When Americans shop for alcohol online, most aren’t adding beer to their carts—whether today or in the likely future, beer is always third behind wine and spirits. Now, the country’s largest wine and spirits distributor has launched its own digital marketing agency to provide consulting services to its suppliers, potentially widening the current ecommerce gap between beer and other types of alcohol.
On Dec. 8, Southern Glazer’s announced the launch of DRAM Agency, an affiliated company that will help wine and spirits brands in the distributor’s portfolio begin or accelerate online sales. These digital marketing efforts will be focused mostly on alcohol marketplaces like Drizly, GoPuff, and MiniBar—which are not themselves retailers but route orders through local liquor stores. DRAM will also help with online shopping through brick-and-mortar grocers like Walmart and Kroger.
It makes sense for Southern Glazer’s:
Boosting sales through these marketplaces and retailers keeps purchased alcohol flowing through a wholesaler, namely, itself.
Direct-to-consumer sales, which have rapidly grown in importance and value to producers, would otherwise bypass a distributor like Southern Glazer’s.
The upshot for the wine and spirits brands in Southern Glazer’s is also clear:
They receive marketing and advertising consultation from their distributor.
That distributor has a financial interest in promoting their products through online marketplaces.
DRAM’s purpose is to display and advertise the brands in Southern Glazer’s portfolio online in a way that encourages a customer to buy them—preferably with a click, right then and there. According to Southern Glazer’s vice president of business-to-consumer ecommerce, Nathan Mansperger, this means making sure brands are advertised prominently, show up as in-stock, have up-to-date and attractive photos, compelling descriptive text, and more. Such details have plagued some brands in the past, causing customer confusion or disinterest. Customers might see out-of-date product photos on marketplaces, or brands might not optimize the text there to show up well in search results.
“We want to make sure that as our supplier partners are on these marketplaces or are on these social commerce sites … that the products look great, that they show up as available, and that we have all the right data to enable [producers] to win ‘share of shelf’ digitally,” Mansperger says.
“Share of shelf” online already favors wine and spirits at the expense of beer. Over Thanksgiving, Drizly reported spirits held 45% of its orders, with wine at 43% and beer at 12%, declining from 15% during last year’s holiday. The creation of DRAM Agency only widens the distance beer will have to run to catch up.
Wine has long been the leader in alcohol ecommerce, with spirits in a solid second place. Much of this has to do with legal frameworks established decades ago: Jeff Carroll, general manager of Avalara for Beverage Alcohol, told the Brewbound podcast that wineries, via online sales to 48 states, have access to 97% of the U.S. population. Breweries, by his measure, have access to just 17% of the population and already face an uphill battle: Beer has lost significant ground in its share of servings in recent years, with spirits far outpacing the category.
Southern Glazer’s new digital agency has the potential to extend that dynamic online in a way that favors its brands. DRAM would like to see its brands placed most prominently on stores’ websites, or in featured ads on marketplace landing pages, or high in web search results for phrases like “bourbon delivery near me.” Google Trends results show searches for “liquor delivery near me” outpace those of “beer delivery near me” over time, likely because consumers know that they can find beer at more brick-and-mortar retailers than they can spirits. As a snapshot, they indicate that online search interest matches with how spirits have grown in real world sales.
“It’s almost like what you think of in terms of brick-and-mortar, where you want [your products] at eye level,” Mansperger says. “So you pull up a website—how often is a certain product seen? Online it’s the same, looking at the amount of physical space a brand has.”
How often a brand is seen and purchased online easily translates to millions of dollars in revenue. Ecommerce alcohol sales are expected to represent 7% of all alcohol transactions by 2024, according to John Kelley, CEO of Craftpeak, a company that provides digital sales technology and services for breweries. Craftpeak estimates total online alcohol sales will increase by $12 billion in that period.
That’s as good a reason as any to accelerate sales now. Brandy Rand, chief operating officer, Americas, for IWSR Drinks Market Analysis, told the Vinexpo New York conference in June 2020 that IWSR forecasts wine will represent 44% of U.S. ecommerce alcohol sales by 2024, with spirits at 39% and beer at 12%. Ready-to-drink products, which IWSR uses as a catch-all for hard seltzers, spirits-based canned cocktails, and some other flavored malt beverages, would represent 5%.
DRAM Agency, with financial backing from Southern Glazer’s, can afford to make sure its brands are seen often and featured prominently. Southern Glazer’s is the 11th-largest privately held company in the U.S., according to Forbes rankings, with revenue of $21 billion. DRAM will achieve share of mind through not just online store listing but through programmatic advertising, a way of targeting ads to specific demographics and using algorithms to place those ads in various digital spaces automatically. This means that a shopper in a brand’s target consumer demographic might encounter an ad for that brand on Facebook or on a blog relevant to their interests.
If an alcohol marketplace functions like a digital brick-and-mortar store, DRAM Agency will use digital advertising tools to ensure its products have the online equivalent of aisle end caps, central placement on refrigerated shelves, and splashy advertising flyers. Online, those take the form of banner ads, featured products, or top search results.
These DRAM efforts will complement an existing business-to-business online ordering platform, Proof, that Southern Glazer’s launched in September 2020. Proof made it easier for retailers to order products from the distributor; with DRAM, the company will work to ensure customers are demanding those products from retailers.
Not every brand or type of alcohol will share in the billions that are up for grabs in alcohol ecommerce, and DRAM knows this. Wine and spirits have advantages there that beer doesn’t:
Wine has roughly a 20-year track record of online, direct-to-consumer sales. Beer, on the whole, has just begun to sell online, despite nearly three-quarters of craft beer drinkers saying they’d like to be able to buy beer direct-to-consumer online.
Spirits have higher ABVs that provide more bang for a person’s shipping buck. It costs much more to ship the same volume of ethanol via beer than it does to ship a bottle of whiskey or tequila.
Spirits and wine don’t need to be constantly refrigerated throughout the storage and shipping process to retain freshness, as beer does.
Now, Southern Glazer’s is putting muscle behind expanding these advantages for wine (and spirits) into online alcohol marketplaces. Sales through those marketplaces are expected to grow significantly in the coming years, especially after Uber Technologies’ purchase of Drizly in February. At the time of that deal, Drizly estimated that 20% of off-premise beverage alcohol sales would occur online by 2025.
If present trends continue, that won’t be to beer’s advantage: Beer—even including the fast-growing hard seltzer category—made up just about 20% of Drizly sales in 2019 and 2020, with wine and liquor splitting the remaining share roughly equally. DRAM Agency’s express goal is to pour more fuel on wine and spirits’ fire.
It’s especially concerning to beer companies given that they’re not winning the offline game, either. Beer as a percentage of the overall U.S. alcohol market has been losing ground to wine and spirits for decades, dropping from 56% of the market in 1999 to 44% in 2020, according to Distilled Spirits Council data cited by The Wall Street Journal.
The ebb and flow of COVID cases has also reshaped taproom sales, an important revenue stream with high margins for small breweries. An Associated Press-NORC Center for Public Affairs Research poll conducted in mid-December indicates more than a quarter of people who visited bars or restaurants monthly before the pandemic say they aren’t doing so now, as experts warn of a wave of infections due to the omicron variant of the virus.
Ecommerce sales represent a new field of competition, but DRAM Agency will be a resource for keeping wine and spirits ahead of beer there, too.
What would it take for beer to make up lost ground? Wine’s playbook might offer lessons.
Wine gained advantages in online shipping almost three decades ago. Lobbying by industry groups such as the California Wine Institute and consumer groups such as Free The Grapes were instrumental in changing laws to allow interstate wine shipping and, just as critically, raised awareness among consumers that they could order wine online.
Kelley says beer needs a similarly strong, unified push for more liberal beer-shipping laws across states if it’s going to keep pace.
“That effort has to be duplicated for beer. We just don’t have a lightning rod that’s equivalent to the California Wine Institute,” he says. “We know it’s got to be done through lobbying and through consumer demand, and it’s got to be a concerted effort.”
So far, Kelley says those efforts in beer have been hampered by two factors.
U.S. breweries are spread across the country, unlike the wine industry, where most of the largest players are concentrated in California and have closer contact with each other.
Kelley says it’s common for breweries to want to ship their beer to another state, while preventing out-of-state beer shipments into their own turf. Unless breweries, trade organizations, and beer drinkers can unite and lobby behind interstate shipments, change is unlikely to happen spontaneously.
And if beer can’t compete in ecommerce, it’s going to cede that ground to wine, spirits, and ready-to-drink cocktails. Kelley notes that every other type of consumer product, from toilet paper to used cars, is moving to sell its products online.
“What we’ll see is some breweries will opt out of this thinking this is not their business plan, but because consumers have moved in this direction in everything else, they’ll move to brands that do offer that access,” he says.
Increasingly, those brands are wine and spirits. While beer struggles to make unified efforts around ecommerce, well-funded initiatives like the DRAM Agency are widening their head start in the so-called “fourth tier” of online sales.
Words by Kate Bernot