This article was initially published in the April issue of Global Drinks Intel magazine. For details on how to subscribe click here.
E-commerce alcohol sales are no longer experiencing the heights that were hit during Covid lockdowns, but online retailers and brands still predict a bright digital future.
The global spike in e-commerce alcohol sales during the pandemic has subsided, forcing brands and e-tailers to work harder to tempt sales from consumers no longer forced to stay at home.
In 2020, according to IWSR Drinks Market Analysis, alcohol e-commerce soared nearly 43% in 16 focus markets, including China, the US, Germany, the UK and France. Now, the research firm expects the widespread reopening of the on-premise channel, coupled with the cost of living crisis, to dampen consumer demand.
Post-pandemic reset
Certainly, many drinks companies have seen a post-pandemic reset. “We experienced sales uplift of over 1,200% during the pandemic, but this came crashing back down to earth during 2021, as we started to see the on-trade reopening and people returning to offices,” recalls Crawford Sinclair, commercial director at Innis & Gunn. The Scottish brewer has invested heavily in its website and online store, allowing it to go direct-to-consumer (D2C) with the help of a specialist third-party fulfilment logistics partner.
In a similar vein, the MD of UK-based Lanique Rose Petal Liqueur, Kieran Gandhi, tells Global Drinks Intel: “We saw 300% growth year on year during lockdown, which has now returned to pre-pandemic levels of growth, with a slight increase compared to previous rates of sale due to our brand’s growth in the last two years. We work with Amazon as our main e-commerce route-to-market, although we also work with specialist e-drink retailers like the Craft Gin Club, who provide brilliant marketing that helps with brand awareness and advocacy.”
Back in the beer category, Carlsberg Marston’s Brewing Co senior e-commerce manager Ellie Price reveals that the San Miguel brand has experienced a significant drop in online sales in the UK post-Covid lockdowns, and its share versus bricks-and-mortar retail is gradually dropping from its 30% high.
“The challenge within this is partially due to the loss of younger shoppers in the channel, as they are now switching their spend more frequently and world beers tend to over-index with the younger demographic,” she says. “Given the channel dynamics we are seeing currently, our business in the UK has to be tunnel-visioned in its approach to growth in the years ahead. Our strategy is focused on excellent retailer partnerships, ensuring investment counts and real focus on our digital shelf set-up. Our growth will come from landing a strategy so that we’re focused on prioritisation through our brands, formats and retailers.”
San Miguel plans to continue to focus on retailers and pure players, says Price, and sees rapid-fulfilment quick commerce [q-commerce] as a growth opportunity. “B2B is an area of huge value and one we will continue to drive,” she adds. “D2C is less of a focus in year one through marketplaces, but [Carlsberg B2B online platform] Carl’s Shop will continue to grow from strength to strength.”
Another post-pandemic challenge for brands wishing to grow their e-commerce sales profitably is rising costs. “We don’t deliver to the end consumer ourselves, so the last mile we don’t feel as much, but the cost of packaging [cartons/glass] has definitely risen, mainly because of Putin’s war, when we package everything at our breweries in Belgium,” says the e-commerce manager at Belgium’s Duvel Beer, Jonas Rosales. “Smaller retailers are suffering the most and are forced into looking for cheaper brands of beers to justify operation [cost] increases. This phenomenon has particularly affected specialised beer e-tailers focused on discovery.”
Longer-term potential
Despite these challenges, the e-commerce channel is expected to grow, adding $10bn to the alcohol beverage market between 2021 and 2026, according to the IWSR, and taking the sector’s market value to nearly $40bn across 16 focus markets. China and the US will drive much of the growth in e-commerce in the coming years, but rapid growth from a lower base will also be generated by developing markets, such as Nigeria, Brazil and Mexico.
In the US, the current e-commerce share of the total off-premise is relatively low at just 4% of the channel’s sales, according to a recent report by Rabobank. With a less mature online consumer base, the channel has strong potential for growth. Conversely, the development of China’s alcohol e-commerce channel has been less dependent on the impact of Covid, and is expected to see continued, steady growth from an already high base.
Multinational drinks brand owners show no sign of pulling back from e-commerce. Late last year, Moët Hennessy and Campari Group jointly took full ownership of Milan-based online wine retailer Tannico with the aim of making it the leading wine and spirits e-commerce platform in Europe. The acquisition followed Pernod Ricard’s 2021 acquisition of UK-based The Whisky Exchange, one of the biggest and most successful spirits e-tailers.
Master of Malt ‘delighted’ with 30% bottom-line increase
Online retailers also report strong sales despite the more challenging trading conditions, supporting the view that e-commerce is experiencing a post-pandemic reset rather than a slump. “Last year, we were delighted with our year, with an over 30% increase in our bottom line (EBITDA) margin and over 20% increases in average order value,” says a spokesperson for Master of Malt, one of the UK’s leading online drinks retailers. “This supported [parent company] Atom Group to have the most profitable year ever.
“We also had a 24-hour shipping record of more than 22,000 bottles going out. During December 2022, we shipped over 247,000 bottles by Christmas. These numbers support our feeling that people are really home-imbibing even though the on-trade has reopened. We still think people are enjoying drinks at home.”
Irish online retail startup The Single Malt Shop also paints a bright picture. Based in Dublin, the platform started trading in 2021 and specialises in premium-plus whiskies priced EUR50–EUR40,000 (US$54–$43,100) a bottle. “The data show that, following a huge boost in online sales due to Covid, the growth in e-commerce has returned to a normal trajectory, which remains very healthy,” says MD Ed Forrest. “We are new, so we’re starting from a low base, but our growth is very healthy indeed. The large majority of people purchase and consume premium whiskies at home and increasingly see e-commerce as a safe, reliable option. I see no reason why this won’t continue for many years to come.”
The Single Malt Shop sells to 30 countries worldwide but its main markets are Ireland and the UK. “As an Irish-based retailer, we have the advantage of being able to ship to both the UK and the EU,” says Forrest. “We’re the most compliant online retailer of alcohol in Europe, collecting and paying taxes and duties locally across the EU every month. This means our customers, be they in the UK, Ireland or Germany, can ensure their orders arrive seamlessly to their door with one payment at checkout.”
Targeting TikTok to drive sales growth
Despite the evidence from online retailers of rising sales, many drinks brands are still missing out on realising the full potential of e-commerce. A savvier approach to social media platforms, especially TikTok, the social media app with 1.8bn users last year, is the advice from Annie Little, strategy director of customer experience agency Initials, which has worked with beer and cider brands Heineken and Strongbow.
“The potential for discovery on TikTok is endless,” she argues. “Alcohol and drinks brands can leverage the platform in many ways, from working with creators, to jumping on trends (spicy rosé, anyone?), and/or inspiring the community to co-create alongside them using TikTok’s unique tools.
“As mobile commerce continues to rise and community commerce emerges, TikTok can offer brands full-funnel marketing solutions that engage consumers at every phase of the path to purchase,” she adds. “From brand discovery to product education to driving sales to post-sales support inspirations – we’re starting to see alcohol and drinks brands take advantage of this platform.”
One size won’t fit all
Quentin Meurisse, VP of business acceleration & planning, commercial & marketing at Pernod Ricard’s The Absolut Co, argues that a one-strategy-fits-all approach just won’t work when it comes to e-commerce. “It’s important to recognise that, depending on region and market, e-commerce has different characteristics and maturity within the alcohol sector,” he says. “For example, there are some markets that are in a growth stage and others that are more mature, where consumers are used to shopping online for alcohol. The dynamics are also quite different depending on market – this is why we always try to localise our e-commerce approach to the conditions that apply in the market.”
Meurisse advises companies that are new or inexperienced in e-commerce to guide consumers to the final steps before making the online purchase. “Having a strong brand and other digital channels helps,” he says. “Utilise e-retailer paid media where and when it makes sense. Think long term and do not judge performance only on quarter to quarter. The macro-shift to e-commerce over time is a reality. Have the courage to experiment and tweak to make sure you have a relevant offer and activation methods.”
For drinks companies that can follow the sort of advice that Meurisse offers and adapt to the new post-Covid landscape, the future for e-commerce could be lucrative.
This article was initially published in the April issue of Global Drinks Intel magazine. For details on how to subscribe click here.
