The coronavirus / COVID-19 pandemic has brought everything to a near standstill, locked people in their homes & forced them to look for alternative sourcing options for daily needs. In such a grave scenario, when acquiring staple items is becoming a struggle- getting alcohol will be even harder.
During this phase, there has been a surge in eCommerce orders & people are flocking to online home delivery options. For alcohol needs too, due to retail store closures & containment issues - the demand is strong online. They see the kind of sale that makes Christmas look puny!
From a producers standpoint - they’d sell roughly the same amount of alcohol; only the distribution channels would change. Less off-premise and more for household consumption. In the US, for bars, 50% of their revenue comes from alcohol - 20% liquor, 5% wine & 25% beer.
On-premise - Nightclubs, bars, sit-down restaurants, hotels have been the worst hit. Over 80-90% of them have closed their doors. The restaurant industry has lost around $25 billion in sales. The rippling effect of the same was also felt across all beverage & alcohol categories.
People are trying to stock up on booze, and fast. Alcoholic beverage sales online have spiked considerably. The demand for alcohol is matching Black Friday & Cyber Monday sales. Due to this mindset, the beverage industry could very well be resilient to recession.
According to Nielsen, Wine sales grew by 66%, and beer sales were up 42%. The sale of canned alcoholic beverages was up 93%, canned rose wine by 95% & Tequila saw a spike of 75% in the US in the week ending on March 21. Nielsen stated that during the same period, Drizly saw a 300% rise in sales & March 12 was their most significant day ever for sales. During the same period, Vivino’s sales soared by 162%. In Italy, its sales saw an even larger spike, up 282%. Another brand, Winc, saw a 578% increase in new member sign-ups & a 49.6 % increase in sales.
Consumers who earlier avoided big volume deals that required them to buy 3-6 packs of beers are now happily accepting every offer that comes their way. Sales of 12-packs of beer went up 61%, 6-packs were up 16%, 24-packs went up by 90% & that of 30-packs of beer was up by 87%.
Gifting of high-end liquor brands too has taken a hit as not many people are socializing these days. Parties and other gatherings have stopped completely - they prefer to collaborate online. Event organizers are canceling major events like St. Patrick’s day and other widely-attended events, such as tournaments, parades, festivals, fairs, concerts, and sporting events. Due to this, offline alcohol consumption has declined. People are turning to eCommerce to fulfill their alcohol needs. Tasting & tap rooms at wineries and craft breweries have been shut down. This is why the Brewers association speculates that there will be a 60% decline in sales in March.
The Current State of Alcohol Industry
Fortunately, liquor retailers have been classified as essential commodities in most states. However, convenience stores - a major hub for wine & beer sales are seeing a significant decline in revenues.
Various state governments have taken proactive measures & directed relaxation in shutdown orders for alcoholic beverage shops. For many who offer home deliveries - orders are shipped directly from the warehouse & delivered to the customer within 2-3 working days.
In Chicago, the state liquor commission reiterated that restaurants and bars serve alcohol, through means of in-house delivery, 3rd Party delivery, drive-through, and curbside pick-up. This means, licensed restaurants can sell unopened alcohol for takeout & delivery purposes.
In Pennsylvania, the Liquor Control Board resumed sales online & the demand shut down the site. However, the sales online are controlled - Customers will be able to purchase up to 6 bottles/day per transaction. All orders must be shipped to home or non-store addresses, & only one order/address will be fulfilled per day. With Credit/Debit cards as the only payment method.
In New York, the state Liquor authority relaxed its rules & allowed the sale of liquor & wine for takeout & delivery. On-premise sales are banned since sit-in services are now barred. Liquor license holders can only sell alcohol for which they have a license. Beyond this, it must also always only be sold with food, during the mandated hours, & violation of the laws will result in a fine of up to $10,000.
In Georgia, however, locals can’t get beer & wine delivered to their homes by retailers or 3rd Party apps. House Bill 879 that allows beverages to be delivered from retailers to residents, was passed on March 12. It’s not a law yet & needs to pass the Georgia Senate & get signed by the Governor.
Along these lines, New Hampshire, Maryland, Washington, Atlanta, Illinois, California, and Texas have also relaxed beverage laws to allow alcohol delivery in light of the possible economic damage to thousands of businesses and millions of employees.
Craft beer producers, who don’t offer bottled beers & rely on on-premise sales for around 70% of their revenue, are seeing significant reductions in revenues. Boutique wine producers, who sold most of their stock in restaurants, have been hard hit by their closures & have come to rely on drive-up pick-up and mail orders to their wine club members.
Beyond this, most beverage facilities are implementing public health best practices like facility sanitation, social distancing, & restricting the numbers of workers in their facility in an effort to protect its employees.
Some Distilling companies have employed their resources to counter the epidemic. They are now occupied with manufacturing ethanol-based hand sanitizers. BrewDog, Amass Spirits, Pernod Ricard USA & more are working on increasing the production of hand sanitizers; instead of focusing on alcohol.
Why eCommerce?
In the digital transformation age, selling online is no longer optional. It provides your brand with a distinct competitive advantage. This is why traditional-offline businesses must consider embracing eCommerce to improve their chances of becoming the leading brand in their segment.
In the recent past, there has been an increased customer demand in purchasing liquor from online channels. Skip trips to the brick & mortar stores and order from the comfort of your home. Even though the eCommerce model is a little immature here, it is bound to become a thriving spot soon.
The stakes will grow, and online alcohol sales will be a thriving segment - just like the online F&B market. Right now, the penetration is slow, but the increasing opportunities should make more brands take the online route. Investing in eCommerce will be imperative!
An Opportunity in eCommerce
Despite the current climate, there is a glimmer of hope for brands already selling alcohol online or those who wish to venture into eCommerce. All the distressed restaurants, bars, distillery's losing sales & anticipating layoff of employees can opt for the eCommerce model.
Online sales are booming - According to Danny Brager, Senior vice president of beverage alcohol at Nielsen, online growth rates for alcohol are ahead of in-store sales growth.
Drizly reported that their sales from new customers were 500% higher than a few weeks ago. For brand owners, this situation is perhaps a wake-up call to start investing resources in eCommerce. In any case, a blanket ban on alcohol during the lockdown will heavily burden the alcohol industry.
Many brands are already beefing up their online presence, staying agile, and making changes to tackle the disruption. They are continuously posting things on their social media channels and creating awareness plus activity around their brand. The best that you can do not alienate your audience.
The craft distillers in the U.S. rely on their tasting room sales for roughly 40% of their revenue. During the pandemic, many bars & tasting rooms responded by trying to recreate the bar experience virtually. The New York State brewery responded by launching a virtual happy hour on Facebook.
Some Bartenders who lost their jobs and found themselves sitting idle are using Social Media to offer videos, recipes, mixology methods, Q&A sessions & other kinds of virtual-interactive entertainment to earn tips through services like PayPal.
Beyond this, brands can consider investing in an on-demand, mobile shopping app for buyers. This will allow their customers quick access to delivery, curbside pickup, & more. In the wake of coronavirus, these are the best measures that a brand can take to navigate the challenges & stay afloat.
Some beverage brands are turning to Quick Service Restaurants (QSR). A QSR is generally for drive-throughs or pickups & doesn't offer alcoholic beverages. Allowing a QSR to sell alcoholic beverages, even if it were just wine/beer, would be a massive boost for the beverage industry.
Challenges Involved
eCommerce has always presented challenges for alcohol brands. Due to strict laws, shipping restrictions & other regulatory measures, it's hard to find a firm footing online. However, in recent years it has become a viable sales channel.
Beyond this, for brands to survive in the increasingly fragmented beverage market, they must be familiar with the various eCommerce channels and have a dedicated strategy for each.
Dealing with Regulations
States & local jurisdictions vary on who can & cannot sell alcoholic beverages. According to the Federal government, an alcoholic beverage is anything that contains 0.5% of alcohol, but states & local jurisdictions may deviate from this.
Nevada is quite lenient; however Kansas, Mississippi, and Tennessee are considered to have the most stringent liquor laws. Aside from this, individual counties forbid the sale of alcoholic beverages. This makes the situation even more confusing.
In some states, only wineries are allowed to sell directly to customers. But in others, even retailers can engage in D2C shipping. Then, some states have limits on the quantity of alcohol that can be shipped. Thus sellers must get a better understanding of who is legally able to sell and where.
If that wasn’t enough, you are going to need - A dealer registration, a license from your state, a retailer license, a shipping license, and other shipping agreements; before the concept of selling alcohol becomes even a fleeting thought in your head.
Delivery
Another bottleneck - as shipping regulations also differ from state to state. Which makes it difficult to sell directly in another state to a consumer or even a retailer for that matter.
Beyond this, before proceeding with shipping, analyze Alcohol and Tobacco Tax and Trade Bureau website & other state alcohol control boards for the various state alcohol policies & D2C shipping regulations. The laws are so complex that some cities within a state can have their shipping laws.
As such, your business will have to comply with all the state & local laws before you can launch a product in the market. During the Coronavirus period, delivery personnel will need to ensure safe-distancing & take-up other hygiene measures to prevent the spread of the virus. Like in New York, anyone delivering alcohol — whether a 3rd Party service or a member of the business — must always have a copy of the liquor license.
Lastly, when making alcohol deliveries, carriers still need to carry out the essential age verifications and other I.D checks. The last thing you'd want is the alcohol ending up with a minor. Thus a person 21 years of age or older must be present at the time of delivery.
Advantages of Selling Beverages Online
The idea of selling online looks even more tempting, when you consider the fact that e Commerce helps your brand reach more buyers, expand your customer base, & grow your business. The limitless potential offered is the reason why the alcohol industry has now set foot in the eCommerce model.
When it comes to eCommerce opportunities for beverage manufacturers, distributors, & wholesalers, they are now in a unique position to differentiate against competitors that still conduct trade through traditional offline sales channels.
Source: Statista
Online grocery could become the biggest driver for online alcohol sales. This channel will be particularly big for Wine & Beer sales. When it comes to wines, most wineries selling through their site’s account for nearly 90% of the revenue.
Showcase your products in an aesthetic-attractive fashion, provide tasting notes, elaborate product pages, 3rd party ratings, testimonials, Loyalty System, improved Customer Support, bundle deals, & much more. Here’s a few more advantages of selling beverages online.
Power of SEO
When it comes to online sales - a mere website is not adequate to generate sales. Further from this, every brand needs additional tactics to improve discoverability & conversions. Ensure that the brand awareness is at its peak & you are constantly getting quality traffic.
When it comes to discoverability, alcohol brands must focus on appearing at the top of search results for the most relevant, high-volume keywords. This is when SEO comes into the picture & secures more visibility, market share, leads, sales & credibility around your brand.
Omnichannel
A one-dimensional model is not suitable for sustaining a beverage business. As witnessed, during the COVID-19 crisis, the retail stores without any online presence were struggling & nearing a collapse. An omnichannel model is the best way to circumvent any unforeseen situation.
Their outlets are drawing closure and will be booted out really soon. The refusal to embrace multiple touchpoints has resulted in their misery. While selling on multiple channels, allows the merchant to diversify & draw orders from somewhere.
Hence start a responsive website, register on marketplaces, invest in social commerce, advertise your website in tasting rooms & liquor stores, create a mobile app, & continue running the Brick & Mortar outlets as usual.
Strong Online Content
A high-quality digital copy with more focus on consumers will go a long way to appease their demands. The textual content can be about the rich history of your brand, product, ingredients, process, distillery, workers, geographic location etc.
Beyond this, some brands even dish out drink recipes or party planning tips. Just, the sort of content that grips your consumers & stimulates repeat purchases. The trick is to always keep giving online consumers the relevant & educational content at their fingertips.
Use of CRM
Running a robust Customer Relationship management system in the background, helps you to conduct a 360-degree analysis of every single customer - providing valuable insights on their behaviour & preferences. Analytics pave the way for a deeper understanding of your buyer base.
Using this you can create highly personalized & targeted marketing campaigns to grow your bottom line. You even get to send offers, product suggestions, discounts & other creative promotional activities. Knowing more, assists in engaging & converting your target audience better.
Inventory Management
Most manufacturers & Distributors will end up handling a large number of SKU’s in their warehouse. This warrants proper management of products - which’ll enable vendors to create-customize their products, handle shipping methods, track inventory, control costs, avoid OOS situations, generate detailed reports of everyday’s progress, manage raw material, sequence orders, & finally automate everything to improve operational efficiency.
Imagery
Showcase your catalog with stunning graphics. A visual presentation of your vast catalog will turn out to be more attractive than a physical menu offering the different selections of liquor available at your store. Images are believed to leave a more profound impact on viewers - use it to your benefit!
Visual content is always more alluring & attractive than a physical pamphlet/book. When it comes to beverages, an online store offers this distinct advantage. High-resolution and ultra HD video content will also complement that textual description & give a more vivid understanding of the product.
Conclusion
In the coming months, we’ll be able to understand the gravity of the COVID-19 situation better. Get a sense of how purchasing & consumption patterns have changed since the epidemic.
Will the spike in online demand - whether due to stockpiling or immediate consumption, sustain throughout the year & create long-term changes or will it fizzle out going ahead? The changes in the distribution pattern will likely see far-reaching implications for the beverage industry.
Nonetheless, alcohol brands have endless, untapped opportunities to engage with customers online. But despite this, many alcohol vendors are yet to embrace online capabilities.
Maybe the temporary relaxed liquor laws & other waivers during the COVID-19 pandemic will offer great respite for many beverage business owners in times to come.
