- The global F&B sector continues to combat new daily challenges owing to COVID-19
- With lockdown restrictions easing and local economies beginning a protracted recovery, there are signs of modest improvement in trading conditions
- Feather in the cap in Australia’s emerging F&B landscape- popular US brand-White Claw is finally coming in October 2020
- After a volatile April 2020, Coca Cola Amatil welcomes May 2020 with modest improvement
In the past few weeks, the significance and pace of events surrounding COVID-19 has been unprecedented. Even though the invisible enemy that brought along with it a pandemic unwitnessed in decades is primarily a threat to global health, ramifications on the economic and financial end have been equally dire. Businesses of every genre have been working through these extraordinary circumstances with the focus on employee safety and wellbeing, customer and community support and striving towards business continuity.
Australia, with above 7.1k confirmed cases of COVID 19 and 103 deaths (as on 27 May 2020, 7:02 AM, as per JHU CSSE dashboard) has restarted some business activity as lockdown restrictions are gradually lifted across states in a staged manner. Consequently, there have been some green shoots of improvement in trading conditions, as the Government stimulus packages, robust healthcare facilities and strict adherence of COVID-19 rules greased the wheels of the economy to work towards its paused economic momentum.
Beverage Industry Amid COVID 19
The global food and beverage sector continues to combat new daily challenges with the outbreak exposing supply chain vulnerabilities, panic buying causing a demand and supply rift, production at the standstill, export and import restrictions, restaurants shutdowns, significantly reduced consumption to name a few. There was unprecedented disruption to trade especially in peak season of Easter, Anzac Day, and Ramadan.
According to Australian Bureau of Statistics (ABS), the consumer price index (CPI) was up by 0.3% in the March 2020 quarter and the most significant price rises were for food and non-alcoholic beverages, up 1.9%.
Specifically for the beverages industry, a study by Deloitte opines that out of home consumption is likely to pick up with the easing of restrictions, but with fears of an economic recession looming and F&B revenues under pressure, it is unlikely that this pick up will be enough to cover lost sales.
What is recommended is- revisiting sourcing, pricing and promotion strategies, rationalising product ranges, assessing resilience and agility of supply chains and align route to market channels efficiently, all while optimising e-commerce and distribution channels.
While Australia gears up to get the economy back on track, two updates from the beverage industry have been garnering attention- the introduction of “healthy alcohol” White Claw and ASX-listed Coca Cola Amatil Limited (ASX:CCL) COVID-19 trading update, wherein it reportedly outperformed the sector amid the pandemic.
Before we dive in- Did you know that ~ 85.6% Australians were responsibly drinking during lockdown, with ~30% abstaining or not consuming alcohol?
Gear Up! White Claw Hard Seltzer is Coming to Australia
A pop culture phenomenon of contemporary times, the US’ popular alcoholic, lightly flavoured sparkling water- White Claw is finally coming to Australia, thanks to Beverage company Lion who has partnered with White Claw producer Mark Anthony Brands International for the deal.
As per the exclusive Australian distribution deal with White Claw, Lion, which owns several beverage brands, will import, market, and exclusively distribute the popular US brand in Australia. The brand is globally known, owing to its extensive traction on social media channels and is likely to be welcomed in Australia, a natural fit in the growing portfolio of Australian adult beverages market. White Claw Mango, White Claw Natural Lime and White Claw Ruby Grapefruit are the flavours that will be introduced first around October 2020.
White Claw is made of seltzer water, a gluten-free alcohol base, and fruit flavour and is often deemed to be a “healthy alcohol” (lower calories and lower sugar).
Coca-Cola Amatil’s COVID-19 Trading Update, Chairman Says Company “Well Positioned For The Future”
After a particularly significant 2019 marking the completion of a two-year transition period, strengthened customer focus, simplified operating model and a strong performance that provide a solid foundation- the brand has benefited from this business transformation effort.
However, the COVID-19 volatility across channels and markets forced the Company to trade through tighter COVID-19 lockdown restrictions, customers remaining closed or operating at significantly reduced capacity, whilst simultaneously cycling the traditionally peak Easter and Ramadan trading periods catalysing unprecedented disruption to trade.
In Spite of these difficulties, CCL’s business exhibited strength and the capability to partially alleviate the unfavourable effect of disruptions via its flexible ways to market, varied channels, meticulous financial management and the vigour of its brands. Moreover, with lockdown restrictions commencing to ease and regional economies to begin a lengthy recovery, there are indications of moderate progress in trading conditions.
In Australia for April 2020-
- Amatil experienced an ~30% decline in volume in the Non-Alcoholic Ready to Drink relative April 2019
- OTG Volume and Convenience and Petroleum Volume was down ~55% and 20%, respectively, on the pcp
- In the Grocery channel, Volume declined approximately 10% versus April 2019 driven by panic buying
- The Alcohol business was down with Volume down ~35% on the pcp reflecting On-Premises closure and soft Easter and ANZAC Day trading
But things seem to streamline in May with COVID-19 restrictions starting to lift. CCL has already noted modest improvement with volume decline rates reducing in the first three weeks of May to ~20% down on the pcp. The Company has commenced repositioning team members back into the OTG channel (they were temporarily redeployed into the Grocery channel in mid-March).
In a Board update, CCL intimated that Richard Conway has been appointed as Group Company Secretary, effective 29 May 2020, following the resignation of Jane Bowd.
CCL quoted $8.81 at market close on 26 May 2020 and was the 5th biggest decliner of the day in the S&P/ ASX200 list, down by 1.56%. On 27 May 2020, CCL was trading at $8.81, down by 0.113% (at AEST 12:25 PM).
As CCL’s Group MD Alison Watkins rightly puts- “while you can’t change the direction of the wind, you can adjust your sails”, it will be interesting to watch the beverage industry respond to the challenges of COVID-19, a situation that has been a testament to the strength of the industry, and witness it unveil its strategy to survive and win in a post COVID-19 world.
(NOTE: Currency is reported in Australian Dollar unless stated otherwise)