Has Coronavirus Infected the Alcohol Industry?

Has Coronavirus Infected the Alcohol Industry?

Amidst inevitable uncertainty owing to the outbreak of the coronavirus, rumours began circulating that sales and the brand equity of namesake Corona beer, currently #70 on the Forbes List of The World’s Most Valuable Brands, could be significantly affected. The main brand in question is Corona Extra, a pale lager brewed since 1925, which is the top selling beer in Mexico and one of the top five selling beers worldwide. Available in over 150 countries, it is also Mexico’s leading export brand and the top-selling imported beer in the United States.

As recently as late February, ‘The Independent’ reported that Corona’s parent company, Anheuser-Busch In Bev, which commanded an impressive portfolio of brands including Stella Artois and Beck’s, was facing its worst quarter in 10 years. This was largely due to a lamentable sales performance in China, resulting in a reported £132m loss in circa 2 months, all the more concerning given the Company’s high sales expectation for a key trading period that included the celebration of the Chinese New Year.

It may be argued that Anheuser-Busch In Bev’s recent performance is actually not that surprising, especially given the stark nature of measures being adopted by governments in the world to tackle this unprecedented challenge. Ranging from firm advice to in some cases enforcement via emergency legislation, the war against this global threat currently focuses on social distancing. This means that the public must avoid visiting pubs, restaurants, nightclubs and theatres – basically any and all such places that host social gatherings, this includes venues licensed to serve alcohol such as for many their favourite bottle of Corona Extra. Similarly, Diageo, a leading player in the spirits industry, has also announced that the coronavirus would leave profits £200m short of initial expectations.

That said, there are still murmurings that Anheuser-Busch In Bev’s recent struggles may in fact be due to a name association between one of its brands and a global pandemic. Corona, Latin for crown, has not managed to escape this obvious but unfortunate name association, fuelling an ever-increasing number of links on social media as the coronavirus escalates. On the surface, data from YouGov would tend to support such a theory, indicating that consumer sentiment towards the brand has been negatively impacted and that purchase intent among US adults has hit a two-year low. In late February as the global crisis spread out of control, Corona’s brewer, Constellation Brands Inc., suffered an 8% plummet in share price. In that same week, Corona’s YouGov buzz score, which measures consumer sentiment, dropped almost 25 points from a year high of 75.

However, another school of thought argues that Corona’s brand issues may not be a result of the coronavirus since sales are susceptible to seasonal fluctuations as consumers consider it to be a summer beverage. In a similar vein, Constellation Brands Inc. has dismissed the coronavirus link and considered it completely unfounded ‘misinformation’, confirming that dollar sales of Corona beer were in fact up 5% in the US for a four-week period ending Feb 16th. This is a view echoed by Mark Ritson, keynote speaker and former marketing professor at Melbourne Business School, who stated that the virus is actually more likely to enhance the Corona brand as opposed to damage it, insisting that constantly hearing ‘corona’ will keep the brand foremost in people’s minds.

There is no doubt that we are all entering a period of massive uncertainty, constituting an unprecedented challenge in the weeks and months ahead to the world economy and the various stock exchanges around the globe. Clearly this will impact brands big and small, many of which will be forced to rely on government intervention for a bail-out, as will employees to prevent a great deal of human suffering. Brands like Corona or other alcoholic beverages may well even prosper as consumers enjoy their favourite tipple at home on an evening, seeking respite from the new daily grind of working from home, whilst caring for children who have been sent home from school and beating the panic buyers to the supermarket shelves.

How is your business affected by the pandemic? If we can provide IP strategy and valuation advice to help you at this difficult time, please get in touch on +44 141 353 3011.

Author: David Holburn, Analyst

Email: David@metispartners.com