Intelligence

Promising Future Ahead for the Online Sales of Alcohol

One year ago, online grocery accounted for just 5% of online alcohol sales. However, it was predicted that online grocery could become the most important driver of alcohol sales.[1]

One year ago, online grocery accounted for just 5% of online alcohol sales. However, it was predicted that online grocery could become the most important driver of alcohol sales.[1] Fast forward to now, online alcohol sales have seen unprecedented growth. In the past month alone, sales have increased by 15%.[2]

Much of the growth in the past month has been due to government mandated shelter-in-place guidelines spawned by COVID-19, which has caused many customers to be wary of going to the store. Instead, they are substituting some of their shopping with online delivery services and are bulking up on essential items — beer included.

In mid-March consumers surveyed by Nielsen said they expected to shop online more frequently in order to avoid public places. This resulted in 35% more people shopping online for CPG items and a total US CPG sales increase of $8.5B by the end of the month.[3] For context, this change was 15x the average rate of change for any two-week period.[4] Currently, the beer industry is seeing an uptick in sales.

As of March 14th, off-premise sales for beer were up 14%. Order sizes were bigger too; sales of 24-packs were up 24%.[5] Online retailer, Drizly, saw sales increase by 300% from earlier this year. Customers on the app are now spending 25–50% more per alcohol order.

While the current circumstances have certainly helped to bolster alcohol sales through online platforms, the trend towards buying alcohol online was set in place long before COVID-19 and will continue after. US online alcohol sales reached $2.6B in 2019, with a YOY growth of 22%.[6]

To get more specific, in 2019 online sales of beer grew by more than 150%. The majority of online beer sales occurred through online grocery, which includes supermarkets and other general food and beverage retail outlets that offer alcohol online.

The second most online beer sales occurred in alcohol marketplaces, which includes platforms for alcohol retailers to sell online without holding a license to sell themselves. These online marketplaces grew by 60% YOY in 2019, with beer making up 15% of the alcohol sales.[7]

Online grocery grew by 115% in 2019, with beer making up 40% of alcohol sales.

In the online grocery space, beer sales grew by more than 120% in 2019.[8] Not only is beer selling online, it is also contributing to larger basket sizes.

According to Instacart data, basket size increases by approximately 15% when alcohol is in an Instacart shopper’s basket.[9]

This indicates a potential for a symbiotic relationship between alcohol distributors and grocery stores as the purchase of one item, in this case beer, can help boost the overall grocery sale. The only caveat of selling beer through an online grocery retailer is that in different states, different regulations apply to whether alcohol can be sponsored or promoted on retailers’ direct sites. Stores like Walmart, Whole Foods, and H-E-B all have featured products on their websites, but in some states, alcohol is prevented from being featured. In other states, retailers promote alcohol delivery, but only if the consumer updates their address to a state that permits it.

So far, the data points towards beer selling better on online grocery platforms, but that does not mean alcohol marketplaces should be ruled out quite yet. Since these marketplaces do not own any product, they are not tied to the same laws and regulations as grocers when it comes to advertising alcohol. Because of this, brands can advertise towards these platforms to drive sales of their product.[10] For example, Coors Lights launched an e-commerce site where consumers can get Coors Light delivered in under an hour via Minibar Delivery or Drizly.[11] An additional benefit Molson Coors has seen by creating e-commerce sites for both Coors Light and Blue Moon, is the ability to track consumer browsing habits online. Molson Coors’ global director of e-commerce stated that while driving sales is an objective, their immediate gain comes from a more robust profile of consumer behavior, allowing them to better determine ways to market to their customers.[12]

Even though much of the current sales are due to unordinary circumstances, there is still a huge potential for online sales in the months and years to come. As consumers become more familiar with these online formats, online ordering will become part of the everyday routine. Pushing for local grocery chains to include alcohol as part of their online offerings not only helps the wholesalers, but it also helps to increase basket size. For advertising purposes, a first step would be to encourage ordering through any of the alcohol delivery apps (described below). A secondary step would be to follow the lead of Molson Coors’ and develop e-commerce sites that drive sales through these apps, but also allows for tracking of consumer purchase behavior. Thus, leading to more informed advertising in the future. As consumers become used to the convenience of ordering alcohol online, brands that don’t promote this offering will fall behind.

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