E-commerce surge in wine and spirits sales drives business
As restaurants and bars became off-limits in the first days and months of the pandemic, wine and spirits enthusiasts logged in or called their local stores and ordered their favorite bottles to be dropped off at their doorsteps.
The purchase created an increase in sales that peaked after a few months, but then hit levels 15-20% higher than before the pandemic, says Mike Provance, CEO of 3×3, a New Marketing company. York which helps liquor brands and retailers reach independent wine merchants and liquor stores.
Online alcohol sales alone have jumped more than 80% in value in 2020 to reach $ 5.5 billion in the United States, according to IWSR Drinks Market Analysis, a data and analytics company based in London.
Globally, the value of alcoholic beverages sold online increased 42% last year to reach US $ 24 billion, IWSR said.
The evolution of shopping, fueled by the growing number of e-commerce sites and the growing popularity of online alcohol vendors such as Drizly in Boston and Vivino in San Francisco, is driving acquisitions (Uber bought Drizly for 1.1 billion in February this year) and capital injections by venture capital and private equity funds that have spotted a growing industry.
Membership numbers have also increased at companies such as Flaviar, which caters to spirits enthusiasts, and dozens of wine clubs, such as SommSelect and Winc. Even traditional channels have transformed, including BevMo !, a California chain of wine and spirits retail stores, which was acquired by goPuff, a digital grocery delivery service with warehouses across the United States. United at the end of last year.
“Any kind of change triggers opportunities for startups and that triggers opportunities for capital,” says Provance.
Vivino, 11, who has tracked 52 million downloads of his mobile wine app connecting users to some 700 outlets, raised US $ 155 million earlier this year from a group of investors led by Kinnevik, a Swedish company. And last week, New York-based SevenFifty, a 10-year-old company primarily engaged in connecting distributors and importers with retailers through a digital platform, announced that it had received $ 23 million from Level Equity. , an American growth private equity fund. .
For these relatively young companies, 2020 was a turning point.
At one point in the spring, Vivino saw a triple increase in sales, initially driven by wine lovers locked in Hong Kong, says Founder and CEO Heini Zachariassen.
Vivino’s app guides customers to wines based on their past preferences, crowd ratings, and taste profiles, and then allows users to purchase their selected wine from a nearby store.
“There was a big boost [in purchasing] in March, April and May, then it landed, but at a new level, ”Zachariassen explains. For the year, Vivino’s gross merchandise value, or the amount of sales generated by the platform, increased 103% to $ 265 million. “It’s been a crazy year, but a good one for business,” he says.
SevenFifty, which makes it easier for retail stores and restaurants to select wines and connect with distributors through an extremely complex supply chain, saw 100% year-over-year growth in 2020 , with orders from retailers to distributors exceeding $ 1 billion, says Aaron Sherman, co-founder and CEO.
Before the pandemic, SevenFifty’s annual growth was in the order of 50%. With the additional funding from Level Equity and related business acquisition plans, Sherman expects the business to continue to grow at a rate of 100%.
One reason for the complexity of the supply chain in the United States is that domestic wine producers and importers can only sell to licensed distributors in each state, Sherman says.
This means SevenFifty had to create state-specific markets and understand various state-level quirks. The state of Oregon, for example, does not allow distributors to offer discounts on cases to individual retailers, although they may price a bottle or case of wine below average over the course of a given month.
Because there is no standardized way for distributors to manage and account for their bottles, much of SevenFifty’s business has aggregated this data across all distributors to create this standardization.
“If you have a place on your wine list, bar, or shelf and need products that match specific attributes, you can explore (through this database) and find all the distributors that sell them.” , he said. Retailers can then create their orders online.
While this type of digital transformation has been in the works for several years, the pandemic has accelerated it, Sherman says.
Recently, SevenFifty has also started offering so called “white label” e-commerce capabilities for wine merchants, making it easier for independent retailers to sell online. While this was a service the company had planned to offer, “when Covid arrived, we hit the gas with it,” he says.
The potential for growth is clear: up to 50% of the 25,000 independent retailers SevenFifty works with do not have a website to sell their products.
Before Covid, only 3% to 5% of alcohol sales in retail stores were online, but this topped 30% overall, and closer to 45% in markets with longer lockdowns or more stringent, says Provance. Companies such as Drizly and Vivino, which connect customers to retailers, have benefited, as have other white-label e-commerce providers, such as City Hive and BottleCapps, he says.
The reason for so much acquisition and investment activity today is not so much the growth of e-commerce, however, as the rush to get hold of “a sufficiently large set of buyers” in an industry. very fragmented, says Provance.
“It’s the potential of being big enough to make a small mark on the industry, because it’s hard to make a big mark,” he says.