I am not crazy. I am not delusional. I am not high on my own supply. I am a 35-year veteran of the booze business. I have run beverage companies at all three tiers. I have sold two beverage companies to private equity and invested millions of my personal money into adult beverage brands. So yes, 2020 (while shitty for us all personally and on many fronts) was a great year for the beverage business.
There are tens of thousands of you all that read my column, and I would assume that you like the content. Please do not think for one second, I am making light of the health and safety risks of the past 9 months or mocking the thousands of suppliers, on premise accounts, and distributors/ importers that have folded during this period, I am not.
2020 was the great reset of our industry. 2020 was the year that ushered in another channel of selling, the app or web portal found its sea legs. 2020 was the year that DTC doubled or tripled in growth. 2020 was the year of launched or relaunched canned wine, RTD cocktails, eco- this, bio that, etc. 2020 was the year that let on premise accounts to sell wine to go. 2020 was the year that GM’s at major distributors left the golf course and left the office and actually went into accounts to sell goods because the on-premise division had been shuttered. 2020 was the year that wine.com became what it was meant to become. 2020 was the year that removed over levered, highly ambitious unique brands from the landscape because at the end of the day, there was no market for the product. 2020 was the year that brands learned how to do virtual tastings, invest in marketing and design and / or take a pause to reset the business model.
As a company that sells brands nationally for the independent supplier at BevStrat, and as someone that invests in brands personally, 2020 was a year that makes sense for our industry. As painful as it was and is, it was the great reset of the hierarchy of the adult beverage business.
Just to cover some key points:
- The coming of age of portals, web selling and the third “new” channel
- For years the ongoing joke was the only person to make money at wine.com was the guy that sold the URL to wine.com for $10M USD. That was for years true. Portals like Thirsty, Reserve Bar, Minibar and the like are all having their day in the spotlight. These apps were all great ideas at inception, but consumer adaptation was slow at best. With Covid, consumers didn’t want to leave the home and browse at a wine shop or liquor store. In store traffic was down 70% April- June. These apps were positioned well and had become established enough to create an easy and breezy shopping experience. Layer on top of that, new brands needed a way to market in stores as the shelf space is linear and finite– the timing was great, and the need was there.
- The thinning of the herd
- No one hopefully wishes for others to have business challenges. We have all had them and they are horrific, but 2020 was the year that the dreamers had to become schemers to make their personal brand stay afloat. The consumers gravitated towards top brands. Many of these brands (think Jack Daniels) are name brand brands that sold themselves. The issue with this brand category is that they make no money for the accounts at all, but they do churn inventory. This is good for distributors and consumers/ bad for accounts that sold them. We had no choice as an industry but to push this way to keep the lights on. Independent brands are the ones that suffered. Historically, when you look at the shelves of the liquor store or wine shops nationally, they are littered with the staples and then surrounded (on shelf) by the independent brands. The reason this works is because the consumer goes into the store, perhaps browses, perhaps speaks with a salesperson, and tries a new brand. Or they go to a bar and a mixologist recommends a new cocktail. This is not happening, and this will not be a regular occurrence until mid 2nd quarter 2021. The result is that the small brand, for months, had gotten no share of wallet or mind. The small distributor that sells these goods as a mainline item is suffering and closing. The small store or specialty store that sells unique items suffers. The brands that are not Tito’s and the like, suffer. The herd thins.
- Additionally, the general consumer does not realize that the adult beverage business is very front loaded. Developing, creating, formulating, packaging, registering, etc. a brand all costs considerable money and takes a ton of time. All before the first bottle is ever sold. The brands that launched in 2019/20 and were hoping for 2020 sales to cover 2019 debt have been scrambling for survival since mid-March.
- 2020 has been truly Darwinistic in the plucking off of brands and small distributors/ importers while calendar ticks on.
- The year of the RTD
- Often thought of as a mixer or too sweet or too cheap in packaging to compete, RTD’s have arrived. The scenario is rather simple. The perfect storm of not wanting to shop and browse, not wanting people in your home and not having a strong desire to make drinks with a myriad of ingredients has ushered to completion the coming of age of RTD’s.
- The drinks are good, the packaging is on point, and the consumer adoption is spot on in a perfect storm of supply/ demand curve. We sell and have sold dozens of marks over the years and have never seen a demand curve like the one we are currently in.
- The continued growth and proliferation of 3PL’s like MHW and others will be refined, redesigned and reassigned as supplier options. As the big distributors retreated during Covid the 3PL’s where clear to the model and continued on course. Routes to market like these, make your own success a rally cry for brands desperate to continue to be sold. While 3PL’s have been in the lexicon, the power they can wield was on full flex during Covid.
It does indeed appear that Covid will wane in 2021 and some degree of normal will return. I feel we all will collectively take a big breath and put it into our rearview mirror. 2021 will emerge, for our industry, as a fresh start and an ushering in of new and unique brands that were born in this pandemic.
At BevStrat and as a personal brand investor, these times while trying, appear to be ending. Our beloved industry will survive and thrive in a different light going forward.
2020 will be viewed as a great year for the adult beverage business when we look back in time.
Three Tier Talk
by Brian Rosen, www.BevStrat.com
Brian Rosen is Former CEO of America’s #1 Retailer, Sam’s Wines in Chicago, Former Partner at PricewaterhouseCoopers in Retail and sought after retailer consultant.
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