A wine merchant outside her liquor shop in Paris in November a day before restrictions eased during France's second lockdown aimed at curbing the spread of Covid-19.
AFP via Getty ImagesAs restaurants and bars became off limits in the initial days and months of the pandemic, wine and spirits lovers went online or called up their local shops and ordered favorite bottles to be dropped off on their doorsteps.
The buying created a surge of sales that peaked after a few months, but then plateaued at levels 15% to 20% higher than before the pandemic, says Mike Provance, CEO of 3x3, a New York marketing company that helps alcohol brands and retailers reach independent wine shops and liquor stores.
E-commerce sales of alcohol alone jumped more than 80% in value in 2020 to US$5.5 billion in the U.S., according to IWSR Drinks Market Analysis, a data and analysis firm in London.
Globally, the value of beverage alcohol sold online grew 42% last year to US$24 billion, IWSR said.
The shift in purchasing—fueled by growing numbers of e-commerce sites, and the rise in popularity of online alcohol purveyors such as Boston-based Drizly and San Francisco-based Vivino—is driving acquisitions (Uber bought Drizly for US$1.1 billion in February this year) and infusions of capital by venture and private-equity funds that have spotted a growth sector.
There has also been a rise in memberships at companies such as Flaviar—which caters to spirits lovers—and at dozens of wine clubs, such as SommSelect and Winc. Even traditional channels transformed, including BevMo!, a California chain of retail wine and spirits shops, which was snapped up by goPuff, a digital grocery store delivery service with warehouse locations across the U.S. late last year.
“Any kind of change triggers opportunities for startups and that triggers opportunity for capital,” Provance says.
The 11-year-old Vivino, which has tracked 52 million downloads of its mobile wine app connecting users to some 700 retail outlets, raised US$155 million in funding earlier this year from a group of investors led by Kinnevik, a Swedish firm. And last week, New York-based SevenFifty, a 10-year-old firm with a core business of connecting distributors and importers with retailers through a digital platform, announced that it received US$23 million from Level Equity, a U.S. growth private equity fund.
For these relatively young companies, 2020 marked a turning point.
At one point in the spring, Vivino experienced a threefold sales bump driven initially by wine lovers locked down in Hong Kong, says Heini Zachariassen, founder and CEO.
Vivino’s app guides customers to wines based on previous preferences, crowd-sourced ratings and taste profiles, and then enables users to buy their selected wine from a nearby shop.
“There was a big boost [in purchasing] in March, April, and May, and then it landed—but at a new level,” Zachariassen says. For the year, Vivino’s gross merchandise value—or the amount of sales generated by the platform—grew 103% to US$265 million. “It was a crazy year, but good for business,” he says.
SevenFifty, which makes it easier for retail shops and restaurants to select wines and connect with distributors through an extremely complex supply chain, experienced 100% year-over-year growth in 2020, with orders placed from retailers to distributors surging past US$1 billion, says Aaron Sherman, co-founder and CEO.
Before the pandemic, SevenFifty’s annual growth was in the 50% range. With the additional funding from Level Equity, and plans to acquire related businesses, Sherman expects the company’s growth will continue at a 100% rate.
One reason for the complexity of the supply chain in the U.S. is that domestic producers of wine and importers can only sell to distributors licensed in each state, Sherman says.
That has meant SevenFifty has had to build state-specific marketplaces, and to understand various state-level quirks. The state of Oregon, for instance, doesn’t allow distributors to provide case discounts to individual retailers, although they can price a bottle or case of wine below average in a given month.
Because there is no standardized way for distributors to manage and account for their bottles, a big part of SevenFifty’s business has been aggregating this data across all distributors to create that standardization.
“If you have a slot on your wine list or back bar or shelf and you need products that fit specific attributes, you can drill in (through this database) and find all the distributors selling it,” he says. Retailers can then build their orders online.
While this kind of digital transformation has been in the works for several years, the pandemic accelerated it, Sherman says.
Recently, SevenFifty also began offering what’s known as “white label” e-commerce capabilities for wine shops, making it easier for independent retailers to sell online. While this was a service the company had planned to offer, “when Covid happened, we stepped on the gas with it,” he says.
The potential for growth is clear: As much as 50% of the 25,000 independent retailers SevenFifty works with don’t have a website to sell their products.
Before Covid, only 3% to 5% of retail store alcohol sales were online, but that jumped above 30% overall, and closer to 45% in markets where lockdowns were longer or stricter, Provance says. Companies such as Drizly and Vivino—which connect customers with retailers—benefited, but so did other white-label e-commerce providers, such as City Hive and BottleCapps, he says.
The reason for so much acquisition and investing activity today, is not so much about the growth in e-commerce, however, as a scramble to get a hold of “a big enough set of shoppers” in a very fragmented sector, Provance says.
“It’s the potential of being big enough to make a small mark on the industry, because it’s difficult to make a big mark,” he says.
May 29, 2021 at 07:00PM
https://ift.tt/3fXgA0i
E-Commerce Boost in Wine and Spirits Sales Drives Deals - Barron's
https://ift.tt/31lUVcw
Wine
No comments:
Post a Comment