By Kristie Wright
In early 2020, the world as we knew it changed. Yet despite the continuing health crisis, many nations are starting to pick up the pieces and repair their struggling economies. New and exciting trends are emerging, one of which is the rise in e-commerce. For the beverage industry in particular, alcohol e-commerce has taken off in a big way.
What Is Alcohol E-Commerce?
E-commerce refers to the buying and selling of goods online. Therefore, alcohol e-commerce refers to the sale of beer, wine, and liquor on the internet. Just like any other consumer packaged goods, buyers can purchase alcohol online, provided they meet the age limit and other legal requirements.
Alcohol Sales Pre COVID-19
Prior to 2019, the alcohol industry had grown at a steady pace. This was understood to be in part a result of wine room tastings, which grew in popularity at the time. However, in 2019, the consumption of alcohol decreased for the first time in 25 years.
Although somewhat established, alcohol e-commerce was not the biggest factor in either the growth of the industry pre-2019 or the downturn of 2019 itself. The e-commerce sales channel was developing steadily, driven by wine sales. The overall blip of 2019 didn’t prepare alcohol manufacturers for the unprecedented turmoil of 2020 and how drastically the industry would come to rely on e-commerce for its survival.
Drinking At Home
Despite the fact that people found themselves unable to visit restaurants, bars and clubs, the sale of alcohol didn’t plummet—contrary to the predictions of many. Establishments might have closed (temporarily), but that doesn’t mean consumers gave up drinking. Initial lockdowns sparked a consumer panic. Panic-buying became rife and shelves were emptied quickly, leading to shortages of basic supplies. While some people bought toilet paper in bulk, many others filled their cellars with alcohol.
Statistics show that in the months after the first lockdown in the United States, liquor sales increased steadily each week when compared to 2019’s figures. The hitch: these sales weren’t happening in bars or restaurants, but at home. Socializing in person was off the table, but having a drink while hanging out with friends or family on virtual communication platforms like Zoom still helped many hold on to some semblance of normality.
While sales in brick-and-mortar establishments dropped dramatically when lockdowns and shelter-in-place orders arrived, alcohol e-commerce thrived.
Alcohol E-Commerce Versus On- and Off-Premise Sales Channels
The success of alcohol e-commerce is a step in the right direction for the industry as a whole. Businesses, like restaurants and bars, which depend on the income from on-premise sales, are still working on the best way to balance their old practices with new regulations.
There have been attempts to boost in-person sales to remedy this issue, but it remains to be seen how these measures will impact the struggling hospitality industry. For example, selling drive-thru alcohol or cocktails to go has helped in some cases. However, it can’t always compete with the losses suffered by businesses. The upshot? Companies have been forced to explore new ways of trading—a silver lining in this global economic crisis.
The Success Of Alcohol E-Commerce In A Time Of Crisis—Is It Enough?
Direct-to-consumer (DTC) alcohol sales have increased exponentially since the beginning of COVID-19—a promising sign that the industry is adapting to the new atmosphere. While some drinks (wine, for example) have already been often available to customers online, others, like spirits, have been a sticking point. In some states, regulations have undergone adjustment, allowing alcohol e-commerce to include spirits.
This change didn’t happen overnight though, and it may be a case of “too little too late” for some. Brands have done their utmost to get the go-ahead to use DTC shipping, especially with regards to the ability to sell over state lines. So far, there have been a number of victories: there are currently 14 states that allow DTC shipping over state lines. This allows smaller brands to expand their reach and supply a larger consumer base than previously.
Another emerging trend is the positive effect COVID-19 has had on the demand for more recognizable wine brands and for spirits like tequila. Producers have had to innovate or pivot their marketing efforts and distribution strategies to ensure customers can easily purchase their products.
In February 2021, the alcohol e-commerce industry expanded when Uber bought Drizly, an app specifically designed for DTC sales. This development, among others, has been seen as a giant leap forward into a “new age” of alcohol distribution. One in which craft and artisanal brands can thrive instead of losing out to huge corporations.
Overall, the demand for alcohol is up. Wine, spirits and beer have seen a huge climb in production and consumption, each adding millions of cases since 2020. While many industries and individual businesses have suffered under the pandemic, a tax relief program–the Craft Beverage Modernization and Tax Reform Act–has allowed smaller distilleries to get a foot in the door.
Also, a reduction in the federal excise tax has given these emerging companies the chance to establish themselves without forking out millions of dollars before they’ve earned them. The lower tax also means less of a mark-up and the ability to price themselves competitively amongst other brands vying for consumer attention.
The Future of Alcohol E-Commerce
As we come up to the two-year COVID anniversary, it is still unclear what the future holds. Lockdowns have gotten relaxed, then reinstated, and relaxed again. There are many questions and few answers.
It is clear, though, that COVID-19 has changed the alcohol industry permanently, pushing it into a new era and fast-tracking progress in the e-commerce sector. While the path forward is uncertain, the success of alcohol ecommerce shows industries are capable of adapting—and achieving success.
To learn the ins and outs of e-commerce including the challenges and opportunities this channel presents for beverage alcohol brands, download E-Commerce 101: The Ultimate Guide to Selling Alcohol Online.
Why didn’t on-premises alcohol sales bounce back after 2020?
In general, industry trends are calculated based on statistics of previous years. In the alcohol industry, the predictions for 2020 were incorrect. Nobody had anticipated the pandemic and subsequent lockdowns. Moving into 2021, there was an expectation that businesses would begin to recover, but the economic impact of COVID-19 remains in flux, making it hard to predict trends with a degree of accuracy.
What factors determine the future of alcohol e-commerce?
Both the immediate and long-term future of alcohol e-commerce is uncertain, but the growth in this sector has been a welcome change. Alcohol e-commerce has flourished in the past two years, and the future largely depends on the removal of restrictions with regard to DTC shipping laws. As things stand, the limitations on the type of alcohol sold are still putting pressure on distilleries.
Will alcohol sales ever return to normal?
This is a tricky question. Will the world itself ever return to normal? It’s unlikely that things will ever go back to the “normal” we knew before COVID. Experts are predicting that DTC sales will stay stable or continue to rise, while capacity restrictions on bars and restaurants in some states may continue to put a dent in on-premise alcohol sales.
About the Author
Kristie Wright is an experienced freelance writer who covers topics on logistics, finance and management, mostly catering to small businesses and sole proprietors. When she’s not typing away at her keyboard, Kristie enjoys roasting her own coffee and is an avid tabletop gamer.