The Impact Of Ecommerce On Alcohol Trading

Posted: Jul 03, 2019

IWSR research indicates that 1.8% of the value of all global beverage alcohol is now sold through ecommerce

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Like others, the drinks industry has recognized what a critical medium the digital environment is to interact with consumers, inform them, learn from them and ultimately to sell to them. Regulation has made the online retailing of alcohol more complicated than other sectors and this has stifled development, but this is changing.

IWSR Drinks Market Analysis’ global database now captures just how effective drinks players have been at selling digitally. Although variances inevitably exist between markets, the results for 2018 show that 1.8% of the value of all alcoholic drinks traded around the globe is now sold through ecommerce.

It is wine that has best harnessed the selling power of the online retail environment. Last year as much as 3.6% of all wine value sales stemmed from ecommerce outlets, a figure that translates into nearly US$8bn of sales. The rapid expansion of wine sales online has even threatened the viability of independent “bricks and mortar” wine stores in the UK. Online wine sales in the country have reached 6.5% of total sales value, prompting one leading wine retailer, Majestic, to announce that they are to sell off much of their retail estate to concentrate on their online business, Naked Wines.

The extensive number of wine producers and the diversity of choice has meant that a culture of experimentation has always existed within the wine sector. The online environment has proved to be well placed to service wine drinkers’ curiosity and to educate and inform consumption choices. The dramatic expansion of online wine marketplaces like Vivino, which after just nine years of trading now claims to have 10 million different wines and as many as 35 million users, has illustrated just how compatible wine selling is within the digital space.

Sales of spirits through ecommerce may not be as pronounced as wine, but IWSR research shows that around US$6.5b of spirits were sold online in 2018, a figure that represents 2% of all global spirits’ value sales. For example, ecommerce is reported to now be Pernod Ricard’s fastest growing channel.

Direct selling on owned online platforms has proved less effective for spirits operators than partnerships or acquisitions with established online retailers and delivery services, perhaps because it compromised choice to exclusively sell their own brands. The recent trend has been for operators to partner with existing online platforms to maximize exposure and to showcase their brands from a different angle to consumers.

Diageo appreciated how important it is for platforms to be independent, and when they invested in on-demand alcohol delivery platform Drizly, they did so through a third party. Even if it was only a subtle influence, Diageo wanted to have some involvement. The company established Diageo Technology Ventures to manage their ventures like Drizly and cement their place at the forefront of the fast-moving ecommerce marketplace.

Diageo have enjoyed success by working with online retailers to control the content: a partnership with UK supermarket chain Asda to redesign their ecommerce pages has reputedly added nearly a fifth to their sales. They have additionally partnered with Amazon regularly to bring their brands directly into consumers’ homes: last year saw the Alexa “Happy Hour” initiative and the start of a pilot, “the Talisker Tasting Experience”, which allows Alexa to take consumers on a Scottish Whisky tasting journey.

Diageo’s launch last year of Johnny Walker “My Edition” demonstrates the extent to which ecommerce allows brands to exploit the ongoing personalisation trend; Diageo worked with Vivanda to enable drinkers in Great Britain and Spain to create the whisky that closest matched their own flavour preferences. This level of personalisation is ideal on an online platform.

July 2, 2019

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