that boosted the growth of the beverage when choices for leisure and entertainment were limited.
Wine Intelligence has found that Brazilians are more open to trying different wine types and styles, compared to other markets (Credit: Wine Intelligence).
5 - Expanding the occasions for consumption and fewer trips
An interesting aspect of consumption during the pandemic was that the consumption of wine was not limited to the table and formal occasions — the consumption frequency index for “as a relaxing beverage at the end of the day” and “in informal meals at home” rose by 51.8 and 18.5, respectively. In addition, empirical evidence shows that the average amount spent on beverages in supermarkets was higher due to the inaccessibility of restaurants and inability to travel. It is interesting to note that once the restrictions were lifted, 55% of those surveyed said they were more likely to travel abroad on vacation. It remains to be seen how this will impact domestic and international consumption.
It is clear that a series of conditions were already in place before the most surprising incident of the century caught everyone by surprise.
A careful analysis of how these factors affect different market agents and a closer look at the past may be a useful exercise to help us to envision what may lie ahead for the wine market in Brazil.
For more information on the Brazilian market, Brazil Wine Landscapes 2021 is now available for purchase. Please read more here.
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Cover photo: Laura Clugston on Unsplash
