Brewbound Podcast: How to Sell More Beer Via E-Commerce in 2022

[00:00:00] Jessica Infante: How can you sell more beer through e-commerce? Find out on The Brewbound Podcast.

[00:00:16] Justin Kendall: Hello and welcome to The Brewbound Podcast. My name is Justin Kendall and I am the editor The Brewbound and I am joined The Brewbound managing editor, Jessica Infante. Hi, Jess. Hi, Justin.

[00:00:27] Jessica Infante: How are you?

[00:00:28] Justin Kendall: I'm doing well. Is it a bones day?

[00:00:31] Jessica Infante: No, no, I don't think it is. I'm feeling a no bones day.

[00:00:35] Justin Kendall: No bones day.

[00:00:37] Jessica Infante: We've been busy. Don't get me wrong.

[00:00:39] Justin Kendall: Yeah. Let's also bring The Brewbound reporter Zoe Licata. Zoe, bones or no bones?

[00:00:47] Zoe Licata: Definitely a no bones day. I'm in like my comfiest at home attire right now, like full sweatpants and fuzzy sweatshirt. So it's definitely a no bones day.

[00:00:58] Justin Kendall: Wow. It's going to be a rough one, folks. So it's been a busy week and a half of news and it just keeps coming. Today, we learned that Deschutes is undergoing a leadership change. Right at the top, CEO Michael LeBlond is stepping down after 15 years and stepping in is CFO Peter Skrbek.

[00:01:21] Jessica Infante: Yeah, Justin, you just broke the story. Michael had been there for a really long time, 17 years, which is like an eternity in craft beer. So long time leader of Deschutes. Deschutes, of course, as everybody likely knows, one of the largest craft breweries in the country, 10th largest last year by volume according to the BA. So this is a big leadership change for those guys.

[00:01:42] Justin Kendall: Yeah, and this is a brand that has had its fair share of challenges recently. They closed the tap room that they had in Roanoke. They never quite got off The Brewbound with building that production facility there after several years. They've also, you know, done a lot of things that they hadn't really done before, which is make an acquisition, which has proven to be pretty successful for them. They picked up Bend Oregon's Boneyard Beer, one of their neighbors, and that brand is really, really doing well. I talked to Neil Stewart, the VP of sales and marketing for Deschutes, and he told me that the Boneyard Beer brand has really done well for them. It's been everything that they thought it was going to be, which he called a rocket ship. If you're playing The Brewbound Podcast drinking game, you can drink now because you heard Rocket Ship. But Boneyard finished last year up 55%. The Deschutes brand finished last year down 2% in shipments. combined those two portfolios from April through the end of 2021, and that's right from the moment that basically Deschutes took over Boneyard to the end of the year, the combined company finished up about 10% in volume. So Boneyard is definitely making a difference for Deschutes.

[00:03:02] Jessica Infante: At the time of the acquisition, Boneyard's volume was pretty much all on premise and they needed to make that big shift and it's hard to do those things without a partner like Deschutes, you know, in terms of getting a high speed canning line and cans and chain relationships. So working out, which is great.

[00:03:19] Justin Kendall: Definitely, and we spent a lot of time last week going through the IRI year-end data and off-premise sales for the beer category ended the year at $44.3 billion.

[00:03:32] Jessica Infante: Yeah, which sounds like a lot, and it is a lot. That marks a 0.4% decline from 2020 sales. And honestly, not that bad when you think about it. 2020 was a year like no other, like none that we've ever seen. And I think I just hit every cliche that has been said in the past few years about that.

[00:03:55] Justin Kendall: An unprecedented year.

[00:03:58] Jessica Infante: Yes, in these uncharted times, out of an abundance of caution, most people were doing their beer shopping at large off-premise stores. And in 2021, you know, the on-premise began to reopen a little bit. So that was, you know, some competition for dollars. So for off-premise sales to only lose less than half a percent, eh, not terrible. The beer category segment that saw the greatest increase was non-alcoholic beer, which is interesting. That's up 24%, hit $236.4 million in sales at off-premise retailers. Next segment with the highest growth was hard seltzer, which shouldn't be that surprising, but hit a 16.8% increase, more than $4.5 billion in sales. Then FNBs did all right, up 5.5% to 3.2 billion. Imports, obviously driven by the Constellation portfolio, up 4.8% to nearly 9.3 billion in sales. And domestic super premiums, which is mostly driven by Michelob Ultra, was up 0.4% to 4.1 billion. Other than those segments, the rest of the category declined compared to 2020. And, you know, we mentioned this before, 2020, a year like no other. blah, blah, blah, when you, I'm sorry to blah, blah, blah, pretty horrific year for humanity. But when you compare 2021 off-premise sales to 2019, sales are up 18.7% in dollars for overall beer category spending. The way that we look at data is gonna be funky for a while.

[00:05:32] Justin Kendall: Yeah, and to be fair to you, a lot of people would like to blah, blah, blah, or yada, yada, yada the last couple of years. One thing we should say too is this talk about IRI off-premise sales, that ties in today's conversation on e-commerce. We're gonna have a guest here, RoboBank analyst Burkhard Nessen, our center square. He's our friend.

[00:05:55] Jessica Infante: He's a friend of the pod. Yeah, Buki is back.

[00:05:59] Justin Kendall: Yeah, Buki is back. I think that helps explain a little bit why sales were lower. You've got increased mobility. You've got an on-premise channel that's returned. And look at life right now. We've got the Omicron variant out there. And really, while some people are taking a hit on ours, people haven't stopped. The country hasn't shut down, so we are still going.

[00:06:23] Jessica Infante: And I mean, whether or not we should have shut down, I guess, depends on who you ask.

[00:06:27] Justin Kendall: That's a totally different story.

[00:06:30] Jessica Infante: That's a different story. Yeah. Bart Watson, the chief economist with Brewers Association in a presentation a couple of weeks back pointed to the fact that sales at bars and restaurants, like their dollar sales are back to 2019 levels. But the one thing that's not is draft sales. And we've talked about that extensively here. I don't need to tread that ground again. But But yeah, you're right.

[00:06:51] Justin Kendall: Well, I mean, we know that Kraft over index is on draft. So without the return of those sales, it's a bigger uphill climb for Kraft.

[00:07:02] Jessica Infante: And in the off-premise in 2021, the Kraft category declined by 4.6%, but still hit $5 billion in off-premise retail sales.

[00:07:15] Justin Kendall: I talk about the Omicron variant and it's still going, but Zoe, you had a story this week on something that the Omicron variant has definitely had a hand in slowing down, and that is the release of Plenty the Younger by Russian River.

[00:07:31] Zoe Licata: Yeah, so I talked to Natalie from Russian River last week, and she was a little bit upset but also optimistic about this rescheduling of their Pliny the Younger release. So they have this annual release that's like a two-week release. You can only really get it or most people go to get it at their two tap rooms. in California and this was supposed to be the first year after a year hiatus where this event would happen again. Lots of people line up, lots of people come, Natalie was saying, from all over the world to get this release. They have special like discounted hotel rates through the brewery because of this. And so this is supposed to be like a exciting event after the initial shutdown of it due to COVID last year. And it's just not going to happen quite yet. They made the decision to postpone it until March. And this is just to make sure that COVID cases go down. Russian River has also not only has their community dealt with a lot of COVID spikes, but they themselves had. Since the week before Christmas, they've had 22 employees test positive for COVID. And now he was saying that spike is due in part to a lot of their employees live together like this is a part of the country where like housing is expensive and so they all have shared housing. And so once someone gets it, a lot of people in the company get it. Which is a bit unfortunate, because they've been a bit more higher in their COVID-related safety measures than some places. They require all their employees to be vaccinated. They all have to wear the N95 masks. They can't just wear cloth masks. And they have to have them on indoors and outdoors on the brewery premises. So unfortunately, despite all those measures, they still got a hit. And it just made sense to postpone this for a couple more months.

[00:09:34] Justin Kendall: Yeah, that is a major economic engine for well that brewery as well as that area of the country. It's a nice boom in February to have that many people from across the country around the world coming there and COVID unfortunately has put a crimp on that. Speaking of another California brewery, you also had the story on the sale of the Green Flash Brewing Facility. That's up as a turnkey operation. It's not sold yet. If you want to buy it, it's still out there. But Zoe, you were on top of that as well.

[00:10:10] Zoe Licata: Yeah, so this was a little bit of an update almost to our story from a few weeks ago, where the intellectual property for Green Flash and Alpine Brands had been sold from WCIPA LLC to Tilray, which is the world's largest cannabis company. They sold intellectual properties, not the actual brewery itself. So they put it up for sale this past week, their San Diego brewery. Just and I both talked to Nick Dove, who is the president of Heritage Global Partners, and they are helping oversee this sale. And he was really adamant that they really want this to be a full turnkey sale. They don't want to have to sell the property and the equipment separately. They want it make this an opportunity for a brewery to come in and just start right away and use the location as soon as they can.

[00:11:03] Justin Kendall: What do you call it? The Brewery Mecca, San Diego. So somebody is probably going to get a decent deal on that location.

[00:11:11] Zoe Licata: Yeah. And Nick was saying that, I mean, a lot of this equipment that is in this brewery, like if you tried to go somewhere else and bring in your own equipment right now, or try to build a brewery of this size, you have really, really long wait times right now, early times to get that up to 12, 18, maybe even a full year to get those things. So this could be a really good opportunity for someone, especially with these big supply chain issues that are happening.

[00:11:37] Justin Kendall: That definitely checks out because in the conversations I've had with some folks, they're telling me that boilers and chillers are in demand and the price is outrageous. Anyway, if you can get it secondhand, shoot your shot, basically. Even those prices are pretty high.

[00:11:54] Jessica Infante: It's a great opportunity to hermit crab.

[00:11:58] Justin Kendall: Hermit crab.

[00:11:59] Jessica Infante: I don't know that other people use the term hermit crab as it pertains to breweries the way that we do, but I really wanted to catch on. So here's a great hermit crab opportunity. I like it. A bigger shell.

[00:12:09] Justin Kendall: Absolutely. And sticking with Zoe, because this is apparently the all Zoe podcast. You also talked to the owner of White Lion here in Massachusetts, in your neck of Massachusetts, and they struck a deal with a former NBA star, Marcus Camby.

[00:12:29] Zoe Licata: Yes, shout out to the 413, I got to do a Western Mass story. So White Line Brewing has partnered with not only an NBA star, but a Western Mass, UMass Amherst basketball legend, Marcus Camby. And they have partnered to not only release a Marcus Camby beer, but they also plan on having a extended collaboration on just local community efforts. and possible just expansion of White Lion's general consumer base and distribution base. So White Lion is based in Springfield, Mass. It self-distributes in Massachusetts, and they're looking to expand into Connecticut in this next year. And they're really focused on giving back to the community around them, helping youth in the community, helping bring more diversity into the brewing industry, really active. And so they met up with Marcus Camby at a community event around basketball, and he was really inspired by their story and what they're trying to do and decided he wanted to be a part of it.

[00:13:35] Justin Kendall: And the beer is literally named after Marcus Camby, right?

[00:13:39] Zoe Licata: It is Marcus Canby is the name of the beer. It's a New England IPA. And there are more beers that they said one or two more beers that might come out in this collaboration. But yeah, the first one is Marcus Canby. So you can drink Marcus Canby IPA.

[00:13:56] Jessica Infante: You can order a pint of Marcus Canby.

[00:13:59] Zoe Licata: Yes.

[00:13:59] Jessica Infante: It's funny. Ray is one of the nicest people. So I'm really glad you got to talk to him.

[00:14:04] Zoe Licata: Yes, Raymary, founder and president of Whiteline, super nice, super excited about this partnership and really excited about potential future partnerships with other local names, possible athletes, other things to just further their efforts.

[00:14:21] Jessica Infante: Yeah, I mean, they're located in Springfield, which is the home of the Basketball Hall of Fame. So you've got to think that that probably helps a little bit.

[00:14:30] Justin Kendall: Yeah. Synergy.

[00:14:32] Jessica Infante: I know things about sports.

[00:14:35] Zoe Licata: Marcus Cambia is a name that like I've always been aware of. He's really big in UMass is like he was a part of their basketball team in 1996 when they went to like the final four or something like that. That was the year I was born, so I don't necessarily, I don't, I can't say I remember it. But he has this, like they just unveiled a statue of him on the UMass Amherst campus this past year. So like, he's a big deal. Yeah. Even for the kids like me, I guess.

[00:15:04] Jessica Infante: Yeah. I know, I know UMass basketball has on several occasions, absolutely embarrassed the Syracuse orange. So they're competitors. Go Minutemen. Go Minutemen.

[00:15:18] Justin Kendall: Uh, and

[00:15:21] Zoe Licata: I'm sorry if I gave you another crisis reminding you of when I was born. It's never intentional.

[00:15:27] Justin Kendall: my brain's just fried at this point. So I don't know how many existential crises I can go through.

[00:15:33] Jessica Infante: The absolute best was you had already left CBC and Zoe and I were at the class of 96 party and, you know, several breweries that were founded in the year 1996 got together and had a 25th anniversary party. And we were just kind of, it was just the two of us. And at one point Zoe looks at me and goes, you know, I was, I was born this year. And I was just like, Oh my God. We should leave.

[00:15:59] Justin Kendall: I've been watching Yellow Jackets on Showtime, which is a great show. And the flashback is in 1996. And so, yeah, when the year you graduated from high school starts being part of flashbacks in television shows, you're starting to feel even older. But highly recommend Yellow Jackets.

[00:16:21] Jessica Infante: I hear it's scary.

[00:16:22] Justin Kendall: All 10 episodes available now on Showtime. And speaking of Showtime, we should get to Showtime, which is Showtime with Burkhard Nessen. Stay tuned for that featured interview up next.

[00:16:38] Jessica Infante: Okay, so we are here with our featured guest, basically the fourth member of The Brewbound team, Burkhard Nessen, beverage analyst for Rabobank. What's up, Burkhard?

[00:16:48] Bourcard Nesin: Hey, jet lag, but doing super good. Happy to see you guys.

[00:16:52] Jessica Infante: For being as jet lagged as you say you are, you seem like a ray of sunshine today. So I'm really glad you're here.

[00:16:57] Bourcard Nesin: I guess I start sunsetting at like four o'clock. I was in Europe. So mornings, I'm like super spry. Evenings, I'm just like, you know, cognitive function declines. Don't feel too good. Not great.

[00:17:09] Jessica Infante: Well, I'm glad we're doing this at 11 a.m. then. So you are here to discuss with us this gigantic report that you've been working on for a really long time that finally got published the other day. We are going to talk all about e-commerce and beverage alcohol, a topic near and dear to all of our hearts. Ricard, you were gracious enough to send us a copy of the report and its associated press release. We covered it last week. Unfortunately, many other things happened in the beer industry last week. So I feel like this didn't quite get the shine that I would have liked it to have gotten. And we are going to talk all about it today. So, I mean, the headline here is really that online sales of beverage alcohol reached $6.1 billion in 2021, which seems like a lot, and it certainly is a lot. But to me, the biggest thing here was that they have more than doubled their share of all off-premise dollars since 2019. Obviously something happened in 2020 to make that happen. So you've been watching this space for a really long time. You're probably the person in the country who knows way more about this than I would say anybody else. What's your big headline takeaway from this year's e-commerce report?

[00:18:17] Bourcard Nesin: It's actually kind of interesting. So I think the big headline is always going to be the numbers and numbers like six billion don't really mean that much to an individual company. I think what really matters is when, you know, you said the other news items probably buried this report. Certainly when I'm based on the number of companies reaching out to me to get a hold of the report, at least I'm getting a lot of attention. internally, if not externally. But the point is, is that companies really want to understand what their competitors are doing. Because in writing this report, I probably interviewed 30 plus, 30, 40 people. You know, the number of companies that I interviewed, usually, you know, at the head of e-commerce level, account for about 70% of alcohol value in the US. So basically, this is a, you know, in doing this, talk to almost everybody. And the one thing I learned is nobody knows what they're doing. And so for the most part, when you don't know what you're doing, you ask your friends and I've talked to all their friends. And so that's really where, you know, people are trying to figure out what to do. And most of the time, especially smaller companies or mid-sized companies, they're not doing that much in terms of e-commerce and preparing for digital sales and maximizing their performance in e-commerce channels.

[00:19:34] Jessica Infante: Obviously 2020 happened and it made everybody, not, it didn't make everybody, but many, many people became much more familiar with the notion of using the internet to procure alcohol for themselves. You say that nobody really knows what they're doing, but did you sense that there's a general greater knowledge base out there in the industry than the last time you wrote this report?

[00:19:56] Bourcard Nesin: Certainly there's more people there. So in doing the reporting, at least at companies, I asked how big was your team before the pandemic in terms of how many people focus on e-commerce within your organization and how many people focus on it now. And on average, the size of e-commerce teams in the industry grew by 117%, so basically doubled. So there's a lot more people there, but that's based on my numbers, 200 plus e-commerce teams. experts in the industry. There aren't 200 e-commerce people in the industry, right? There were maybe 100 before and so there's not a lot of knowledge here. And so there's a lot of people striving for, you know, what am I supposed to do? Am I doing enough? Should I hire more? Who should I hire? What are the skill sets I need to be successful? What should I do or what should the mandate of that e-commerce team be once I get there? But for the most part, most companies, even if they did double the size of their e-commerce teams, could be doing quite a bit more, I think. I don't think there's any risk of over-investing in the area at any company in the U.S. right now.

[00:21:02] Justin Kendall: You mentioned that there's no risk of over-investing, but a lot of the companies that, you know, were probably listening to this, they can't afford the folks to get into this space. So I'm curious, what are some things that smaller beer producers can do right now to sort of better play in e-commerce and take advantage of some of the opportunities that are out there?

[00:21:24] Bourcard Nesin: It's really, really interesting. So as part of the research again, that survey, I also divided companies into size and smaller companies actually have a lot more e-commerce people per million dollars in in revenue and that would be you'd think like oh yeah that that's fine but when it comes to updating say brand content for your brand it takes just as much work to update the content and product images and description on drizzly for a brand that is selling you know a thousand cases as it does for bud light right like you literally have to do the same amount of work so it may seem like these individuals are investing, over-investing, but they're actually oftentimes just drowning. So what I would say for the most part is if you're a small company, you need to have somebody who's kind of directing that. You need to assign somebody who's going to be in charge of figuring out where our sales are going in e-commerce, like what are the platforms I need to focus on to improve the performance of my brand or improve the way that consumers see my brand in an online world, right? Because it's not only whether somebody buys it, it's that every time somebody sees your brand on Drizzly or on totalwineandmore.com or on an independent retailer website, you know, that's an opportunity to tell a story. That's an opportunity to tell them why your brand is great. And so you really want to make sure that you understand where your brand is online and figure out where it's having the most impact. You need somebody in charge to do that. And then I think if you really don't have resources, which I think most companies you just don't want to give resources to it. But if you really don't have any resources, I think it really comes down to setting up responsibilities within your existing sales organization and making sure that those people are able to focus on channels most relevant to them. So if you have somebody visiting a big grocer like Kroger or Walmart, you should also make sure that they understand their e-commerce business as well.

[00:23:20] Zoe Licata: Are those companies that aren't necessarily dedicating as many resources as they should to this? Is there like a common thread that you found between them of like why that is? Is it just a lack of understanding of a lack of they think there's much importance to it? Like why? Why is that necessarily?

[00:23:38] Bourcard Nesin: I mean, it's really interesting, you know, again, surveying e-commerce leaders in the industry. And this is, you know, the people that work at brands. So I've also spoken and worked with all of the platforms, you know, like Instacart and Drizzly and those guys. For the most part, I surveyed all these people and I said, what is your CEO? misunderstand the most about what you do. And overwhelmingly, it's this thing called digitally influenced sales, which is something I alluded to earlier, which is that if a consumer goes on to Drizzly or to Totalwine.com or whatever and like searches for beer or, you know, craft beer or hazy IPA or whatever brand you have out in the market, and they check it out, and then they don't necessarily buy it, that is still an impression. And that then leads to that person purchasing in-store. Or perhaps there's somebody in the store literally looking at a shelf going, hey, what's the difference between this beer and this beer? And then they're going to go online, and they're going to look up your brewery and your brand and say, why is this special? And you want to make sure that wherever they land, that you're able to tell the story that helps them make that decision in that moment or down the road. The other thing that I think is really important for senior leaders to understand is that classical marketing theory suggests that you want to market to young people you want to drive trial in younger legal drinking age consumers that will create a relationship with your brand and then create long term. like consumer and so you win a lifetime consumer so that there's a, you know, you acquire them young and then there's this lifetime value that that's created there. The online consumer is a lot younger, they're a lot wealthier than your average consumer and Kraft way over indexes online. So it's also an opportunity to direct trial with like the most important demographic group that Kraft has in a lot of ways. And so I really think it's also, you know, helping senior leaders understand that e-commerce is relatively small now, it's like 4% of total sales. But it's way way more important for the future of your brand and brand building.

[00:25:38] Jessica Infante: One thing that really struck me while reading and reporting on your report was that you've broken up e-commerce into a few different channels. And these mean different things for, cause your report covers beer, wine, and spirits, but, you know, beer, wine, and spirits all perform differently in these different channels. So why don't we establish what those are for the audience? And we can kind of explain, you know, where beer does well and where beer under indexes. So the first one that you went through in the report was online grocery, which definitely the biggest $1.6 billion. Wine is the biggest category in that channel with $678 million, but beer's not too far behind at $615 million. And then spirits is about half of that at $332 million. So obviously, you know, if you were running a beer brand, it seems to me that this would be a great place to focus your energy because this is where you actually get some representation, right?

[00:26:30] Bourcard Nesin: Yeah, online grocery is super interesting. You're exactly right. Beer does perform really well. And I think setting up a baseline understanding of how alcohol performs since the pandemic began, it's helpful to point out that like all e-commerce groups, right, grocery shopping online became a real big thing. Amazon grew a lot. But the important thing to understand is relatively alcohol way outperformed overall grocery, so other food and beverage categories. And why is that? And I think that a lot of it doesn't come down to consumers. It comes down to the retailers and the platforms like Instacart out there. And that's really a consequence of those retailers coming out and adding to the footprint of stores that offer alcohol online. So before the pandemic, there was a lot of grocery stores where you could shop online, where they could legally sell alcohol online, but you couldn't because it was, you know, difficult regulatory for them to do that. And it kind of freaked out retailers a little bit. Pandemic hit, huge opportunity. And so, you know, the number of retailers that sold alcohol grew enormously. And so for beer specifically, that's really important because beer is super heavy and beer is pretty cheap. And it's relatively available everywhere. So if I'm a consumer I'm not going to order beer to get shipped to me. It costs too much. It's too easy to get in person. So really the reason that you buy beer is that you want to just buy groceries and you're kind of piggybacks on the back of that. And I think that's really an important thing for brewers to understand is that's really where so much of the opportunity is for them is, you know, kind of just piggybacking on other purchases, because for a consumer, it's pretty easy just to walk down to the convenience store and pick it up and adding a new routine or a new shopping trip for alcohol specifically, it's kind of people talk about convenience, it's not that convenient. If you have to like shop online and wonder about delivery, and there's a bunch of uncertainty in that process, it's much easier just to walk down to the street.

[00:28:28] Jessica Infante: Beer and grocery is so funny to me because, and this is clearly a me problem, but my personal adult beer buying life has all taken place in states where beer is generally not sold at grocery stores. So it's never really like my first thought, but in most of the rest of the country, in states that are much more normal in their regulatory environments in New Jersey and Massachusetts, you can buy beer at a grocery store. The second biggest channel you have for e-commerce alcohol is online alcohol marketplaces. And I think this is probably what a lot of people do think of when they think of using the internet to get booze is things like Drizzly. So this channel sold $1.3 billion in alcohol in 2021. Most of that to wine, $672 million. Spirits, $418 million. Beer, a distant third place at $234 million. So, you know, these marketplaces, you know, that we talk about them a lot, like Drizzly, Instacart, you know, they are very, you know, relevant, but maybe not so much for beer. So, you know, is there an opportunity for beer makers to change that? Or is this something that they should just cede to Wine & Spirits?

[00:29:41] Bourcard Nesin: I definitely don't see it. I definitely wouldn't say that. So marketplaces, like you said, Instacart and Drizzly, Instacart and Drizzly, I think have an 86% market share here. And by the way, Instacart is, in my report, included in both grocery and marketplaces. So they're kind of double counted. So if you add up all the individual channels, it adds up to more than the total sales. And so if you were to adjust for someone like Instacart, which does a lot of the grocery stuff, beer's share of this channel declines quite a bit. And again, that comes down to the fact that shopping for beer for delivery is a fairly narrow use case, right, for delivery for an alcohol-specific order. Whereas beer and spirits are kind of harder to get, or you want a specific selection, you can justify doing that. But for beer in this channel, it's just kind of hard to think of ways in which, you know, unless you're planning a party, which I don't have that many, I'm not that popular, I don't have that many friends, get that beer delivered. And then the other side here is that you would also typically want to order beer cold. And if these platforms aren't going to be able to kind of guarantee that they're going to deliver this beer cold, it is kind of a risk for you, because the only reason you would really need to order beer from one of these platforms for an alcohol-specific order is to get it quick and to get it cold, because you need it quick. And again, it just kind of limits the whole total value of beer's opportunity there. Though I should say again, craft ridiculously over indexes in all these e-commerce channels, largely because of the fact that those consumers that use Drizzly and Instacart are rich and educated, which is the crappier consumer, overwhelmingly.

[00:31:23] Jessica Infante: So then I was just going to round this out with the other two platforms, channels, which is, you know, specialty liquor retailers, you know, things like BevMo and Total Wine. And they've, you know, I've at least noticed that for sure Total Wine has built out a pretty hefty e-commerce presence.

[00:31:40] Bourcard Nesin: And then about 10% of their online sales are e-com. Oh, that's a beer out of 10% more than 10% of it. It's actually more than 10% for totally 10% of the e-com sales of beer, which is, you know, historically I had kind of not thought about this as beer even being a part of that space, but it's actually quite a few of those. The vast majority of those independent retail sales are like for delivery locally.

[00:32:05] Jessica Infante: Gotcha. Gotcha. Yeah. I mean like the Bevmos and Total Wines and Binny's of the world, they sell a lot of beer. Then the last channel, which really isn't that relevant for our audience and our purposes is DTC wine. And obviously wine has had these DTC privileges for years, and that's a much more developed marketplace for that particular category. So those are the four channels and how they shake out for beer. Justin, what were you going to ask?

[00:32:32] Justin Kendall: My question is, you know, how can these platforms such as Drizzly, GoPuff, Instacart, even the Bevmos and Total Wines, as they evolve their platforms, how can they better work with producers? What are some things that they can better do to help those producers sell more beer through those channels?

[00:32:54] Bourcard Nesin: That's a really good question. I don't think a lot of your audience, which is predominantly small, medium-sized brewers, are going to have enough clout to tell them how to change things. I'm sure some of those buyers are listening to the show. So I'm going to turn that around and say, what can suppliers, what can a brewery do to improve their performance on these platforms? I would say that the first thing is figure out, one, do you have distribution into that account? If you don't sell to Kroger, you don't have to update your brand content on Kroger because those sales are literally picked off of the shelf. So figure out where you have distribution and which platforms you need to work with, and then make sure you update the content on that platform. Each retailer tends to have a different system for updating content, and some of them have automated systems through Cinego and Salsify, which is kind of like a form filler. You fill in your brand information, they supposedly go out and automatically format it for each platform. But for the most part, it's your job as a brewer to update your content, make sure your image is right, and that's really important. Because if you, for example, are selling on Drizzly a six-pack of your craft beer, in bottles and it shows a four-pack of cans, consumers are going to be very confused and they're not going to buy it. If, for example, you have an image of a single can and the description says a bottle, they're going to be confused and they're not going to buy it. So it's really important to have that content side right in addition to the brand building opportunities there. But I can also comment on how retailers and retail platforms can improve the alcohol shopping experience as well.

[00:34:40] Justin Kendall: Yeah, and I think that's what I'm sort of getting at is are there ways these platforms can help keep these brewers, even larger brewers, even larger craft brewers in stock?

[00:34:52] Bourcard Nesin: Oh, that's really interesting. So that's a real challenge, right? Because most of the sales are picked off of retail shelves. And so it's really important for brands to make sure that they're in stock. And one of the magical things is that, you know, Drizzly and Instacart, they don't actually own any alcohol. They don't actually, they literally don't sell alcohol. They help retailers sell alcohol. And so when you buy alcohol on Drizzly or Instacart, the payment shows up as a specific retailer, right? Because the payment is transacted directly to the retail platform. And so if your brand is out of stock at the store that you're shopping from on Drizzly or Instacart, it's going to be out of stock on the platform as well. When Drizzly and Instacart integrate into one of these POS systems of a retailer, they actually need to get real-time insights into out-of-stocks at that retail store in order to know what's on the shelf. And that automatically populates their platform with those brands and whatever they have. And inventory shows up on the website. The interesting thing is that actually gives brands an opportunity not only to monitor out-of-stocks for sales on Drizly, but also gives them an opportunity to monitor out-of-stocks for in-store environments as well. Now, anyone you speak to says these platforms are really crap at actually doing that. At this point but it's easy to see how you know these integrations into these retail platforms are creating all kinds of opportunities to help brands actually drive in-store sales by minimizing their time out of stock. And again, that comes back to, holy crap, the person who visits Instacart or talks to Instacart suddenly learns that now they have a responsibility to go and work with their distributor and their sales team and do all these things to figure out how can we take care of out-of-stocks in a more timely way using this data I'm collecting from the e-commerce environment. That takes a ton of work. And it just comes down, again, to it's not only about sales. It's about all these other things that are transforming your business. And as a leader, you really do need to make sure that you're giving enough resources to your e-commerce-focused employees to be able to take advantage of, you know, hey, I think I can solve out-of-stocks for our in-store groups as well as our online sales at the same time. It takes a lot of work to do, but you want to give resources to it.

[00:37:12] Justin Kendall: We know that beer has lagged behind sales of wine and spirits in the e-commerce realm. How much of the opportunity for beer is tied to legislative changes?

[00:37:25] Bourcard Nesin: Are you talking about DTC specifically, or in general, is e-commerce hurting beer more than wine or spirits?

[00:37:31] Justin Kendall: I think DTC probably more so than e-com, but I feel like there's probably more of a tie there.

[00:37:39] Bourcard Nesin: So I think it all comes down to what for beer, your most important channel is grocery, right? And there's a ton of interesting things happening there. But a lot of times the legislation technically allows beer to be sold online, but like the retailer isn't allowed to use Uber to deliver it. Or, you know, there's a new law in New Mexico that said, you know, grocery stores can deliver beer using third parties if they have less than 10,000 square feet of retail space. And so then it's like, OK, so small grocers or bodegas can sell beer, but not the large retailers. And as we pointed out, beer really needs that grocery shopping trip to sell online. And if these large grocers, which account for the large, vast majority of these grocery store beer sales, aren't able to deliver beer, then it really hurts the beer category. So in that case, yes, when it comes to DTC, Specifically, I would say minimally because beer isn't economically conducive to DTC sales. It's not a profitable opportunity. It's a great way to work with some of your most loyal consumers and make sure that you can ship them their favorite brands when there is a new release or something and you can really drive engagement. But that's more of a brand building than a sales channel. it's just not really a legislative priority, I think. And if I was the BA or any advocate, it would be a nice to have in terms of DTC shipping across state lines. It's not going to be super important simply because there's a bunch of other stuff on the legislative agenda and you don't want to use your political capital to change DTC laws for a business that no one's going to make money on.

[00:39:19] Jessica Infante: Are there any states where any kind of online transaction to acquire alcohol is completely prohibited?

[00:39:26] Bourcard Nesin: I don't know that. I would guess Utah would be a good bet, if you ever wanted to guess. Delaware is also really tough on alcohol, a control state. New Hampshire isn't that bad. But again, it tends to be states with state-run liquor stores.

[00:39:44] Jessica Infante: There were so many legislative changes to what was allowed and what wasn't allowed during 2020 that I think, you know, I'm sure there've been some states where this opened and we missed it.

[00:39:53] Bourcard Nesin: I mean, if you look at where there were big changes, I mean, I think in the report, I had said like, there was like a maybe 10, 15% of the growth can be attributed to legislative change. A big issue is that legislative change just takes a long time to implement. So for example, Georgia allowed for alcohol delivery, which gave room for, you know, Drizly and Instacart to move into the state, and especially for wine and spirits. I think you could deliver beer then, but I'm not sure, I don't remember well. But each municipality had to legalize that on a municipal by municipal basis. And so that just takes a really long time to implement and not to mention all the complications of payment and all those things. As a brand, again, it's good to know and you should keep up with that. But for you, the guidance really is just the same. Make sure you have great distribution. Make sure you understand where your brand is being sold online and make sure that the content information you have there is accurate and up to date. Again, I was very surprised with how many brands kind of just assumed that Drizzly would do it for them. And Drizzly does. They just do a very bad job of it automatically because they don't know. They're going to have a guy who doesn't know anything about beer go in and create a program that scrapes that information off of some other platform or they won't do it at all. When I say Drizzly, I really just mean any e-commerce platform. I don't mean Drizzly specifically.

[00:41:18] Jessica Infante: Yeah, and I know in some of the interviews you conducted for this report, you talked to some pretty high up e-commerce executives at really large companies, which we talked a little bit about in the beginning, but.

[00:41:26] Bourcard Nesin: Yeah, I got a quote from ABI, Constellation Brands, Molson Coors, PBR. Oh, I didn't get a quote from PBR, but basically the three big beer companies in the US I got.

[00:41:37] Jessica Infante: And this quote that you had from Sarah Gautre, who's the director of e-commerce at Molson Coors, I thought was really interesting because it really shows how they're looking at what this channel can do to help the rest of the company across all of their channels. As Sarah told you, quote, from a supplier's perspective, if we can offer senior leadership visibility into out of stocks, measure the impact of digitally influenced sales and the incrementality of our retail media spend, we can unlock further investment in resources, technology, and advertising to support our customers and drive growth not only online, but across our entire business. So Molson Coors is really looking at what they learned from e-commerce and applying that across everything to IRL beer shopping. I hate myself for saying that. But yeah, like, I mean, this really seems like this is such a valuable tool that's really giving you really, really interesting stuff. What else did you hear from from other brands?

[00:42:32] Bourcard Nesin: The interesting thing is that this isn't for Molson Coors per se, but for basically all but one or two companies in the country, they have to fight tooth and nail, the e-commerce teams have to fight tooth and nail for every penny they get. One head of e-commerce at a large company basically said, it's like a zero-sum game. Anytime I want an additional headcount, I literally need to convince somebody in a senior position to take somebody else from another team. And so it becomes a very hard environment to actually take it. I pointed out earlier, like you get to, you know, do this marketing in new. There are all these new marketing opportunities. There are all these new ways to monitor out of stocks, to be smarter at spending money in digital advertising and retail media, which we should talk about and define retail media in a bit. But it takes a lot of time and it's a long learning process. And if you don't have the resources and the people there to take care of it, you never end up getting better at it. And then you end up just wasting a lot of money. And a good example of that would be, you know, if I'm a brand, I can promote my brands on platforms like Drizzly, right? I can give Drizzly $10,000 and say, hey, when somebody searches IPA, I want my brand to be the first one that shows up. The interesting thing is that it seems a lot easier for e-commerce teams to get that $10,000 to advertise on Drizzly than it is to get an additional headcount to update content on Drizzly. And so then you end up having like these organizations that end up spending a lot of money to send people to a website or send people to a product page that isn't up to date or might be out of stock. And so you're like, you're basically spending that money for what? Like to create a frustrating experience for the consumer. And so again, I think it just comes down to like, you don't need to, as a senior leader at a beer company or a craft brewery, you don't really need to think about spending those $10,000 until you have all that other stuff in place. Just a lot of frustration, despite all the growth in e-commerce teams and all the senior leaders talking about how big of a deal e-com is, it just seems like over and over again. Now the on-premises is opening back up. And e-commerce teams are like, the well's dried up, right? Now my leadership's like, yeah, we got to give more resources to the on-premises. It's like, yeah, but e-commerce is going to keep growing over the next 10 years. It's not going to disappear. So I think, again, if I sound like a broken record, it's because this is literally what I hear everywhere. This is just not enough resources for e-commerce teams, despite all of the growth in e-commerce people at alcohol companies.

[00:45:10] Zoe Licata: You see that getting better at all? Is there hope for it?

[00:45:15] Bourcard Nesin: I hope so. You know, it is really interesting. It seems like middle-sized companies were the ones who suffered the most, actually. There's this like really uncomfortable reality of being a mid-sized company in which you don't have like that, like, hey, Rick, do you want to take care of the income stuff? Because there's only five of us. Whereas a mid-sized company, you now have all these processes where you're like, okay, we have to, we have HR and we have like budgeting committees and we have all these like planning things. And so you have these institutional silos that kind of requires one team to kind of own something but you don't have money just to throw up problems like ABI or Constellation does and so what you end up having is just like caught in the middle where you just don't do enough and you can't really unlock and act quickly either and so you know I think they have the most trouble and and I think they've had the most trouble adding additional resources during the pandemic as well. I don't think it's getting that much better. I basically am every week going out and on behalf of e-commerce teams, speaking with senior leadership, trying to explain to them why e-commerce is not something that happened in 2021, but is going to happen, you know, more and more and more over the next decade.

[00:46:25] Zoe Licata: We talked about this a little bit and I have to, as the designated Gen Zer, I have to talk about this. But I mean, within your report, you noted that consumers are younger and by 2030, millennials and Gen Z will be 54% of those legal drinking age consumers. So how much of that like generational change is going to impact e-commerce and what people are going to have to be changing their business decisions around?

[00:46:55] Bourcard Nesin: That is my favorite question. Thank you so much. So interestingly, e-commerce growth is, to put it in the most crass way possible, old people die and young people become richer as they get into good paying jobs. Young people grew up with cell phones and shopping online. Old people hate it. And so really, if you look at in the report, there's this graphic which shows that 2020 was the first year in which millennial and Gen Z individuals will outnumber the number of boomers and the silent generation. By 2030, that's going to be three times more millennials and Gen Zers in legal drinking age. And so basically, as those young people get into, you know, start getting into their 30s and start having money to spend, they're going to spend a lot more money online. And so, you know, it's this incredible kind of march forward where you ask yourself, is e-commerce going to grow next year? Yes. Is it going to grow Over the next five years, yes. Over the next 25 years, yes. It's like one of those things where it's like, it's definitely going to keep growing. And so, yes, we saw incredible growth over the last couple of years. And yes, it's going to be a little bit slower now, but that inevitable march of generational change is going to drive e-commerce growth for a long time going forward. And I also just want to reiterate what I also said earlier, which is that don't you want to market to young people anyways? Young people shop online. So you get to target those people who could provide huge returns in terms of lifetime values by acquiring them online. And by the way, it's worth mentioning that if you acquire a customer online and they love your beer after they buy it online, They also buy it in store. It's not like the only time, like if they buy something on Drizzly, that they only buy it on Drizzly and they don't buy it anywhere else. It's not the way it works. If they like your brand and they discovered it online, they're also going to buy it in the grocery store when they go there in person.

[00:48:48] Justin Kendall: So this has been great, Burkhard. But what's maybe one thing from the report that you'd like to get out there that we haven't asked about?

[00:48:56] Bourcard Nesin: My favorite topic, when I say favorite, I say that deeply seeped in sarcasm is quick delivery, right? So all these apps that offer 15 minute delivery and other stuff. The most famous kind of quick delivery company is GoPuff. GoPuff bought Venmo, GoPuff bought Thicker Barn, and I think that's really cool to take all that crazy e-commerce money and buy what I would assume are profitable physical businesses. But the cool thing about GoPuff is they're actually I think the second largest source of beer sales in the U.S. online besides or third behind Instacart and Wal-Mart. They're surprisingly big. And I think their key there is they actually do serve that convenience channel really, really, really well. And why do they do that? They focus on getting stuff to you cold and focus on that younger demographic. They do sell a lot of crafts. They're a great partner to breweries. They sell a lot of hard seltzer. Again, just a function of their demographics. But I think there's a lot of people who go out and look at the other players in that world, you know, the gorillas and these other companies that are getting hundreds of millions of dollars in VC money. And they go, oh, you know, this is the next big thing. Right. And I think a lot of people are thinking, how does this make sense economically? And if you're wondering that, just know you're not alone. It doesn't make sense to me either, that there can be so many of those. 15-minute delivery people who likely just, you know, say that they have a micro-fulfillment center, but they actually just have like a bodega with a pile of crap in it with a couple things of beer here and there. So, you know, as exciting as GoPuff is, that doesn't mean every other company in the space is going to be successful. So, you know, if I was a brand, I'd focus on GoPuff and maybe DoorDash, but wouldn't feel like I was missing out too much if I wasn't getting a call with Joker or Gorillaz or one of those other 15-minute delivery companies.

[00:50:51] Jessica Infante: One of my favorite facts that I have encountered, you know, in the years that I have been doing this is that for a time in 2020, GoPuff's central Philly location was like the number one retailer of White Claw, which just says a lot about Philly, I think. Yeah.

[00:51:08] Bourcard Nesin: Or in Philly.

[00:51:09] Jessica Infante: No, like nationwide. I don't know how long it lasted, but it had that crowning achievement for a little bit. We had Randy Ornstein maybe on the front lines, I think with you too. You were there. We were there. Yeah. Gritty's hometown. What a place.

[00:51:25] Zoe Licata: When you have so many options like a GoPuff and DoorDash and Drizzly and then also focus on like making sure you have that grocery option too, like is it better for these companies to make sure they have a presence in all of these places or to have a focus on just a couple of them?

[00:51:43] Bourcard Nesin: You should always know where your brand's getting sold and if there's a bunch of different companies out there, then yeah, you should do it. Well, I mean, the amazing thing is, is that companies care a lot about how their brands present in retail, right? You think about, you know, the programming for your brand and you're like, no, I really need a great display. I really need to make sure that, you know. we present our beer in our image. Think about online, you can do that so much better than you could at a pharmacy or a convenience store or at a grocery store. You can actually tell your story in a meaningful way. And the more of that story you can tell, the better. And as I said, the online consumer is actually a lot wealthier and more educated than your average consumer. You could actually you know cater your digital content to that audience. So a lot of brands like copy and paste the beer label text onto the description. And it's like it doesn't make a lot of sense. It's not really explanatory. It's not helpful. So it makes a lot more sense for you to deliver that real like clear information you know. And so Yeah, put it everywhere, but if you have limited resources, make sure you're prioritizing either the platforms that get you the most eyeballs or the most sales or end the most sales, right? Because those are really where it's going to be important for you to, in a world of limited resources, focus your attention.

[00:53:05] Jessica Infante: One thing we haven't really discussed yet, but was really important to smaller craft brewers was at the brewery sales. Now, obviously that if you're, you know, selling beer at your own brewery, that's not flowing through, you know, the Instacarts and the Drizzlies and the DoorDashes of the world. But what do small producers need to know about using the intranet to facilitate these transactions?

[00:53:28] Bourcard Nesin: The funny thing is that I'd said DTC online sales don't make sense for breweries. That was specifically DTC sales that are shipped in the mail. If you're a brewery and you're doing DTC sales online, it's actually pretty good. I mean, the likelihood is that once somebody buys your beer online, they also give you their email. And that means you can send them information about your next drop. It means you can send them your new release. And for the most part, if you can contract somebody to do delivery, that's up to you. But to me, it's just a really nice and thoughtful way to serve your consumer who might be busy or whatever. So I don't think it's going to ever become the majority of any brewery's sales. But If you have a tap room and you sell four packs from that brewery, why not add an online environment and then add those people to your mailing list and then make sure that you're driving repeat purchases. And that does make a lot of sense. And that is still DTC sales, I must say. Direct-to-consumer is not synonymous with e-commerce or shipping or anything like that. If I go to a farmer's market, that's a direct-to-consumer transaction. It's just not necessarily the newfangled e-commerce version of it. Perfect.

[00:54:46] Jessica Infante: Yeah. I mean, I think those click and collect things online are really helpful for, you know, if you're out running errands and just want to pop in, pick up your beer and get back on your way.

[00:54:56] Bourcard Nesin: It's not going to be a huge deal, but honestly, for most breweries, but e-commerce sales or e-commerce functionalities are commoditized at this point. Like there are a million people who could solve that for you almost instantaneously. So there's absolutely no reason why as a brewery, you couldn't spend an afternoon and set up an online shopping place. There's absolutely no reason that a brewery couldn't do that. And I think it's, it's a loss if you don't, to be honest, because it's free money.

[00:55:26] Jessica Infante: Fantastic. Well, Burkhardt, congrats on this report. I know you worked really hard on it. It's really interesting, really comprehensive, and I am really glad that you shared it with us. So thank you for that.

[00:55:38] Bourcard Nesin: And I should say, I think I'm doing a Brewers Association session, webinar thing on the report. And I should say that I'm a man of the people. And despite the protests of my superiors, I will make this report public on the 21st. So reach out to me before then, or after that, just go to research.robavank.com to find it. It's a lot of information and I interviewed a lot of people that deserve to see the results of their contributions. And a lot of craft brewers also helped make this report possible. So thank you guys as well.

[00:56:14] Jessica Infante: Awesome. Look at you, so thoughtful. Well, guys, I think that's a perfect place to leave it. Ricard, thank you so much for joining us as always. Thank you to our one-man audio team, Joe, for making this palatable to the ears. Justin, Zoe, you guys are awesome. Thanks for being here. If you enjoyed the podcast, remember to like, rate, and review it. If you want to shoot us a note about what's been going on in this space, it's podcast The Brewbound.com. And make sure you subscribe on Spotify to get reminders when new episodes come up, which is just about every Thursday, sometimes sooner. Yeah, and we'll see you guys next week.