This week, Dutch brewer Heineken put it out there that it’s been facing some serious challenges mastering today’s e-commerce space. Understandably so, and Heineken is certainly not alone.
Online sales for beer, liquor and wine are finally starting to take off, growing 32.7% in the US in 2017, according to Slice, with beer representing 13.8%. According to Profitero, the rate of purchase online is much higher in the UK, where upwards of 34% of beer consumers regularly purchase online, compared to 4% in the US. Globally, online alcohol sales measured $1.7B in 2017.
“While e-commerce in the alcoholic beverage space is still immature, we are starting to see the shape of a robust category,” says Ken Cassar, principal analyst for Slice. While wine sales are currently in the lead, “ultimately…beer will likely win as grocers figure out how to manage through complicated laws that vary by local jurisdiction,” he predicts.
In today’s on-demand, uber-customized world increasingly driven by convenience and seamless customer experience, there will hardly be a mass manufacturer that won’t have to invest in digital optimization and shift their strategy to accommodate new, online customer behaviors, or risk significant loss in market share.
It’s here that brands will reach a tipping point. Those who look out at their wider industry to see the coming trends, capitalize on the data and forward-looking insights at their fingertips and find a way to drive the entire enterprise forward based on those insights, will win out. The rest, well, just might find themselves falling by the wayside, much like we’ve seen with Kodak or Blockbuster in the past.
Kudos to Heineken for ringing the alarm bells and recognizing when change is needed, before it’s too late.
In order for this to happen, however, we’ll all have to work together. The Heineken team cited as one of the major challenges an isolated team structure by which marketing, sales and supply chain rarely work together. In our data-driven world, everyday, customers, retailers, brands and more are leaving behind significant clues that can indicate their preferences and expectations, product feedback, retailers on the rise, new players and more.
Insights from this data can and will be the glue that binds teams together, and fuels collaboration between manufacturers, distributors and retailers.
The impact of a single insight
Anheuser Busch released a study called eCommpass that looked at ways e-commerce is shaping the alcohol industry. One of the insights they found was that, “there are nuances in the way online shoppers behave when buying beer versus other grocery items. Grocery shoppers tend to rely on department navigation functions, whereas beer shoppers rely on the search feature to find beer, indicating the importance of search optimization. When it comes to the beer results page, shoppers direct most of their attention towards glancing at product images and not much else, though in some cases they can be swayed by recommended products.”
In other words, appealing to customers online is an entirely different ballgame.
The impact of an insight like this stretches across far more than marketing. Manufacturers now need to get a handle on the way customers are searching. How do they talk about your brand online? What are the qualities they’re looking for? What are new demands when it comes to flavor preference, or new trends in the industry?
As well – where are they searching? There are significant differences between a search on Google that produces a plethora of retail options vs a search on a brand’s website, which produces instead a plethora of competitive options within that store. How do you then stand out from the crowd? This becomes a packaging issue. A branding issue. A product description and keyword issue. And ultimately a retailer partnership issue.
External factors impacting the growth of e-commerce in the beer industry
Changing consumer behavior
Millennials are so demanding.
It’s no secret that there’s been a massive uptick in demand for improved omnichannel experiences, increased personalization and predictive recommendations (see: Amazon). This shows no sign of slowing down, especially as millennials continue to climb the ranks in terms of spending potential. For brands accustomed to the brick & mortar space, this is likely a new challenge.
Moreover, younger customers are showing a decline in brand loyalty, specifically when it comes to alcoholic beverages. Online, they also tend to lean more heavily on recommendations based on the preferences their favorite machine learning technology has come to understand.
On the other hand, access to online customer data offers manufacturers an incredible amount of detailed information about their customer segments that they never had access to before. Customer reviews, trends in online purchase behavior, in-store purchase combinations and more can open the door to insights for product development, potential partnerships (see unlikely brand mashups you never thought possible) and new retail targets.
Education is still required
As the online alcohol industry is just finding its feet, many customers still aren’t aware that it’s possible to purchase beer online – and more importantly, they don’t know where to go to find it. Take a look at what they’re asking Google:
As a result, Google predicts a sharp spike in the number of searches related to “buying beer”:
The competitive manufacturer would be well-advised to snap up those keywords if they hope to stay on top of this rising trend, and incorporate education related to alcohol delivery into their marketing strategies.
The growth of the craft brew and an eye toward expansion
Competition of course won’t come only in the form of big producers. Craft brews have been seeing substantial growth in market share. According to a report by the Brewers Association, craft brewers saw growth of 5% in the US in the first half of 2018. Total sales in 2017 topped $26B, up 8% from 2016. However, this is a steep drop off from the 13% growth rate recorded in 2015, and 18% rise in 2014, leading many to believe this growth is slowing.
What external data can help uncover are reasons why consumers have been drawn toward these high-ABV, high price and higher calorie alternatives, which breweries are on the rise and how their purchase decisions are made.
As well, signals can help those looking out spot opportunities to expand into complementary verticals or identify promising partnerships. Kombucha, cannabis, energy drinks and non-alcoholic beverages all appear to be on the table. For those that have ventured cross-category, the impact on customer perception and stock price will tell the story of success or failure.
A new look at retailers
At the end of the day, a manufacturer’s online sales are highly dependent on the retailers they’re working with. Amazon has promised to change the game for online alcohol sales, leveraging the Whole Foods network. But advertising restrictions mean Amazon isn’t able to take advertising money from alcohol brands – meaning any promotion would have to be undertaken by the retailer itself.
Perhaps a more significant trend on the rise are new, e-commerce delivery services like Drizly, Wine.com, Eebria, as well as others like BevMo which straddles online and brick & mortar, and finally food delivery services from Fresh Direct to Uber Eats.
This has opened up alcohol manufacturers to an entirely new set of potential retail target customers, and with it an entirely new channel for reaching the end user. With new channels comes new consumer behavior, different trigger points and purchase funnels and entirely different marketing strategies.
Because this is a nascent space, even smaller players in the context of the food delivery space can make a massive dent, so those who are first movers, owning the relationship with services on the rise like Drizly, are seeing significant advantages.
Forward-looking customer insights
Insights from external data in this case are incredibly valuable from the c-suite, through sales, marketing, product development and even product design where things like labels and packaging take on new levels of importance. The game has changed. The customer has changed, and the preferences of the end user have changed. Looking back at what’s worked in brick & mortar up to this point is not going to be of much help in tomorrow’s ever-personalized e-commerce world.
Learn more about how your brand can leverage insights from external data by downloading our infographic here.