The on-trade channel is extremely important to Beverages companies. Depending on the category and geography it can be anywhere from 20% to up to 80% of revenue, and almost always skews to a higher price/litre and margin product (single-serve format vs multi-pack). Revenue from this channel is down 30-40% y-o-y in markets where it has already re-opened for some time, and this pattern is fairly consistent across geographies. The nightlife channel is only delivering about 25% of its normal level of revenue. In the UK, nightclubs are yet to re-open. Early reads on Q2 and H1 results reveal significant operating de-leverage in the Beverages space. Heineken and Pepsi’s North American Beverages division are two high profile names that have experienced major operating de-leverage, with organic EBIT declines of 53% and 37%, respectively, in the latest period. We expect further volatility from their peers in the upcoming reporting season. The off-trade channel is not able to fully replace the lost demand in the on-trade. Consumers are favouring the mainstream brands and buying larger pack sizes, which are lower price/unit. Product innovations are largely being delayed, though there is still scope for successful packaging innovations. Strong data on off-trade Alcohol sales data in the US from Nielsen and NABCA does not accurately reflect the wider off-trade landscape, which is more subdued, according to the companies operating there. Further compounding the pain, Beverages companies are being asked to shoulder much of the working capital cash squeeze. Larger companies are providing temporary working capital to their on-trade customers during the re-openings. And those with a more fragile supplier base, such as wine and cognac producers, will probably need to support the farmers who provide the inputs. If performance continues to be sluggish in the on-trade, there is risk of modest downside to our forecasts for the large cap players. We see the greatest risk to our numbers at ABI, especially in the wake of the Heineken announcement, though we continue to be nervous about Spirits given the relatively long shelf life of the products. In the small mid cap space, where we have amended numbers (AG Barr forecasts remain under review), our “post lockdown” quarter assumptions for Out of Home channels range from -75% to -50% of previous levels. We have been most bearish on Nichols, not because of any worse positioning, but it is the most recent number change and it is becoming increasingly clear there is no rapid recovery.