The rise of e-commerce in wine and spirits sales is driving business
As restaurants and bars became banned in the early days and months of the pandemic, wine and spirits enthusiasts went online or called their local stores and ordered their favorite bottles to be dropped off at their location. door.
The purchase created a sales surge that peaked after a few months but then peaked at levels 15% to 20% higher than before the pandemic, says Mike Provance, CEO of 3×3, a marketing company of New York which helps alcohol brands and retailers reach. independent wine merchants and liquor stores.
E-commerce alcohol sales alone jumped more than 80% in value in 2020 to reach US $ 5.5 billion in the United States, according to IWSR Drinks Market Analysis, a data and data company. analysis in London.
Globally, the value of alcoholic beverages sold online grew 42% last year to reach US $ 24 billion, IWSR said.
The shift in shopping – fueled by a growing number of e-commerce sites and the growing popularity of online liquor 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 from venture capital and private equity funds that have spotted a growing industry.
There has also been an increase in memberships 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 has been taken over 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 retail outlets, raised $ 155 million in funding 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 US $ 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 due to wine lovers locked in Hong Kong, said Heini Zachariassen, founder and CEO.
Vivino’s app guides customers to wines based on previous preferences, ratings and taste profiles from the crowd, 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, ”says Zachariassen. For the year, Vivino’s gross merchandise value – or the amount of sales generated by the platform – increased 103 percent to US $ 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 , orders placed from retailers to distributors topped US $ 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 plans to acquire related businesses, Sherman expects the company 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 cash discounts to individual retailers, although they may price a below-average bottle or case of wine over the course of a year. given month.
Because there is no standardized way for distributors to manage and report 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 or on your back bar or on a shelf and you need products that match specific attributes, you can explore (through this database) and find all the distributors. who sell them, ”he says. Retailers can then create their orders online.
While this type of digital transformation has been underway 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 stepped on the gas,” he says.
The potential for growth is clear: as many as 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 that jumped above 30% overall, and closer to 45% in markets where lockdowns were longer or more stringent, says Provance. Companies like Drizly and Vivino – which connect customers with retailers – have benefited, as have other white-label e-commerce providers, such as City Hive and BottleCapps, he says.
The reason for so many acquisitions and investments today is not so much the growth of e-commerce, however, as the scramble to get their hands on “enough buyers” in one. very fragmented sector, 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.