COVID-19: How Will It Affect The Bourbon Market?
We all know by now how COVID-19 is affecting our lives. Most of us are either working from home, out of work, or some of the select few tasked with continuing to work in a somewhat normal environment because our career or service is considered “essential”. In our personal lives, we are feeling the effects of social distancing. Spouses are driving each other nuts. Kids are “bored” and driving their parents nuts. We are all binge watching every single documentary we can find on streaming services. Most of us are gaining weight that we really don’t need to gain. COVID-19 is affecting us all in both big and small many ways, but how is it currently impacting the bourbon industry? And, maybe more importantly, what will the impact be for the industry’s future? Let’s take a look.
Currently, the bourbon industry is being affected in several ways. Here are a few:
Bars across the nation have been ordered to shut down. Bar sales are huge to the American whiskey industry as the margins for bar owners are large. Now that the bars are closed, those sales, obviously, are simply not there.
Distilleries have shut down tours, events, and for the most part their gift shops. These activities are huge, not only from a revenue standpoint, but also from the standpoint of obtaining new customers. There is no more effective way for bourbon companies to add new loyal customers than to host them for a tour. Once someone goes on a tour and tasting, they are hooked.
Quite a few distilleries are changing over some of their equipment and lines to produce much-needed sanitizer to support the medical industry and others on the frontlines of treating and testing for COVID-19. This is a tremendous thing these companies are doing for the greater good, but it does come at a financial and inventory cost.
There is a significant hit to export sales and growth. The U.S. has been one of the last countries to see the effects of the COVID-19 virus or, at a minimum, one of the last to react to it. In China, Europe, Japan, etc; those countries and their economies are struggling. With recent tariff increases and this COVID-19 issue, export sales are suffering.
As you can see, COVID-19 is affecting the bourbon and whiskey industries in a big way. Like most companies, COVID-19 is striking huge blows to the bourbon industry and there may not be a lot of improvement in sight. Until this virus is under control, the bourbon industry will continue to hurt. So, what is there on the other side?
Once this pandemic is under control, the economy starts bouncing back, and we are operating under normal conditions; I predict there may be some positive trends coming for the industry:
Increased availability of aged whiskey will be available to the public. My hope is that due to the factors discussed above, we can have a period towards the end of this year and into 2021 where former “shelf bourbons” such as Blanton’s, Buffalo Trace, Rockhill Farms, ECBP, etc. are more readily available at retail price. Before COVID-19, we were starting to see some of this already. Hopefully, this can be the beginning of a movement back to the mean.
Increased inventory of fall allocated releases. Hear me out as I know this sounds crazy. The industry will need to bring back the popularity of the bourbon craze. They need to bring back drinkers to the stores and bars. The industry will need a jump start to get back to the level of interest as it was before the virus. What better way than to release larger allocations of highly-allocated bourbons like Pappy, BTAC, Old Forester Birthday, etc.? We know there will be larger volumes of aged bourbon due to the downturn. What better way to jump-start the bourbon craze than larger release quantities?
Additional states passing laws that allow the legal sales and shipment of spirits from one state to another or within your own state. This is happening folks. Just this week, Kentucky passed this very bill. One silver lining of the COVID-19 virus may end up being the beginning of increased (and legal) bourbon shipping, which eventually leads to the tearing down of the three-tiered system.
This COVID-19 is a serious virus from a health and well-being standpoint and it is affecting every single part of our economy; including the spirits industry. Let’s hope that our industry does what it always has done; react, adjust, and survive.
Cheers!
