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IWSR: US to overtake China as world’s biggest online drinks market by 2021

With China's slower-than-expected growth rate, the US is expected to surpass China to become the world's biggest online drinks market by the end of 2021, according to IWSR.

Based on new IWSR research, IWSR forecasts that the value of alcohol ecommerce will increase by 42% this year, across 10 core markets, to reach US$24 billion, thanks to the pandemic-induced shift towards online shopping.

With China’s slower-than-expected growth rate, the US is expected to surpass China to become the world’s biggest online drinks market by the end of 2021, according to IWSR.

This prediction draws a sharp difference from IWSR’s previous report in 2018 that says China’s online drinks market size is four times of the US.

China is currently the largest online alcohol market in the world, however, its growth rate (23% value growth, 2019-2020) has been slower than that of the US, UK, Australia and Brazil, says IWSR.

The US is predicted to surpass China to become the world’s biggest online drinks market by 2021, according to IWSR.

This is because alcohol ecommerce is already reasonably well developed in China, allowing for less room for growth. IWSR consumer research findings show that most (46%) Chinese consumers who buy alcohol online have done so for several years. The market is also heavily reliant on restaurants and bars, where about half of China’s alcoholic drinks are sold.

After witnessing a value growth of over 80% in 2019-2020, the US is poised to overtake China to become the largest alcohol ecommerce market in the world by the end of 2021.

Between 2019 and 2024, US total alcohol ecommerce value will grow six-fold, from half that of China to nearly double. Growth, however, is coming from a low base: in 2019, ecommerce represented just 1% of off-trade retail alcohol volume in the US. By 2024, IWSR estimates that ecommerce will account for 7% of total off-trade beverage alcohol volume in the country, compared to 6% in China.

“This year, there has been a huge increase in awareness of alcohol ecommerce among US consumers, while some states have relaxed legislation to facilitate online sales and home deliveries. IWSR consumer research data shows that in the US, 44% of alcohol e-shoppers only started buying alcohol online in 2020, compared to 19% in 2019. Growth is largely being driven by the omnichannel segment as supermarkets and traditional retailers seek to rapidly enhance their online offering. On-demand players are also expected to gain significant share,” notes Guy Wolfe, Strategic Insights Manager at IWSR Drinks Market Analysis.

Market size

The 10 core markets included in IWSR’s new comprehensive Global Ecommerce Strategic Study (Australia, Brazil, China, France, Germany, Italy, Japan, Spain, UK, and the US) collectively represent over 90% of total alcohol ecommerce value.

The report also examined an additional 10 “markets to watch” (Mexico, Colombia, Argentina, Netherlands, Israel, Nigeria, Kenya, South Africa, Singapore, and the Philippines.)

Across all of those 20 markets, IWSR expects the total value of alcohol ecommerce to exceed US$40 billion by 2024.

Though the online shift is exacerbated by the pandemic, IWSR believes the new purchasing behavior is here for the long term.

“Consumers’ increasing proclivity for online purchasing has been driven by necessity in recent months, but these purchasing behaviours are here to stay. As brand owners increasingly invest in the channel, markets must be assessed on their own merits with a bespoke strategy developed. This is especially important as government regulations for alcohol ecommerce may evolve as the channel continues to grow,” says Wolfe.

Across the 10 core countries, marketplaces currently account for nearly half of total online alcohol sales by value, but the omnichannel and on-demand channels are predicted to gain share.

The value of the Direct-to-Consumer (D2C) channel will also grow by almost US$3 billion between 2019 and 2024, at a value CAGR rate of 24% (2019 – 2024).

Though wine is the dominant ecommerce category in most countries, across the 10 core markets, ecommerce for ready-to-drink (RTD) products is predicted to represent 10% of total alcohol ecommerce value by 2024 – up from 2% in 2019.

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