After Covid-19 boosted online beverage alcohol sales, growth is expected to normalize as omnichannel and on-demand operators gain share, according to a new report released Thursday from the IWSR Drinks Market Analysis.
The long-term outlook for online alcohol is overall positive, but with e-commerce weighted towards premium products, inflationary concerns may also temper short-term growth.
The e-commerce channel has significantly matured in the U.S. since before the pandemic, shifting from predominantly direct-to-consumer (D2C) sales of wine to diverse categories and omnichannel, mainly due to large investments from the country’s major supermarket chains. Value growth in the U.S. reached nearly 80% in 2020 and 15% in 2021.
“Covid-19 boosted consumer awareness of the channel, and retailers and brand owners have invested heavily in the space. Certain states also eased previous restrictions on online sales, while in others, technological solutions offered a way to legally circumvent such barriers,” said Guy Wolfe, head of e-commerce insights for IWSR Drinks Market Analysis in a statement.
But as on-premise bounces back, alongside a shift back to traditional brick-and-mortar purchasing, more moderate expansion is reflected in forecast growth rates, with e-commerce sales expected to record a value of +11% from 2021-2026, in the U.S. Online purchases still remain a small part of the overall market, accounting for 3.5% of total U.S. alcohol sales.
The skew to more premium products and pricing online may inhibit short-term growth due to high inflation and rising living costs, although over the long term the premium segment is likely to be better insulated. While premium-plus products had a 28% value share of total beverage alcohol sales in 2021, online purchases made up 49%. The ratio is expected to rise to 54% in 2026.
Platforms like Speakeasy and ReserveBar have aimed to differentiate themselves by providing premium shopping experiences. But some affluent customers are reducing purchase frequency or quantity in order to avoid down-trading, according to the report.
The online beverage alcohol landscape is also likely to look different in the next few years: omnichannel and on-demand operators are expected to gain share at the expense of D2C.
The shift will be of particular benefit to beer and spirits. Spirits’ share of e-commerce is relatively modest due to restrictions in some states, but online sales of spirits are expected to rise +17% between 2021 and 2026, just ahead of beer, cider and RTDs. Whisky, which accounts for about half of online spirits sales, and premium agave spirits will spearhead future growth.
The beer, cider and RTDs categories have previously underperformed in e-commerce thanks to a combination of factors including shipping costs, slimmer margins, mainstream pricing and wide availability in physical retail. But that may change with the rise of omnichannel.
“Omnichannel caters to stocking up, with larger total basket sizes and click and collect options reducing delivery fees,” said Wolfe.
Growth will also be driven by rising sales of no-alcohol products, which the report highlighted as a strength for beer, share gains by RTDs, and online investments by craft brewers.