Expanding ways for consumers to access liquor means manufacturers and retailers need to assess where and how to play, says Exceedra APAC Sales Director Simon Elsby
The liquor industry has moved on apace in the past 18 months, spurred by the pandemic which has accelerated some trends, such as ecommerce, and out of necessity prompted business model, operational and distribution pivots. Other channel evolutions were already in train.
The net result has been an expansion in channels to market, increasing complexity but also calling into question the traditional, perhaps now somewhat binary notion, of ‘off-premise’ and ‘on-premise’ in a world of integrated commerce filled with consumers who want to be able to buy anytime, anywhere, from anyone for delivery to wherever they require.
Below is a roundup of some of the growing and emerging channels to market and some implications for liquor brands and retailers.
Evolving and Emerging Channels
We’ll start with some of the more established channels and work through to some of the newer ones.
Ecommerce and mcommerce (mobile commerce):
‘Core’ online ordering and delivery in Australian liquor has reached $2 billion in sales according to IbisWorld, with 2020-2021 forecast to grow at 27 per cent versus prior year, partially driven by on premise shutdowns. Even Dan Murphy has had its delivery capacity tested, with its standard 2-day delivery at time of writing at 100 per cent capacity and only express delivery or 'click and collect' options available. During the pandemic 'click and collect' and curbside pickup have become mainstream. Some of the players in the space, such as Naked Wines, offer subscriptions, a growing business model across a range of categories and industry sectors. (Although one could argue that wine clubs, including Qantas fit into the subscription space, and wine clubs have been around for decades).
While selling on eBay might not be new, the scale of marketplaces is something to take into account. A search for wine (only wine, not beer, spirits, ciders or other categories) on eBay Australia at the end of August yielded over 8,700 listings alone. Along with Endeavour Group, marketplaces are also morphing into hybrid B2B and B2C marketplaces. Examples include WineDepot, Cellarlink, and HelloDrinks.
Direct to consumer (D2C):
Traditionally a fraught space in FMCG due to perceived channel conflict with the major retailers, D2C has really seen an uptick during the pandemic, forced by the closure of winery cellar doors among other things. Some craft breweries are delivering four packs and six packs (not just cases) to consumers, utilising their sales reps who may not be able to physically call on accounts during lockdowns. The genie is out of this particular bottle. Expect D2C to continue to grow.
On-demand delivery and Q (quick) commerce:
Defined as delivery in under 30 minutes, Australian examples include Jimmy Brings. There is a swathe of such providers in the UK. The supermarket space is heating up in on-demand with companies such as Gorillas, operating in seven European countries and the UK and currently hiring in Australia, delivering in ten minutes. Given that Woolworths and UberEats recently announced a partnership for one-hour grocery deliveries, a similar Endeavour partnership can’t be too far away.
Although currently niche, voice commerce for replenishing orders via voice assistants such as Alexa or Google Nest (“Hey Google, order me my bottle of Scotch”) may also pick up in the discovery stakes as voice assistants morph into visual smart home hubs. Amazon’s Echo Show, for instance, serves up different product options to purchase visually on a touch screen in response to a voice command.
In its simplest form, this is ‘buy now’ buttons on Instagram, Pinterest, TikTok, Facebook Shops, etc. It’s actually one of the larger, and fastest growing, commerce types. However, liquor is not currently allowed on social platforms in Australia for either sales or marketing purposes. This may change in time as the social media providers’ algorithms improve their monitoring of and ability to target legal drinking age (LDA) users via their behaviours and content generation.
There are a number of other new channels on the horizon.
In China, livestreaming retail is huge (USD $130billion+ forecast for 2021) and is starting to catch on in the USA. Think online two-way interactive versions of TV shopping channel shows, with influencers and key opinion leaders as hosts). Contextual commerce, where a consumer can take a photo of anything in its organic environment and be directed to somewhere to buy it, is in its infancy. And in the augmented and virtual reality ‘metaverse’ (ask your tween or teen about it), consumers can currently purchase Louis Vuitton and other branded ‘skins’ for their avatars in gaming using non-fungible tokens (‘NFTs’). Product placement in the metaverse is expanding to fast moving consumer goods.
The point being that ‘ecommerce’ or ‘online’ is just the start of it. Channels to market are fragmenting. Manufacturers and retailers need to be choiceful about where and how to play.
Some of the explosion of new channels has been driven by the need for companies to pivot during the pandemic. The on premise is an obvious example, moving to pickup and delivery while doors are shut.
In Australia, some upmarket restaurants are selling off their wine cellars.
In Singapore, the Grand Hyatt offers same-day delivery for alcohol and 'click and collect' for its upscale dining options. Its liquor offer, which is primarily premium as you would expect, includes bundles such as a variety mix of 5 sojus, or Campari and soda, or mixed ‘stay at home’ cases.
And given the dearth of international duty-free travel retail, others have stepped into the breach. In Singapore, ecommerce providers such as Paneco and Alcohaul, previously quite small outfits, have ballooned by focussing on the ‘top shelf’ liquor products previously the province of travel retail, at competitive prices and often with one-hour delivery windows.
What does it all mean?
Fragmenting channels to market means that both manufacturers and retailers may have less visibility of demand levels and spikes, particularly in channels such as on-demand, or where there are no planned promotional calendars. So, robust demand and forecasting processes are needed to cope with the complexity of multiple channels. A fragmented channel environment obviously puts pressure on the supply chain if spikes are less predictable, such as with snap lockdowns.
Ultimately, we’re not in the binary ‘on premise and bottleshop’ world anymore. While the complexity of the go-to market has increased with the increased means of consumer availability options, it has similarly multiplied sales opportunities. And increasingly, having the right trade spend investment strategy combined with more systemised pricing and promotional planning capabilities means that the challenge is in determining which opportunities to take up, and how to execute them in a holistic, joined-up way.
Exceedra is an Associate Member of the Drinks Association.