How the on-demand liquor delivery business changed overnight during the coronavirus pandemic
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It was the week of March 9 when employees at Drizly noticed a discernible change in orders.
Drizly is a digital marketplace for beer, wine, and spirits, working with local retailers in more than 180 markets to serve millions of customers across the United States and Canada. Prior to the shutdowns and shelter-in-place mandates that came in mid-March to curb the spread of COVID-19, the e-commerce brand was on track to slightly outpace its growth targets for this quarter.
But customers have been placing larger orders than usual—by as much as anywhere between 25% and 50%—which Liz Paquette, head of consumer insights at Drizly, says indicates a “stock up” mentality.
“The baseline we have been comparing our sales during this time to accounts for and includes the growth that Drizly was already seeing this year,” says Paquette. “Essentially, that means sales are up dramatically above what we would have expected to see at this time, even factoring that initial growth rate.”
And there has been a dramatic acceleration in sales every week since. For the week of March 30, Drizly sales were up 461% over baseline (baseline being eight weeks prior—what the company would have been expecting to see around this time). Many of these orders came from new customers, who have accounted for approximately 40% of orders over the past couple of weeks; Paquette says this figure is usually closer to 15%. New buyers are up nearly 1500% year-over-year in the past week.
“We know that during a time when many businesses are struggling, delivery affords an opportunity for retailers to continue providing real value to their customers at a local level,” Paquette says. “We’re able to play a really critical role during these times in helping many of these retailers continue to operate. We have also seen growth in the number of retailers inquiring about the platform, with approximately 300% more leads coming in compared to the average.”
Online sales for alcohol have seen an unprecedented uptick over the last few weeks, with reported sales increases ranging from 50% to 300%, depending on the provider, says Brandy Rand, chief operating officer for the Americas group at IWSR Drinks Market Analysis.
IWSR confirms that customers are buying in bulk, as the market research firm has been tracking consumers buying more large packaging formats for beer (packs of 12 cans or bottles and up), wine (three-liter boxes), and spirits (one-liter and 1.75-liter bottles) while customers stock up for extended periods at home while practicing social distancing and self-isolation.
The majority of e-commerce sales are being made via large grocery or big-box stores like Whole Foods or Walmart—both of which offer their own delivery and pick-up services—or via mobile app-enabled, digital marketplaces like Drizly or Minibar, which connect customers to local retailers who make the delivery.
But alternative off-premise concepts are also finding new customers. Spirits Network, a shoppable streaming entertainment channel dedicated to premium spirits, just launched during the fourth quarter of 2019. Following the coronavirus shutdown, the New York-based company has already seen a triple-digit increase in both at-home delivery and streaming entertainment consumption across mobile, desktop, and on Apple TV.
“Spirits Network has seen explosive growth due to COVID-19, which is a silver lining for the entire spirits industry considering how many other types of businesses have been negatively affected,” says founder and CEO Nick Buzzell. “While this is not a social situation we would ever wish for, we are happy to help bring entertainment and comfort to people who are spending a significant amount of time at home.”
Spirits Network continues to see a steady increase in interest from week to week, even in states with tight liquor laws. “Some states changed decades-old liquor laws overnight and lifted restrictions on home delivery, interstate shipping, and are now allowing bars and restaurants to deliver spirits, which is a glimmer of hope for struggling bars, restaurants and small distillers which want to reach consumers at home,” Buzzell says. “A true sign of the times.”
St. Patrick’s Day (March 17) is usually big for Minibar—an app-based portal for having beer, wine, and spirits delivered—whereas April is actually slower as people tend to go home for holidays like Easter, according to Lindsey Andrews, the company’s cofounder and CEO. Sales typically ramp back up for Cinco De Mayo. But since March 11, new buyers have gone up by 533%, and revenue has increased by 144%.
“Therefore, getting 10 times our normal new buyers in April is certainly unusual and can certainly be attributed to the pandemic,” Andrews says. “We are also now seeing the number of customer service tickets in a day that we used to get in a week.”
Currently, Minibar delivery is available in 50 markets across 18 U.S. states, with more than 500 retailers on the platform and more being added everyday due to the increased interest from vendor partners and customers. “We’ve needed to respond quickly to the unprecedented demand and have had to help many local mom and pop shops adapt to the technology to continue reaching their customers with foot traffic decreasing,” Andrews explains. “This has also required us to quickly add new stores to help with the soaring demand.”
And Minibar is also seeing greater orders earlier in the week, with Monday seeing as much traffic as the drinks business previously saw on a normal Friday, which Andrews says has always been the company’s busiest day. “Friday used to be the busiest day due to the combination of both individual consumer’s orders plus the majority of our corporate orders occurred on Friday,” she explains. “As many businesses are navigating new waters, the corporate gifting aspect of our business has almost disappeared outside of companies buying their teams gift cards for virtual team happy hours.”
Pick your poison
Beverage alcohol categories are seeing increases across the board, but wine already commands a larger share due to direct-to-consumer sales. A recent IWSR e-commerce report shows that wine is the biggest online category in the U.S., accounting for 54.5% of total turnover, followed by spirits at 28.5%, and beer, cider, and mixed drinks at 16.9%. Concurrent with spirits sales booming, premium mixers are also flourishing. Fever-Tree tonic water sales have seen exponential growth in grocery and online sales, rising 70% and 150%, respectively, over the last four weeks, according to a representative for the company.
Wine continues to be the top performer across the board for liquor delivery services, which can be attributed to a variety of reasons, including a wider spectrum in pricing, but it is also easier to drink with a much lower ABV than spirits. (Although beer and hard seltzer both have wine beat there.)
And while recent reports suggested millennials aren’t buying wine as much as previous generations, pandemic sales figures suggest that could change. One service that targets millennials especially is Winc, an online wine club that determines a subscriber’s monthly bottles through an algorithm that identifies palates and selects wines accordingly. The company has seen an increase of almost 10 times the average daily demand over the last few weeks. Comparing the drink-at-home boom to the typical sales bump during the holidays, Winc cofounder and chief operating officer Brian Smith says it’s the largest shift in the $70 billion U.S. wine market that he’s seen to date.
“Working from home and social distancing are accelerating at-home consumption and the broader adoption of e-commerce in wine at an unprecedented rate,” Smith says. “The category has historically under-indexed compared to other consumer categories in e-commerce, but this is changing rapidly.”
Winc added 42,000 new members in March, and saw an 111% increase in orders and an 80% increase in revenue during March versus February. The company continues to add an average of 2,102 new members a day, compared to an average of 207 per day the year prior. Smith admits this has put a strain on its infrastructure, especially when most of the team is working remotely.
“More than ever, we are focused on creating community with each and every bottle, and we’re finding creative new ways to connect through social media and digital platforms,” Smith says, adding Winc recently kicked off a virtual happy hour series led by its winemaker, Robert Daugherty, to benefit hospitality industry workers.
Red wine continues to be the top-selling product on Drizly, with Cabernet Sauvignon as the best-selling varietal, followed by white wine, vodka, bourbon, varying types of whiskey, hard seltzer, and tequila. The top-selling brands on Drizly include Tito’s vodka, Bota Box boxed wine, Josh Cellars wine, White Claw hard seltzer, and Bulleit bourbon.
“We’ve seen category share remain fairly static over time, with some slight shifts in the direction of wine over the past couple of weeks, up to 44% at various points,” Paquette says. This perhaps would point to the idea that people are sticking to their standbys—at least from a categorical perspective—at this time. Over this past week, share has started to shift even closer back towards the norm, with wine coming back down slightly to 41% and beer rising up to 19%.”
And if wine drinkers can’t enjoy a glass al fresco, they’re reaching for the next best thing. Among Winc’s most popular bottles at the moment is the latest vintage of Summer Water Rosé.
Minibar also noticed an uptick toward the hard liquor category (but wine remains supreme), but curiously, sales for tequila have gone down on average. “It’s hard to say exactly why this is, but we believe that tequila is consumed mostly in social settings, which have decreased since the emergence of COVID,” Andrews says.
At Spirits Network, demand has been high for scotch, bourbon, and tequila. Buzzell also notes higher sales for its “Bottle of the Month” club as consumers are looking for easier ways to not only restock but also try new beverages without leaving home.
Nevertheless, by and large, consumers are favoring well-known brands they know and trust. “What’s interesting about this trend is that it also reinforces consumer desire for brand familiarity and comfort, versus aisle browsing to experiment with new brands or styles,” Rand says. “Large-scale downtrading is not yet evident, so spending is evident across all segments, from value to standard to premium—likely due to reallocation of dollars from eating out, going to concerts, sporting events, and movies.”
However, even if liquor sales are soaring and liquor stores have been deemed “essential” businesses by many local and state officials across the country, that’s not to say it’s smooth sailing for anyone.
“I worked hard to not lay off anyone and we are holding strong, but this is an unprecedented global crisis, that is affecting everyone and there are a lot of unknowns,” Buzzell says, noting that the company will still need immediate assistance from the federal government, and Spirits Network has applied for the Paycheck Protection Program. “We also need the support of the larger spirits businesses to continue to market in a time when consumers’ attention is at an all-time high. It is natural to want to retreat during a time like this, but if you look at history in crises, the companies that continue to market, engage consumers, and adapt their businesses come out much stronger and profitable in the long term.”
“This has been a humbling experience,” Paquette says. “We know and understand that Drizly is experiencing outpaced growth during a time at when many businesses are suffering.”
Alcohol e-commerce sales reached approximately $3 billion in North America in 2019, according to IWSR, and that figure is expected to grow to as much as $13.4 billion by 2024. Rand expects that online liquor sales and delivery will not only continue but accelerate faster than previous growth estimates.
“Alcohol e-commerce was already a category on the rise; this experience has certainly cemented that,” Paquette says. “We anticipate that consumers will continue to shop online and order delivery well beyond this, and our focus long term will remain on building the best e-commerce alcohol shopping experience out there. Our hope remains, just as anyone else’s, that we all go back to business as normal as soon as possible.”
Andrews acknowledges that Minibar has seen a surge in demand, and the company has had to onboard more employees to keep up with demand. While it’s difficult to outline a long-term strategy as the near-term still looks so uncertain, she says it will be important to maintain both new vendor and customer relationships to ensure retention—especially as the pandemic has served as a proof point for this type of business in the larger ecosystem.
“The spirits business was heavily reliant on on-premise and experiential, and I think many brands were unfortunately caught off guard and needed to quickly develop a long term direct-to-consumer commerce approach.” Buzzell says.“Every industry should now be thinking about how they can better position themselves for at-home and direct-to-consumer virtual commerce and take immediate action to prepare for what the post-COVID-19 economics will be.”
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