The “misalignment” of growth strategies across the supplier, wholesaler and retailer tiers will continue to be a problem for bev-alc in 2024, according to Bump Williams in the first Bump Williams Consulting (BWC) Monthly Industry Update of the year.
“The growth strategies of the three tiers have never been in alignment,” Williams wrote. “And now, when you add in a fourth dimension – the consumer – it makes real volume growth highly unlikely and real [dollar] growth a very real challenge.”
This misalignment comes on top of what is expected to be a tumultuous year for the industry, according to Williams, inferring from conversations with industry members at the end of 2023.
“In the bev-alc business, it’s always one thing or another trying to derail our momentum, and I don’t expect 2024 to be any different,” Williams wrote. “In fact, I expect it to be at a heightened level of sensitivity.”
Williams identified the top 10 “growth challenges” bev-alc is expected to face this year, determined by end-of-year business reviews and strategy meetings:
- Inflation and other “financial constraints” on consumers;
- Industry-wide advertising and marketing is not appealing to consumer demands or preferences;
- “Social media disasters;”
- “Lack of strong, long-term, strategic industry leadership;”
- “Lack of successful innovation;”
- “Too much power in the hands of too few people;”
- Cannabis “eroding bev-alc occasions;”
- “Loyal/heavy consumers” moving to other beverage categories, including non-alcoholic (NA);
- “Loss of shelf space, display space and cooler door space;”
- And “politics, taxes and legislation.”
All three tiers are approaching these challenges in different ways, according to Williams.
For manufacturers across beer, wine, spirits and NA, the focus is driving profits, Williams wrote. That results in deploying tactics such as focusing on high-end brands and revenue growth management, as well as “profitable innovation” and trending flavor or high ABV offerings.
Other strategies for manufacturers include:
- Strategic partnerships and joint ventures;
- Internal cost cutting;
- A focus on distribution and wholesaler relationships;
- Expansion of the own-premise;
- And the strengthening of core brands.
Distributors across bev-alc categories are putting a greater emphasis on portfolio focus, Williams wrote. Wholesalers are looking to expand their “total bev portfolio[s],” focusing on “velocity brands,” and adding growing segments such as NA beverages, imports and flavor-forward offerings. Wholesalers are also looking to continue to reduce the amount of beer brands and SKUs they are carrying, according to Williams.
Other distributor goals this year include:
- Reduce the number of deliveries;
- Find ways to attract new consumers;
- “Protect shelf space;”
- And pursue wholesaler acquisitions or alignment.
For retailers – including grocery, convenience stores, drug stores, mass merchandise, liquor, club and dollar stores – there is a “consumer-centric” focus. Retailers are looking to drive foot traffic and shopper loyalty to their establishments, investing in category and consumer insights, according to Williams. Areas they are prioritizing include high-end beverages, flavor-forward beverages, NA and “health and wellness” brands, private label and single-serve.
Other retailer strategies and priorities include:
- “Incremental innovation;”
- Driving “market basket [dollars];”
- Decreasing out-of-stocks and focusing on “shelf space profits;”
- “And cross-category promotional money;”
The concerning misalignments across industry members, according to Williams, include:
- “Service levels;”
- “Core brand growth;”
- “Brand building vs. brand collecting;”
- “Growing malt-based beverages;”
- And “category management strategies.”
“There has been a definite shift in the balance of power in our industry and 2024 will be a crossroads year for a lot of people,” Williams wrote. “Focus, targeted distribution, protecting shelf space, consumer insights and strategic partnerships will be the DNA of winners in the years to come.
“The next 3-5 years are not for the faint of heart, I can assure you,” he added.