Online US alcohol sales outstrip traditional retail sales four-fold
Online alcohol sales in the US have hit $1.7bn, and are outstripping growth within bricks and mortar retail according to Dutch bank Rabobank.
While off-premise alcohol sales had a five year CAGR of 1.44%, sales from winery websites have quadrupled over the same period. $100m of sales were processed from online delivery apps in 2017, up from zero in early 2013. Even beer, where sales are declining is seeing great growth online, up by 70% a year according to Heineken’s US president and CEO Ronald den Elzen.
However, Rabobank says that while the power of online sales cannot be ignored, brand owners are facing a new headache. With at least a dozen online channels, and each affecting brands differently, brand owners must make sense of the plethora of companies and identify which channels best suit their products.
The online channel which accounts for the largest portion of sales is speciality retailers. These are worth an annual $975m, with the majority of sales from high end consumers looking for hard to find wine, though only 13 US states currently allow out of state shipments, which threatens growth in this channel.
Direct to consumer sales is the second largest segment of the online market, accounting for $410m. Rabobank points out that DtC sales are not the same as online sales; only 7%-10% of direct sales come online
On demand delivery companies work with brick and mortar retailers to deliver alcohol within an hour, and this category is worth $103m. However, it is one of the fastest growing segments in online alcohol sales, with apps such as Drizly, Minibar Delivery and Saucey creating online market places that enable brick and mortar stores to sell their products online.
At 5%, online grocery sales currently represent a very small part of total online sales, but Rabobank predicts this will soon change, and that growth will be driven by brick and mortar grocery retailers coming online, describing the sector as “the sleeping giant”.
“The channel’s relative irrelevance will not last long,” said the bank. “We firmly believe that it will develop into the most important driver of alcohol sales.”
Penetration of online grocery lags 13 years behind the rest of retail, with only 55 of grocery dollar sales processed online. This compares to the rest of online retail which accounts for over 9%. Nielsen predits that the online channel will command a 14% share of food and beverage sales by 2025.