Online Alcohol Sales Set To Take Off For Brands, Grocers And Pure-play Sellers

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As online grocery shopping continues to grow, so will online alcohol sales, according to a recent report from Rabobank and cited by Supermarket News. Rabobank analysts reported U.S. online alcohol sales hit $1.7 billion last year, a relatively small total dollar value, but that growth in online channels is outpacing that of brick-and-mortar retailers.

Off-premises alcohol sales posted a CAGR of 1.44% from 2013 to 2017, according to IRI data, while winery website sales quadrupled and on-demand delivery apps went from zero in 2013 to processing more than $100 million in annual sales in 2017, Rabobank stated.

Nick Rellas, co-founder and CEO of Drizly, the country's largest on-demand alcohol delivery service, told The Spirits Business in 2016 that alcohol sold online will be worth $7 billion to $15 billion each year "over the next few years." Rabobank's report also noted that alcohol brands have a dozen online channels they can use, and that each of them will impact brands with a different level of success.

Dive Insight:
When buying groceries online, shoppers can now add beer, wine or spirits to the total and conveniently have the items delivered or pick them up. The Rabobank research analysts noted that Amazon's alcohol sales skyrocketed by 230% in Germany and by 96% in the U.K. last year, and that 34% of beer drinkers in the U.K. routinely get their favorite beverage online.

?After launching online alcohol ordering and delivery in London, Amazon is now offering alcohol delivery in Seattle, Portland, Cincinnati and Columbus and several other cities through its Prime Now service, which includes free two-hour delivery of groceries and alcohol. Of course, e-commerce alcohol retailers must adhere to the same minimum age laws and other state and local restrictions as any other alcohol retailers.

Alcohol makers, grocers and online-only sellers all have something to gain from this trend since shoppers like to check out the variety of products online and their successful experiences often lead to additional purchases. Free delivery — or for a fee depending on the company and on the time it takes — is an incentive for shoppers who factor in time spent driving, parking and being inside a store.

?Wine and beer will loom particularly large for online sales, Rabobank's report projected, in part because some states limit spirit sales and delivery. Wine especially stands to benefit because of its potential pairing with food items, the researchers pointed out, and in states where stores can't legally sell it, retailers might join with liquor stores or open their own. Struggling beer manufacturers might also see sales increases through an assertive online presence.

Woodford Reserve, a bourbon distillery owned by Brown-Forman, has successfully positioned itself in the online marketplace. The firm has invested in e-commerce and mobile apps to give consumers new channels to shop, and, at the same time, are using real-time analytics to collect data to improve performance. These strategies contributed to the brand leading the pack in underlying net sales, according to the company's most recent earnings report.

Still, grocers have opportunities to capture consumer dollars that e-tailers don't. In-store wine and beer sampling, for example, has been used to good effect by many supermarkets and is a savvy way to capture millennial shoppers. This demographic doesn't have the same brand loyalty as older consumers and is often enticed by new flavors and varieties while baby boomers often stick to what's familiar. Rabobank reported that traditional retailers now sell about 44% of wine in the U.S. and about 25% of the beer and spirits. As consumers grow more familiar with online alcohol shopping, brick-and-mortar retailers will need to continue ramping up these in-store experiences.

By Cathy Siegner
March 14, 2018
Source: Fooddive.com