As bars, restaurants, and taprooms remain closed across the country, breweries have had to rapidly adjust to losing an entire sales channel almost overnight. To maintain cash flow, some businesses have moved beyond onsite to-go orders or phone deliveries to embrace the next step in this new world of beer sales: ecommerce.
As states loosen legal restrictions and breweries’ budget pressures mount, the ability to sell beer online has fast-tracked business plans in a time of need—and it may finally match what consumers may have wanted all along.
Under normal circumstances, an ecommerce portal would take breweries months of planning and roughly a month or two of web development work to execute. But the circumstances of the last month have been anything but normal. At least one brewery, in response to these turbulent times, was able to set up a web store in just two days.
The need for a speedy solution is why there’s a new beer delivery truck rolling through the streets of Manhattan. It doesn’t have branded side bays or roll-up doors. It’s a beige 2003 Lexus GX 470 with a rusted trailer hitch and 250,000 miles on its odometer. The Lexus belongs to John Dantzler, CEO and co-founder of New York City’s Torch & Crown Brewing, and it’s one of the brewery’s responses to the COVID-19 pandemic.
After New York City mandated restaurants and bars close to the public March 16, Torch & Crown’s staff began beer delivery to homes—hence the Lexus. On March 17, online orders were available via the brewery’s website for delivery anywhere in Manhattan; the brewery added Brooklyn delivery March 24 and plans to add delivery to Queens soon. The brewery had planned to add an ecommerce section to its website eventually, but the closure of on-premise accounts following the COVID-19 (coronavirus) outbreak sped up their timeline. Instead of the web store opening two years down the line, the brewery made it a two-day project. In its first week of selling beer through its website, Torch & Crown filled 300 orders for roughly 170 cases of beer, including some orders as small as a single four-pack of 16oz cans.
“Look, we are grateful for everything that comes in,” Dantzler says. “In light of everything that’s going on and in light of the situation out there, it’s a thrilling amount of support from our city.”
It’s something plenty of breweries have scrambled to figure out in the last few weeks as bars and restaurants close: How can they sell beer to customers through the internet?
Now is certainly the time to make it happen. Drizly, an alcohol ecommerce platform operating in more than 180 U.S., Canada, and European markets, reported a marked uptick in customers beginning the week of March 9. Drizly saw its most orders ever on March 20, with new customers accounting for 41% of orders that day. New customers typically account for about 15% of orders. Customers are also spending 25-50% more per order than average on the platform, indicating a “stock up” mentality also playing out in brick-and-mortar stores. But it’s not all good news for beer: Last week, beer accounted for 15% of Drizly orders, down from its average 17% share, but on par with averages across peer services like Instacart or Thirstie, according to research by Rabobank, a Dutch bank focused on food and agriculture.
Despite beer’s lag behind other alcohol in the space, ecommerce now seems like a balm as on-premise beer sales are in some places entirely wiped out. Such sales are only legal in certain areas, though states including New York, Maryland, New Hampshire, and Texas have eased legal restrictions on home alcohol delivery in recent weeks as COVID-19 has forced closures of bars, restaurants, and other public spaces.
Much of the ecommerce marketplace for beer is dominated by grocery stores or companies like Drizly and Minibar, which partner with licensed retailers and do not hold liquor licenses. Those platforms feature beers already at retail; breweries with taproom- or on-premise focused businesses face the daunting task of building out their own ecommerce logistics. Even those who are able to put together online sales like Torch & Crown will likely find they can’t entirely make up for lost draft sales.
Still, this moment is pivotal for online beer sales: Will it be the crisis that pushes breweries of all sizes to think more seriously about ecommerce? There is significant money at stake. Before the COVID-19 crisis, Rabobank estimated beer would fail to capture $1 billion in potential online grocery sales in 2020. Will the pandemic nudge Americans who are reluctant to leave their homes to shop online for alcohol? A survey conducted this week by consumer intelligence research platform CivicScience found a direct correlation between online grocery shopping and having concerns about going to public places during the coronavirus.
Online sales won’t be enough to save breweries who don’t have other revenue sources, but it could be a boon to breweries already established in the digital retail space. As we’ve seen with increased demand for packaged beer at grocery and big box stores, increased demand for beer delivery is likely to benefit established national breweries already playing in that sandbox.
“I don't think ecommerce will solve this,” beverage analyst Bourcard Nesin says bluntly. “Very few breweries will be able to lean on this in a meaningful way.”
Nesin, who works at Rabobank, likens direct to-go or delivery purchases from breweries to putting a Band-Aid on a gaping wound. These sales are only likely to generate some short-term relief from COVID-19’s impact he notes.
His research has found that alcohol in general—and beer especially—have been slow to capitalize on Americans’ ecommerce spending. In Rabobank’s 2020 Alcohol E-Commerce Playbook, Nesin notes that alcohol’s share of food and beverage spending drops by 88% online compared to its share in physical stores.
The reasons are multifold, and the problems compound each other:
Traditional grocery stores have been slow to sell alcohol online due to complex and variable state regulations.
Because of that, consumers haven’t been trained to think about the internet as a place to buy alcohol. (A 2018 Constellation Brands consumer survey cited in the Rabobank report found 65% of online grocery shoppers living in places where it was legal to buy alcohol online didn’t even know that was an option.)
Wine has fared better than beer in this sense: Wine well outpaces beer in online grocery and marketplace (Drizly, Minibar, etc.) sales, to say nothing of the vast number of wineries that ship wine directly to customers.
On top of all this, buying beer directly through a brewery’s website for home delivery is an even rarer offering.
“There are very few breweries whose popularity is so great that you’d be willing to go to a standalone website to order, and the reason those breweries have so much demand is because their supply is limited,” Nesin says.
This creates a paradox: Breweries who are popular enough that drinkers would order beer directly from their website are the ones who have never needed to set up web-based stores. Why build the infrastructure for online sales and delivery when you have a steady line for can releases at your brewery every weekend?
Dantzler will be the first to say building such infrastructure is not easy. Torch & Crown was able to create an online ordering system in 48 hours because the company’s marketing and sales director, Chris McClellan, and Dantzler have web development and computer science backgrounds. McClellan pulled two all-nighters to Frankenstein together an ordering, payment, and delivery management system using Microsoft SQL Server, Stripe, Excel, and delivery-route optimization software.
With the ecommerce portion of the site now functional, the brewery continues to adapt to its new role as a delivery company. Receiving and fulfilling orders piecemeal can lead to inefficiencies, as was the case recently when Dantzler received an order for delivery to the Lower East Side 20 minutes after he’d left that neighborhood. Something as basic as trying to find a customer’s apartment inside a large building can prove challenging.
“Some people leave delivery instructions with their order, but for others I’ll buzz and they unlock the main door but then I’m standing in the hallway, like ‘Should I go up? Are they coming down? What should I do?” Dantzler says. “We need to solve that by installing a platform for more clear communication with our customers before [the delivery].”
The brewery is charging the same price for cans via delivery as it would for cans purchased directly at the brewery. With a volume discount (10% off orders of $80 or more), delivery orders could actually be cheaper than orders placed in person if a customer uses the discount code visible on the website to waive the $5.99 delivery fee. Drivers—Dantzler and other owners excepted—keep any tips they’re offered.
With just over a week of delivery sales under its belt, it’s too early to say what the return on investment in such infrastructure will be for Torch & Crown. At least the Manhattan brewery has population density working in its favor. After all, there need to be enough customers within a certain delivery radius to make such a system even remotely efficient.
And that’s where the big brands—Blue Moon, Corona, White Claw, and others—excel. For example, he landing page of Drizly’s beer tab displays 24 products; not one meets the Brewers Association’s definition of “craft.”
Drizly data shows Corona's gross merchandise volume for the week of March 15 is up 281% over its numbers this time last year. These brands have the volume, the existing retailer placements, the pricing flexibility, the promotions budgets, and the household name recognition to make online sales happen at a scale that generates real revenue. These are things that small and independent breweries—and those hurting the most right now—don’t have in place, or could never afford.
Crucially, as the Drizly page indicates, these national brands are already well established in ecommerce marketplaces. Other smaller breweries will have to play catch up.
“If you’re a brewery doing self-distribution, make sure your products are available to retailers that are represented by ecommerce platforms like Drizly or ones that have proprietary ecommerce,” Nesin advises. “Make sure they’re getting up-to-date brand images and descriptions of your beer.”
Nesin repeatedly emphasizes that online order systems aren’t going to save the average small brewery who produces around 600 barrels of beer a year, whose taproom is closed, and can’t sell kegs to retailers. But, he says, the breweries who develop ecommerce sales now are likely to see those efforts continue to pay off after this particular crisis has passed.
“On the other end of this, brewers will understand a bit more about how to do business online more effectively even if it’s only a small portion of overall revenue,” he says. “It’s going to help some brewers at least start to think about how to manage their products in a digital environment.”
Words by Kate Bernot