Scratcher ticket sales rose to a fever pitch in multiple U.S. jurisdictions starting in mid-April as the COVID-19 storm battered businesses and kept people huddling indoors. When consumers began warily stepping outside their doors, there were few alternatives. Lack of competition for entertainment options fueled scratcher sales.

For example, in Colorado, lottery sales dropped to about $7 million a week during the first couple of weeks during stay-at-home orders, then jumped to $10 to 11 million a week—with no signs of letting up. “One of the biggest factors here and probably across the country is the fact that the only businesses opened for weeks were grocery and retail stores, and the fact that we were the only game in town,” said Todd Greco, Scratcher Product Manager, Colorado Lottery. “All other areas where people could spend discretionary income were shut down—movie theaters, bars, restaurants and most impactful—casinos. This left lottery tickets as the only means of entertainment.”

But other regions of the country were not as resilient. “Through February, our instant ticket sales were more than 2% ahead of last year’s record-setting figure. Due to the pandemic and an extended stay-at-home advisory in Massachusetts, weekly sales of instant tickets dropped significantly, as much as 30%, during a seven-week period. We also postponed the scheduled April launch of four tickets, which included a new $30 game. By mid-May, instant sales were returning to last year’s levels and that trend continued into June. While we will show a slight decrease in instant ticket sales for the year, given the circumstances, the instant ticket category performed very well,” said Edward Farley, Chief Marketing Officer, Massachusetts Lottery.

Lotteries are still frantically surfing what could be the first wave of the pandemic. By late July, there has been a double-digit growth in new cases and increases in deaths. The map of United States looks like a quilt with dark red pieces sewed together on the bottom half, along with rows of tangerine and orange pieces filling out the right and left borders.

“I am not sure we have seen post-pandemic recovery yet. We have our eye on the fall when school ‘may’ start and COVID numbers continue to rise. We believe that will be the true test to our portfolio,” said Ammie Smith, Senior Marketing & Product Development Manager, South Carolina Education Lottery.

“We’re positioned to keep supplying the games current players and new players have found so entertaining,” said Wisconsin Lottery Director Cindy Polzin. “We will be bringing back advertising that we temporarily paused during the pandemic. This will help support the games.”

FY20 Results

Oklahoma Lottery reported a 46% increase in instant sales over FY19. Two key factors were the introduction of a $20 price point in late December and the addition of 108 7-Eleven stores as new retailers in February. Plus the lottery “saw a huge demand for instant games during the fourth quarter as casino locations throughout the state were closed and players were looking for alternative entertainment options,” said Brandie Reisman, Director of Marketing & Administration, Oklahoma Lottery.

Florida Lottery’s FY20 Scratch sales topped $5.66 million or 14.7% higher than FY19. “We continue to focus on families of games with extended print runs that allow for dynamic top prizes and a product promotional strategy designed to fuel growth across every price point. Our sales team supported our product goals with footprint expansion at retail, including a major upgrade within our largest corporate chain (Publix), and a laser focus on new game activation and vending machine fullness,” said Shelly Gerteisen, Director of Product, Florida Lottery.

Wisconsin Lottery’s unaudited FY20 instant sales were up 13.9% in FY 2020 compared to FY 2019. “With other avenues for entertainment closed, demand for scratch tickets has been high since mid-March. Since lottery is sold in two of the retail channels that remained open throughout the pandemic, c-stores and grocery stores, our products remained in front of customers,” said Polzin.

Missouri Lottery’s FY20 Scratchers sales are up 13.1% YOY. “This can be attributed to: adjustments to game prize structures on our higher price-point games; continued increase in the number of game facings available at retail; and because we were one of the few entertainment options during the pandemic this past spring,” said Bill Burton, Instant Product Manager, Missouri Lottery.

The Arizona Lottery reported a 13% increase in Scratcher sales. “In addition to the increase in sales, partially due to the pandemic, we also saw an impact attributable to a change in our standard 24 bin schematic,” said Mary Cimaglio, Senior Instant Games Manager, Arizona Lottery.

The Ohio Lottery realized a 12.7% increase in FY20 instant sales (over $211.8 million). “The main drivers for this increase were our higher price points. We saw our highest FY sales ever at the $10, $20 and $30 price points. Total sales for the $5 price point was at its highest since 2013,” said Ronald Fornaro, Instant Ticket Product Manager, Ohio Lottery.

The Michigan Lottery is forecasting a YOY increase through September 30, 2020, of over $180 million (10.9%). “Prior to the COVID-19 pandemic we were forecasting total portfolio growth of over 6%. In the process of flattening the curve, some forms of Lottery’s direct and/or indirect competition for disposable player spend were suspended through Executive Order as issued by the Governor or done so on a voluntary basis. Specifically, casino operators closed their doors to the public for up to two months. Most if not all tribal casinos have resumed operation but at reduced capacity. However, the three private casinos in the city of Detroit are still pending re-opening, at a planned reduced capacity as well. Although it’s almost impossible to prove one-to-one correlation, we understand anecdotally through our sales team that players simply pivoted their dollars to lottery products, with instant games and other products like our Daily and digital/e-instants being the primary benefactors of that increased spend,” said Travis Priest, Printed Products Manager, Michigan Lottery.

Kentucky Lottery’s YOY instant sales increased 10.7% in fiscal 2020. “We attribute this increase to a strong portfolio mix, as well as the lack of competition due to COVID closures for entertainment dollars. We’re hearing from our players that Scratch-offs are a welcome fun break from the boredom and bad news of the pandemic and quarantine,” said Edie Frakes, VP, Marketing, Kentucky Lottery Corp.

The Colorado Lottery’s Scratch sales increased $45 million in FY20. “The main drivers were committing to set game launches every six weeks, increasing the number of games available and facings at retail, and continued strengthening of our families of games,” said Colorado Lottery Director Tom Seaver.

North Carolina Lottery’s FY20 instant ticket sales grew by 9.5% YOY. “This growth can be attributed to a few key initiatives: better penetration of high performing games, game merchandising optimization and more consistent introduction of unique value proposition games. We also unexpectedly benefited at the end of the year from limited entertainment options due to the pandemic and resulting Stay-at-Home orders,” said Randy Spielman, Deputy Executive Director, Product Development & Digital Gaming, North Carolina Education Lottery.

The Idaho Lottery’s traditional Scratch games increased 8.8% in fiscal 2020. “Pre-pandemic, we were already trending ahead of last year. After the COVID-19 pandemic reached Idaho, and once we emerged from our Stay-Home order, we saw a rebound in these sales. Anecdotally, our increase was due to lack of competition from other entertainment choices and more than just our regular players participating,” said Joe King, Lottery Product Manager, Idaho Lottery.

Pennsylvania Lottery’s Scratch-Off sales increased 7% in FY20. “Speaking generally, when COVID-19 first reached Pennsylvania in March, the PA Lottery saw overall sales initially decrease by an estimated 25%. That’s when roughly 30% of our retailers were closed. However, in May and June we saw a significant boost in retail lottery sales as businesses started to reopen. As a result, that has recently led to some big sales weeks for Scratch-Off tickets. This occurred despite the negative impact of the illegal gambling machines marketed as ‘Pennsylvania Skill Games’ that have been operating illegally throughout the commonwealth for some time. These machines continue to siphon PA Lottery revenue which funds many state programs that seniors rely on,” said Kara Sparks, Director of Products, Pennsylvania Lottery.

The Maryland Lottery’s FY20 instant ticket sales increased +5%. “Primary growth came from the higher price points ($10, $20 and $30), in addition to some growth in the $3 category and success with families of games such as Lucky 7s. We also saw increasing sales in our Crossword category due to the addition of our first $20 Crossword game,” said Leslie Mitchell, Instant Product Manager, Maryland Lottery & Gaming.

New Mexico Lottery’s FY20 scratcher sales are up 5.74% YOY. “From mid-March through the end of July, instant sales saw an increase of 20% overall compared to the same time last year. This could be attributed to the closure of most entertainment venues, including casinos. The increase was a welcome boost to overall sales and beneficiary proceeds considering the significant decrease in our large jackpot sales,” said Wendy Ahlm, Director, Advertising & Marketing, New Mexico Lottery.

New Jersey’s Scratch-Offs ticket sales increased 0.4% over FY19. “This increase can be attributed to two strong family launches, a New Jersey Lottery record breaking holiday week of sales and most importantly the introduction of New Jersey’s first ever large format Super Ticket,” said Kristen Connelly, Product Manager, Northstar New Jersey.

The Texas Lottery’s fiscal year (which will end August 31, 2020) is expected to see a significant YOY increase in scratch ticket sales. “Understanding that almost all of the 20,000 retailer locations in Texas where lottery tickets are sold were deemed ‘essential service’ locations and remained open for business even during times of ‘shelter in place,’ in mid-April sales for scratch tickets began remarkably turning around,” said Robert Tirloni, Products Manager, Texas Lottery.

Multiple lotteries are projecting YOY growth with FY20 instant ticket sales (ended June 30) but they did not cite percentage growth. “We entered FY20 with good momentum and saw consistent growth throughout the year. We attribute the growth to our continued efforts to diversify every aspect of the Scratch-off portfolio to ensure that we are responsibly appealing to the broadest section of Hoosiers we can,” said Sarah Taylor, Director, Hoosier Lottery.

“Our YOY instant ticket sales will increase in FY 2020. The main reasons for the increase are the changes in consumer behavior as a result of the pandemic, print quantity management, bin expansion efforts, enhanced tools for lottery sales representatives, and a further diversification of prize structures,” said Brian Grisenbrock, Products Manager, Nebraska Lottery.

“We are still finalizing our fiscal year 2020 sales figures, but we anticipate that the Iowa Lottery’s instant-scratch ticket sales in FY20 will have increased from our FY19 total,” said Mary Neubauer, VP, External Relations, Iowa Lottery.

Major Challenges

The list is endless for the challenges faced by U.S. lotteries selling instant tickets during the pandemic, such as delaying launch schedules, withdrawing advertising support and stopping on-site DSR visits.

Several lotteries suspended game launches in April and May due to the coronavirus. “We didn’t want to give the playing public any additional reasons or motivating to make any unnecessary trips to the store and it was of course the right move as Michigan had experienced once of the highest per capita case loads of COVID-19 in the nation at the onset of the pandemic,” said Priest.

“Typically, we launch new scratch-off games each month, but we cancelled the April launch, and also cancelled all advertising and promotional activities in April, May and part of June,” said Mitchell.

Idaho Lottery’s summer Scratch Game campaign, which focuses on Idaho’s State Parks, was delayed due to the parks themselves actually being closed. “This game launched in late June when the parks opened to camping. Otherwise, we have kept our Scratch Game launch schedule intact and added a $30 game launch in June,” said King.

Other lotteries chose to maintain their scheduled product releases. “We did not make any changes to our monthly launch plans for Scratch-off games. We did, however, pull back advertising support across all channels,” reported Melissa Pursley, COO and General Manager, IGT Indiana.

“Additionally, we are having to adapt to changes in demand patterns that are impacting things like sales channel contribution and self-service utilization,” added Robert Tharp, Senior Director Product Development & Analytics, IGT Indiana.

Multiple marketers mentioned the challenge in adjusting their schedule for instant games due to the sudden demand. “We are now reevaluating our order quantities and adjusting our launch schedule to accommodate any future spikes. We are also looking at potential second chance opportunities a little differently because ‘trip prizes’ may not be as exciting to players as they once were,” said Arizona’s Cimaglio.

“We didn’t adjust our game launch plans as a result of the pandemic. We did, however decide not to actively advertise and market those games. We decided to stay the course until we had more information to go on before we adjusted our instant game plan. Our biggest challenge now is to maintain enough games in market due to the much higher than anticipated sales volumes that have resulted in sell through rates that are twice as fast as anticipated. This has put a strain on maintaining the optimal portfolio in market,” said Spielman.

Keeping product in the pipeline is key. “The explosion of demand for Scratch-Off games in May required us to be nimble with production and distribution. Working closely with our vendor partner, Scientific Games, we continuously monitor sales and warehouse depletion rates, and we faced shipping and delivery challenges. Nearly half of our active Scratch-Offs have needed reorders and new game quantities have been increased which, in turn, increased demands for press time and distribution overtime,” said Sparks.

The biggest challenges revolve around inventory management. “There are limitations on the packing line due to social distancing mandates. Soft launching, full initial distribution and keeping up with daily orders are challenges. Some retailers were not activating new games because their sales representative wasn’t available to return older games,” said Terri Rose, Director of Marketing, Virginia Lottery.

The Nebraska Lottery fast-tracked its Scratch game development timing to ensure adequate games in the field. “The main challenges that we have experienced pertain mainly to print quantity management in order to efficiently align accelerated consumer demand on a particular Scratch game’s life cycle,” said Grisenbrock.

Closing prize offices also posed a huge challenge for lotteries. The Iowa Lottery only allowed prize claims by mail or via a secure drop box at lottery headquarters. “Those same restrictions could be renewed if there is a resurgence in COVID-19 cases in our state,” said Neubauer.

Instant tickets tied to travel programs also required changes. “Another major impact is to the experiential trip promotions, such as the $5 Million Vegas Challenge™ and the Big Cedar Lodge Cash Adventure, which had to be rescheduled and/or restructured due to the pandemic. Also, the Texas Lottery has canceled its participation in selling events around the state, including the State Fair of Texas,” said Tirloni.

Lottery sales reps began returning to on-site visits as states entered phase one and two after stay-in-home orders expired. “Not having sales reps in the field has been a major setback,” noted Florida’s Gerteisen. “From the inability to change out POS, which is a huge driver of sales, plus we rely on them to spread enthusiasm about new games and offerings in a way that’s more impactful than a retailer flyer or terminal message.”

Ohio’s Fornaro predicts “new retailer recruitment will most likely be the biggest challenge this year. We did not delay or reduce any launches through the pandemic. We will be releasing more games in the upcoming launches to shore up our inventory.”

The Great Unknown

Surging instant sales helped many lotteries make or break their FY20 sales goals. “The biggest challenge—one we never expected—is getting enough games out in the field to keep inventory levels up after the surge in sales,” said Greco. “As with many jurisdictions, we pulled back early in launching new games thinking sales would drop off dramatically. The good news is, that didn’t happen and sales took off, the bad news is, now we’re trying to get games out in the field to keep our dispensers full.

In those jurisdictions where iLottery sales are permitted, sales were robust. “We have seen a surge in players turning to the lottery’s online games available on pailottery.com. Online play increased substantially during the COVID-19 pandemic and is now about 24% ahead of estimate for the fiscal year,” said Pennsylvania’s Sparks.

Fiscal 2021 remains uncharted territory as the pandemic continues to drastically change how and why people interact at retail businesses. The potential for a second wave in the winter threatens. “The main challenge we see is the fear of the unknown. At this time, we do not have any plans to change our strategy or launch schedule,” said SCEL’s Smith.