A casual reader looking at spirit sales numbers for 2020 might think it’s a pretty good year. After all, in July Nielsen indicated a 52-week rolling sales increase of 5.1%. But those numbers do not tell the whole story. Overrepresentation in sales increases by the larger, high awareness brands and well known value brands, and stocking up (or hoarding) have potentially skewed the figures for months to come. Of greater concern is that off-premise stock up and at home consumption may lead to spirit brands feeling more like commodities than before. Another concern is that the worst on-premise closures since Prohibition are placing strains on both the sales and brand value of many spirit brands. In today’s Plain Talk article, we’ll look at four strategies brands can use to overcome the effect of critical on-premise losses.
The Numbers
The closing or limiting of bar and restaurant occupancy has been tough on our on-premise customers. To make things worse, many of these businesses have closed permanently. According to Forbes and DISCUS in 2018, on-premise beverage alcohol sales amounted to 53% of all alcohol sales in the US, including just over 48 million 9-liter cases of spirits. In fact, as early as May 7th, 2020, Nielsen suggested that the spirits industry would need to grow sales trends as much as 31% through the end of the year to offset the impact of on-premise closures. And that assumed a reopening of much of the on-premise landscape by the end of May 2020. Instead of reopening and staying open, many states reinstated closures or limited-capacity restrictions for on-premise accounts. While craft distillers are clearly more heavily dependent on tasting rooms and on-premise partners, virtually all spirit brands are feeling the pinch, and for some, the pandemic could be an extinction-level event. So what steps can you take to protect and position your brand for future growth now?
The Biggest Problems You May Not Be Thinking About
The challenge of bar and restaurant closures boils down to three pretty big problems. The first and most obvious is the loss of volume. This is clobbering bottom lines across the category and is the thing that most brands are concerned with for obvious reasons.
The second problem is trial. The bar is pretty high for many to make a first-time purchase of a brand off-premise. The outlay of $20, $30 or even $50+ for something a customer has never tried is a big ask. Because of this, brands have historically relied on on-premise sales to drive confidence in off-premise sales through lower cost trial and experience (and competitive blunting). Bartenders as grassroots experts in spirits have been crucial in building trial and loyalty. Even brands that are succeeding in offsetting on-premise losses in the off-premise channel are losing out on this critical customer journey point.
Finally, there’s the related impact on brand affinity. For many brand fans, their experience at the bar defines their perception of a brand. The neat bourbon recommended by a plugged-in bartender, the first time they had an ice-cold Jägermeister from a chilled shot dispenser and so on, and, of course, the great time had by all at the bar or restaurant. All of this experience distills down to brand perception, and when bars and restaurants are closed, the opportunity to create those brand bonds are gone.
This is why the brands that appear to be faring better during the pandemic are the more comfortable, “old faithful” brands. According to a piece in the New York Times, Nielsen indicated that, “instead of buying a bottle of craft whiskey, [customers are] buying two bottles of Jack Daniel’s.”
So how can brands respond to overcome the volume, trial and brand value problems?
Packaging
There has never been a better time to look at your packaging to see if it is working as hard for you as it needs to. There are very few components to your product, basically the bottle and what’s inside. In a market where you are almost completely dependent on off-premise sales, that bottle (or the box surrounding the bottle if you’re fancy) has never been more critical to your success. Ask yourself these questions:
- Does my package “jump off the shelf” at the expense of competitor brands?
- Does my package suggest “premiumness” or quality?
- Does my package (or display) offer value or a differentiated experience in some way?
Regarding premiumness and attractive visibility, the wine category is a virtual slugfest of competitors trying to jump off the shelf at buyers. If you think about the last time you shopped for wine, you may recall the almost intimidating number of labels vying for your attention, and even if you didn’t buy it yourself, chances are a label with a colorful rooster, an irreverent name or a slick, full-bottle wrap caught your eye. So, does your spirits brand do the same? If you cannot say “yes” with absolute objective certainty, ask consumers in online panels, at shop-a-longs and in focus groups. They’ll tell you. Without going into extremely pricey examples, here are a few brands that stand out on the shelf:
- Ever since Woodford Reserve broke the mold with its premium bottle, we’ve seen a lot of bourbons follow suit and up their packaging game, so this shelf is full of tough competition. Other standouts include Willet, with their pot still shaped bottle, Angel’s Envy in the sleek modern teardrop shape and the classic, old-school embossed Bulleit Bourbon bottle.
- Bombay Sapphire — in the trademark blue bottle , Sapphire stands out in what can otherwise be a pretty bland herd of clear glass bottles on the gin shelf.
(Woodford Reserve trailblazed premium packaging in the bourbon category.)
While getting noticed and making a good impression is essential, the third question — offering a differentiated or personalized experience — can be the deal closer. Asking a consumer to buy an unfamiliar brand means you have to enhance or offer them the experience they seek. Any whisky drinker knows exactly what to expect if they buy a bottle of Jim Beam white label. Good quality and value in a daily sipper or with a mixer, right? Reliable and consistent, right? Lots of history comes with those perceptions. So why change? This is where offering an exceptional experience or angle may pay off. For example:
- Monkey Rum offers a bottle designed to be “upcycled” into cocktail glasses.
- Bombay Sapphire is offering a bottle of their gin packaged with a limited-edition screen printing kit and recipes for a creative at-home experience.
- Affinity packaging in general is a great way to earn an off-premise sale. On-brand affinity packaging can be created for virtually any attractive customer group. Whether sports, a cause, a lifestyle, a geography or a group, there are some excellent connections to be made with this approach.
Ready-to-drink Cocktails
While we’ll be dedicating an entire article soon specifically to innovation in RTD’s, they are worth a mention here. Big brands have looked at RTD innovation since the 90s, but today, with the evaporation of on-premise sales, RTD’s are becoming a fast growing segment that replaces lost volume and creates critical trial opportunities. Today, most RTDs come in one of three brand styles.
First is the big brand RTD. These are canned or bottled RTD cocktails that include a famous/well-known spirit brand. The best example of these are the Jack Daniels-branded RTDs (Country Cocktails and Jack Daniels & Cola). In 2019, Spirits Business reported that IWSR named these respectively the number 5 and number 2 best-selling RTDs globally. Other big brands in the RTD space include Kahlua, Jim Beam, Absolut, Bacardi, Sauza and Malibu Rum.
The second segment is the purpose-built RTD, beverages exclusively produced as RTD cocktails and not associated with any big brands. Brands like BuzzBox, Miami Cocktail Company and LiveWire, each focused less on the spirit and more on overall cocktail quality and innovation. Like other RTDs, this segment is experiencing explosive growth and driving increased innovation in cocktail quality.
The third and most relevant to this conversation is the branded RTD for up-and-coming spirit brands. The most at-risk spirit brands today are the youngest, who by definition are overly dependent on the on-premise channel for trial and sales. Smart, responsive brands have dialed up their focus on RTD innovation to help create or grow sales off-premise while introducing consumers to their brand. Early RTD innovators, like Cutwater Spirits (acquired by A-B InBev in 2019) own Cutwater Fugu Vodka and Bali Hai Tiki Rum, but have aggressively grown RTD production. Smaller distillers like Southern Tier Distilling in New Jersey, Beach Time in Delaware and Gosling’s Black Seal Rum in Bermuda have pushed hard into the RTD space to build trial, sales and brand affinity.
Regardless of which of these groups describes your brand, long-term predictions indicate steady growth for RTDs and short-term demand offers brands who want to grow (or survive) a lifeline. If you’re not already working on an RTD, do it now.
Online
You may already have product available online, but ecommerce is a space where beverage alcohol companies have lagged way behind most FMCG categories. Ask yourself if you have an online strategy or if you are just for sale online. There’s a difference. The brands that have an online strategy are helping drive triple-digit online sales increases.
Let’s face it. Pretty much any brand you’ve ever heard of is on Drizly and Instacart (and now Amazon Prime). If you’re not, you’re already late to the game. But if you are listed, there’s a lot to consider. First, how are you driving traffic to online purchase? What is your social media strategy? What about native advertising? What does your content look like? Are you taking advantage of current trends?
One example to consider is the macrotrend in the US for “making.” Being housebound has accelerated home activities like cooking, baking, gardening, crocheting, DIY, etc. Since mixology is our industry’s version of cooking, how are you leveraging the opportunity? Consider not just photography but video for your home mixology content. Take a page from popular cooking sites like Epicurious.com and Food.com and learn from their presentation and user experience. Also offer visitors the chance to rate, share and comment on your recipes. Magic happens here as creative customers engage and freestyle with your cocktail recipes.
Content and photography end up becoming an important part of the ecommerce experience on partner sites as well. Consider extending new, original content on ecommerce product pages to keep the experience fresh.
Finally, on social and ecommerce websites, consider your process for review management. Reviews on social and ecommerce pages validate the choices of other customers and drive up your visibility, and there are dozens of great choices at varying price points to help you tap into the benefits of online reviews.
Bartender Engagement
One last note to consider. When the pandemic is behind us and the remaining bars and restaurants reopen for business, bartenders will probably remember which brands were supportive and which brands “ghosted” during tough times. One way that brands can show support is by sponsoring bartender and service industry podcasts. There are hundreds of them, and content frequency right now is high because so many service industry people have time on their hands due to layoffs and closures.
Research or talk to your agency for recommendations about the best podcasts for your brand, geography, etc., and work out messaging that is hopeful and supportive of the industry, and if relevant, showcase any contributions or programs that you are participating in to support service workers. For example, many brands have given millions to bartender relief programs. If you’d like to learn more about podcasts as an affordable engagement and influencer marketing tool, check out our article on podcast advertising from Media Director Mary Kate Reed.
Questions?
While not an exhaustive list, hopefully we’ve provided some useful ideas as you battle your way through 2020 and into a future that will undoubtedly be permanently altered by the events of this year. If you’d like to learn more about strategies to compensate for on-premise challenges or if you’d like Mike to introduce you to PriceWeber’s amazing beverage marketing team, call us at (502) 499-4209 or contact us here.
About the Author
Mike Nickerson is PriceWeber’s Chief Marketing Officer. Mike’s background in beverage marketing includes national and global account management and strategy roles in the spirits, wine, beer and RTD categories for brands including Absolut Vodka, Smirnoff Ice, Jim Beam, Courvoisier, Kahlua, TGI Friday’s (RTD), Rex Goliath Wine, Partida Tequila, Blue Moon, Coors Light, Bud Light, Budweiser and Corona Extra.
