Like many markets around the world, the ways Canadian wine consumers engage with the category has been strongly affected by restrictions put in place to slow the spread of COVID-19. These changes are amplified by the fact that 2019 was a poor year for the volume of wine sales in Canada. 2020 has seen a rebound in wine sales through the provincial liquor boards and Australia wine is among the beneficiaries.
Premiumisation and wellness led to volume decline in 2019
In 2019, two forces combined to drive down the volume of wine consumed in Canada. First, premiumisation was driven by consumers buying higher-priced wines with less frequency, and this came at the expense of lower-priced wines. Figure 1 illustrates that this caused volumes to decline in 2019, while value was able to stay on its growth trajectory.
Figure 1: Total wine consumption in Canada
Source: IWSR
The second force driving down wine consumption was the health and wellness trend. Some consumers pulled away from wine and beer in favour of low-sugar, canned cocktails and craft spirits. Ready-to-drink beverages (RTDs) grew by 10 per cent in volume, while spirits grew by 0.5 per cent. All other alcohol categories declined in volume in 2019.
Along comes COVID-19
The first recorded case of COVID-19 in Canada appeared on 25 January 2020. Case numbers stayed low until mid-March when a state of emergency was declared. This was followed swiftly by restrictions on restaurants, bars, and other public places, and the shutdown of the US-Canada border to all but essential travellers. New cases per day peaked in May and have since come down significantly. However, Figure 2 illustrates that there are still thousands of active cases in Canada.
Canada is currently in ‘Stage 3’ restrictions, meaning restaurants are open, but with social distancing requirements in place.
Figure 2: Current active cases of COVID-19 in Canada, 14 August 2020
Source: Public Health Agency of Canada
During this time of upheaval, still wine consumption amongst regular wine drinkers has remained stable, with off-premise consumption making up for the loss in on-trade consumption. Sparkling wine and spirits have suffered, see Figure 3.
Figure 3: Category purchase quantity change during lockdown March 2020 compared with pre-virus behaviour
Source: Wine Intelligence
Consistent with other markets, online channels have seen the greatest increase in usage, while visits to physical off-trade locations remained mostly the same as before the virus.
Figure 4: Change in channel usage during lockdown March 2020 compared with pre-virus behaviour
Source: Wine Intelligence
Wine sales rebound
In the year ended June 2020, Canadian wine sales grew by 5 per cent to 54 million 9-litre case equivalents, according to data from the provincial liquor boards. This was driven by a growth of 11 per cent in the quarter ending March 2020 (compared to the same quarter in the previous year) and 5 per cent in the quarter ending June 2020. As illustrated in Figure 5, domestic wine was the largest driver of this growth, although most source countries benefitted. Australian wine sales increased by 3 per cent to 4.7 million cases in the year ended June 2020, driven by an 8 per cent increase during the last quarter.
Figure 5: Canadian sales volume, top 7 sources, year ended June
Source: Association of Canadian Distillers
Australian wine exports benefit from increased off-trade consumption
In the year ended June 2020, Australian wine exports to Canada declined by 6 per cent in value to $186 million. This was thanks to poor performance in the first half of the year, driven by changes in consumer behaviour in 2019, as mentioned above. However, since the pandemic, Australian wine exports have benefitted from growth in wine sales in the off trade (see Figure 6).
Figure 6: Australian export value to Canada, rolling MAT
Source: Wine Australia
Exports to Canada grew by 14 per cent in the fourth quarter (April–June 2020). Figure 7 illustrates that this growth came at all price points, but especially exports at an average value between $5 and $7.49 per litre, up 19 per cent. Value in Q4 2020 also exceeds total value in Q4 2018 at all price points.
Figure 7: Export value by price point, fiscal quarter 4
Source: Wine Australia
The big question is how consumer behaviour will change once the threat of a pandemic is gone. Will wine sales remain high in the off trade once on-trade occasions are on the table again? Will consumers revert to their pre-virus mix of alcoholic beverages or will Australian wine continue benefiting from its known and trusted presence in the Canadian off trade?