Online sales of beverage alcohol reached $6.1 billion in 2021 and have more than doubled their share of all off-premise dollar sales since 2019, according to a new report from Rabobank beverages analyst Bourcard Nesin.
E-commerce sales of beer, wine and spirits accounted for 4% of total category off-premise sales in 2021, up from nearly 1.9% in 2019.
“Although beverage alcohol remains unpenetrated relative to other edible grocery categories online, it has made up significant ground over the past two years,” Nesin wrote. “Online alcohol sales have grown 131% since 2019, outpacing growth of overall grocery sales during that period by a wide margin.”
The onset of the COVID-19 pandemic in March 2020 forced consumers to stay home from work, school and social activities, and many turned to the Internet to shop for basic needs, including alcoholic beverages. Since 2019, overall online sales of alcohol have increased 131%, Rabobank found.
Of the $6.1 billion Americans spent on alcohol via the Internet, $3.8 billion went to wine, $1.3 billion to spirits and $960 million to beer. Similarly, wine has far greater penetration in the e-commerce channel, with 8.6% of its 2021 sales happening online, a +0.1% increase from 2020. The beer category’s online sales also increased +0.1% from 2020 to 2021, with 1.4% of all beer category sales coming through e-commerce. Online sales’ share of spirits dollars declined -0.3% in 20201, to 3.4%.
Each beverage alcohol category’s e-commerce sales vary by channel, which Nesin counts as online grocery, online alcohol marketplaces, online operations of licensed specialty retailers, and direct-to-consumer (DTC) online wine.
Online grocery retailers – in which Nesin includes the online alcohol sales of traditional grocery chains such as Kroger, Albertsons and Publix, as well as online retailers such as Amazon and Gopuff – hit alcohol sales of $1.6 billion 2021. Of that, $678 million was wine, $615 million was beer and $332 million was spirits.
The channel saw explosive growth (+238%) in 2020, and maintained those levels to grow +9% in 2021 as shoppers became accustomed to online alcohol shopping. However, online grocery alcohol sales began to slump as vaccines became more widespread, and declined -5.8% over the last three quarters of 2021 compared to the same period in 2020. Rabobank predicts the category will grow 15% in 2022.
“Considering the massive growth rates of 2020, however, moderate growth in 2021 and 2022 is an incredibly positive outcome,” Nesin wrote. “It points to the stickiness of the alcohol category online and is a testament to the infrastructure retailers and alcohol brands have built over the past two years. Even if sales won’t return to their pre-pandemic growth rates until 2023, the long-term outlook of alcohol in the online grocery segment is brighter than ever.”
At +238% in 2020, alcohol sales through online grocery have far outpaced the growth of overall grocery sales, which reached about 100% in 2020. Nesin attributed alcohol’s growth to the channel going through a “massive expansion” of stores participating.
“Prior to the pandemic, most grocery retailers willingly ignored the alcohol category,” he wrote.
Between 2019 and 2021, Walmart added alcohol e-commerce to 1,300 stores, increasing its share of stores offering the service from 18% to 47%, according to Rabobank.
Online alcohol marketplaces such as Drizly and Instacart posted the biggest growth in the pandemic era – +274% year-over-year growth in 2020. These marketplaces are not licensed retailers, but offer an online platform to connect consumers with licensees.
“The growth dynamics for marketplaces over the last two years are very similar to online grocery,” Nesin wrote. “The pandemic drove a massive uptick in consumer demand for online services, which in turn led to massive growth in brick-and-mortar stores searching for an e-commerce solution, which in turn added thousands of retailers to marketplaces’ retail network.”
Instacart, which offers grocery services as well, and Drizly, which focuses on alcohol and was acquired by Uber in a $1.1 billion cash and stock deal in early 2021, are the largest in the category. Their share has increased from 76% of all alcohol marketplace sales in 2019 to an estimated 86% in 2021.
Wine ($627 million) and spirits ($418 million) both dominate beer ($234 million) in share in the marketplace channel, which Rabobank expects to increase sales +15% in 2022. Marketplaces’ interest in adding convenience stores to their platforms “offers a glimmer of hope for the growth of beer sales in the channel,” Nesin wrote.
Online sales at licensed specialty retailers – in which Nesin includes national and regional liquor chains such as Total Wine & More, BevMo! and Binny’s Beverage Depot and the e-commerce arms of state-run liquor retailers in control states – increased 151% in 2020, but declined a bit in 2021 as consumers returned to shopping in person.
Total sales hit $2.2 billion in 2021, half of which was wine ($1.14 billion), followed by spirits ($777 million) and beer ($276 million). This channel has “always been the largest, most mature channel for online alcohol sales,” and includes wine e-retailer giant Wine.com.
Wine has had a decade-long head start in e-commerce, and online sales in the wine DTC channel reached $1.6 billion in 2021. The category includes online wine clubs ($846 million) and the e-commerce operations of individual wineries ($791 million).
“While DTC shipments are a huge opportunity for spirits, the same is not true for beer,” Nesin wrote. “The simple truth is that beer is incredibly heavy and incredibly cheap compared to wine and spirits. The average bottle of wine shipped DTC is worth nearly $40 and weighs around 2.5 pounds. A very high-end 4-pack of craft beer in 16 oz. cans costs $20 and weigh 4 pounds. It is just not economical.”
Alcohol Companies Expand E-Commerce Teams
Rabobank found the average size of e-commerce teams at alcohol producers has increased 117% since 2019, when the financial services firm last published its findings.
Bev-alc producers that already had sizable e-commerce teams grew their teams 62% on average since the onset of the pandemic, but e-commerce teams at the lower three quartiles of companies increased by 230% in the same time.
These teams “are not merely driving online sales,” Nesin wrote.
“They create media that drives awareness,” he continued. “They tell stories that deepen the connection consumers have with their brands.”
Additionally, e-commerce teams have the ability to peer into account-level data and tie it to media investments.
“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,” Sara Goucher, Molson Coors director of e-commerce, told Rabobank.
As younger millennials reach their prime spending years and more of Generation Z reaches legal drinking age, “they will push a dizzying share of sales online,” Nesin wrote. Millennials and Gen Z overtook Baby Boomers and the Silent Generation by share in 2020. By 2030, Rabobank projects that Millennials and Gen Z will account for 54% of the U.S. population, and Boomers and the Silent Generation will account for just 20%. Bev-alc producers should prepare accordingly, Nesin wrote.
“E-commerce will be the No. 1 driver of industry growth over the next decade and a critical component of brand-building, awareness and trial, both online and in-store,” he said. “Even as the pandemic wanes, companies that fail to invest proactive in their e-commerce teams will struggle to remain relevant and retain market share.”