The Digitization of the Alcoholic Beverage Industry (Pt 1)

July 28, 2020
WHY drinks businesses should go digital now or get left behind

Whether you’re a multinational corporation (MNC) or a small-medium enterprise (SME), digitization will have impacted your business at some point. It’s impossible to escape it and if the recent pandemic has taught us anything, digitization has become even more important, as consumer habits shift online.

Having a digital customer journey bears many advantages:

  1. Improves efficiency of customer service by lowering response time, and lowering operating costs by 25–30%
  2. Improves customer satisfaction by 33%
  3. Improves credibility as you can easily display reviews, testimonials, and use cases
  4. Provides new ways to interact with customers and collaborate with other businesses worldwide
  5. Provides data and insights, which can be used to tailor future communication with customers, and make better business decisions
  6. Present at all stages of the customer journey, from awareness, to purchase and retention

While I cannot imagine there being many businesses that are truly uninitiated to the benefits of digitization, I know that many are still reluctant to take the plunge. This is especially true in the alcoholic beverage industry.

Just last year, Rewrite Digital Founder and CEO Jon Reay remarked (with regards to a survey done by the company) that while 80% of those surveyed recognized the importance of digitization for future growth, there is a “sizable gap between acknowledging value and following through to realise it”.

Which is why, after 15 years in the alcoholic beverage industry and seeing the lack of action taken towards going digital, I am spurred to help break down the topic into the why’s and the how’s of digitization in the alcohol industry — all to be explored in this series of articles.

Disruption of the Beverage Industry

Digitization of the alcoholic beverage industry is a long time coming.

In a study conducted by the Foundation for Alcohol Research and Education (Australia), there were 107 alcoholic beverage advertisements that popped up on a personal Facebook and Instagram account within one hour. That’s an average of one ad every 35 seconds, and 66% of the ads had a direct call to action button such as “Shop now” which redirects to an e-commerce store.

Since 2015, renowned companies in the industry such as Heineken, Pernod Ricard, and Patrón have been significantly increasing their digital marketing budget. Patrón also partnered with Amazon to launch an Alexa Skill called Ask Patrón where users can use voice activation to access the recipes in the Patrón’s Cocktail Lab.

The unfamiliarity of it all can be daunting, but when it comes to digitization, I believe that it is more important to do it now than to do it right (at least not at first; eventually you will get it right). There needs to be a sense of urgency in digitizing your beverage business. A solid digital infrastructure is no longer something that is simply “nice to have” — rather, it should be regarded with a “do or die” mindset.

The Boom of Alcohol E-Commerce in 2020

Image credit: on Unsplash

With stay-home orders in place due to COVID-19, consumers aren’t left with many ways to get their drinks. The most viable option is online purchase — thus the soar in digital sales of alcoholic beverages in the past few months.

Nielsen reported that in the weeks of March and April 2020, online alcohol sales in the US went up by 234% compared to the same period last year.

In fact, alcohol is the fastest growing e-commerce department among consumer packaged goods (CPG), and weekly growth has continued. — Nielsen

Despite closure of F&B and entertainment outlets, 45% of Singaporeans declared spending more than usual on alcoholic drinks. In the United Kingdom, 63% of consumers are either still drinking the same amount or even more over the COVID-19 period. The number goes up to 88% for Canadians.

In the face of COVID-19, markets without a strong structure in place for alcohol e-commerce are hit the hardest. Eventually, countries that restricted access to online purchase of alcohol — such as Korea and India — have lifted the ban. Such is the fact of doing business in the current landscape; in order to be able to continue meeting consumer demands and cover overheads, businesses must embrace digital transformation.

Thinking Ahead: Post-COVID-19

The importance of going digital in the alcoholic beverage industry goes beyond the pandemic. It is not a passing trend or phase — it’s a permanent new reality. From here on out, alcohol e-commerce will experience a long-term, probably even permanent, boost.

Although many countries have begun to gradually ease lockdown restrictions, consumers are cautious and hesitant about resuming drinking in bars, pubs, and restaurants. It doesn’t help that on-premise outlets will have social distancing regulations imposed on their operations, which will significantly limit capacity.

“In-home consumption [of alcohol] will continue to remain elevated as the restaurant sector will take some time to rebound,” says Sara Hillstrom, Senior Director of Category Development for Anheuser-Busch.

Echoing the same sentiment, Lindsey Andrews, CEO of on-demand alcohol delivery service Minibar, says, “What the growth numbers in April have shown us is that online alcohol delivery is here to stay.”

Like it or not, the threat of being hit by a second wave of COVID-19 looms above us all. Even in the best case scenario where the world rids itself of the virus, the road to economic recovery will be a long one. The only way for businesses to remain relevant through this rough period is by embracing digitization, especially as consumer behavior changes after being accustomed to seeing more brands going online.

Keen to begin your digitization journey? In the next part of this series, I will give an overview of the various areas that alcohol brands can look into when it comes to digitization, such as e-commerce, social media, augmented reality, and more.

Lukasz Piotrowski
CEO & Founder
Lukasz Piotrowski is a dedicated entrepreneur and a force of change in the alcohol and retail industries, constantly innovating solutions that blur the lines between offline and online retail. After establishing brands DRNK:AR and Reetail:AR under Omniaz, he is keen to share his 15 years’ worth of knowledge and experience on how to digitize retail businesses.