In the latest installment of Brewbound’s A Round With – a weekly Insider-exclusive Q&A series with industry leaders – Rabobank analyst Bourcard Nesin tells us all about the future of e-commerce alcohol sales, changing drinker demographics and being a dad.
Nesin is a beverages analyst at Dutch cooperative agribank Rabobank, where he covers non-alcoholic and alcoholic beverages and co-hosts the podcast Liquid Assets. He lives in Portland, Maine, with his wife Lea and daughter Emilia.
You’ve always been a go-to source for us on the topic bev-alc e-commerce sales. What will the e-premise channel look like without Drizly?
The short answer: it will be smaller. Drizly was responsible for hundreds of millions of dollars in online alcohol sales annually, and Uber Eats hasn’t got their own program for selling alcohol up and running effectively. So, unfortunately, a lot of that spending is going to simply disappear for a while.
There are, of course, other options for buying alcohol online, most notably Instacart, DoorDash, ReserveBar, wine.com and myriad grocery chains and independent stores with an e-commerce program. Eventually, consumers will find a solution that works for them. The loss of sales will be temporary, but it still hurts, especially in a year like this in which good news is hard to come by.
For retailers that were using Drizly, I hope they find alternatives. Platforms like City Hive – which helps liquor stores create their own branded websites – are most likely to benefit from the change. And ultimately, since they are more profitable platforms for selling online, I suspect that in the long run, retailers will benefit too. A few retailers, though, were doing a lot of business on Drizly (like 10-25% of total volumes), so the loss really hurts. They are sitting on a bunch of inventory they won’t be able to sell overnight.Ultimately, Drizly was never a major source of sales for beer, so craft brewers will be minimally affected.
In your recent report “Why Drizly Never Delivered” (great title, by the way), you call out the unrealized potential of Drizly’s advertising business. Could Drizly have met another fate if they had gotten this part of the company right?
Honestly, no. Drizly DID get the advertising business right, but the level of ad spending from suppliers (mostly large bev-alc brands) on Drizly just wasn’t sustainable. Even if that aspect of their business overinflated how much Uber paid for the company, there were still so many synergies that just never materialized. Drizly was supposed to be a specific service within the Uber Eats app, but Uber never made that happen. If they had executed that plan effectively, I genuinely believe it would have been successful and Drizly would still exist today, even if they no longer operated as a standalone app.
Now that the pandemic-driven boom days of e-commerce are behind us, how settled are we into the channel’s next phase? What changes do you think are still coming?
There is still some shake out needed. We just saw Kroger shut down some of the centralized fulfillment centers it built in partnership with Ocado, and it is hard to imagine how quick delivery startups like Gopuff become profitable. So, there will still be some changes to which channels are growing or contracting as consumers and investors pick the platforms that work for them longer term.
However, brewers would be wrong to focus too much on the selling aspects of the digital world. So much of why e-commerce and online sales matter is discovery. Brewers want to make sure that their products look beautiful and their messaging is clear in as many places as possible. If you want to know how to do it well, just copy your peers and competitors that are doing a great job (ahem, Allagash).
You research and analyze the broader beverage industry. What can bev-alc, and specifically beer, learn from current market forces in the non-alc world?
Brewers (most of them anyway) are obsessed with their product. They are by nature competitive and that manifests in trying to ensure they are making the best beer in the world (or at least the best out of the 10 brewers based in their mid-sized city).
Non-alc players, on the other hand, care much, MUCH more about creating the best product in the world. Meaning they focus on marketing and market research to ensure they are connecting with the right consumers. Also, non-alc brands tend to be much more focused on efficient production and cost controls, something that doesn’t jibe super well with brewers’ obsession with quality and enormous hop additions and grain bills.
That said, a lot of craft brewers don’t have an ambition to become a national brand and instead thrive as an integral part of their local community. That model WORKS. However, becoming the next big thing is the focus and ambition of virtually every non-alc brand in the country. For those brewers that are ambitious, start with market research, then build out some marketing plans, all the while hiring a great CFO or accounting person that can ensure you are running as efficiently and profitably as possible.
There’s no denying the craft beer industry is in a downturn. What signs should we be looking for to know that the situation could be changing?
I don’t think things are going to change much. The outlook for the craft beer business has fundamentally changed versus five years ago. I’ve been writing a lot about the wine business, and 2024 could be the first time in (something like) 50 years that the number of wineries in the U.S. will decline. The market is saturated. Eventually the number of brewers in the U.S. will have to decline too.
Does that mean the sky is falling? Of course not! There are plenty of opportunities to grow, create value for owners, support your employees and delight your consumers. If you have a brewery with a respected brand and is financially well managed, you don’t have anything to worry about.
What’s the best advice you’ve heard lately?
I heard this from a wine business, but it very much applies to beer: “We can all agree that in order to be successful your product has to taste great. If you don’t have a good product, what are you even doing here? Assuming your alcohol brand does meet that necessary threshold, product quality is just a commodity and no longer differentiates you from the competition. Therefore, all that really matters is your packaging, marketing and go-to-market strategy. So, focus on that stuff.”
You’ve done a lot of research on changing drinker demographics and found that the youngest cohort of legal-drinking-age adults became more female than male for the first time in 2019. How may this have changed in the last five years and what does it mean for bev-alc suppliers?
If my calculations are correct, 2024 should be the first year in which the majority of individuals under 30 years old that regularly consume alcohol (at least once per month) are women. As a brewer, there is a simple answer for how to connect with that consumer: Hire and promote more women in your organization. The amazing thing is that those women in operations, brewing, senior management and marketing will bring innovative ideas and products that connect not only with women, but with all consumer groups. The same logic applies to hiring Latinos and Latinas, for example. Unfortunately, I don’t see nearly enough of those folks in decision-making roles at breweries, and it is such a missed opportunity.
You’re coming up on 10 months of being a dad. Congratulations! How has this changed your outlook on the industry? Or your approach to work? (Note: I am specifically asking you this because no one ever asks men these things.)
I’m so glad that you asked me this. I talk so much about parenthood that I’ve become one of those obnoxious people that is so obsessed and excited about “being a parent” that it subsumes all other aspects of their identity. Being a parent is a lot of work, but it is not complicated. You show your kids love, you listen to them, you make sure they are vaccinated and above all, you play with them. It is kind of like brewing an IPA, you have to be pretty useless to ruin it completely.
I write and do complex industry analysis for a living. To focus and be effective at my job, I need 4-6 hours per day of uninterrupted time to think, fail and try again until I find a solution. When your favorite thing in the world is in the next room laughing, crying or cooing, it is pretty hard not to get distracted (not a problem for my wife, though). I’ve started going to a coworking space 2-3 days a week. That was a tough decision and it breaks my heart a little bit every time I leave, but it was necessary for me to find a room of my own.
P.S. For anyone that wants to know what being a dad feels like for me, I encourage you to watch the incredible animated movie Spiderman: Across the Spider-Verse. The depiction of Peter Parker as a new dad made me feel seen more than any movie I’ve ever watched.