Navigating the move to online retail
The challenge of COVID-19 has accelerated the move to online retail, but navigating consumer demands, appropriate platforms and stockist relationships as breweries digitise can be a minefield.
Recently Carlton and United Breweries faced criticism from publican Rob Comiskey, owner of major Queensland venues Eatons Hill and Sandstone Point Hotels as well as numerous bottle shops. He accused the brewer of undercutting its own stockists by listing on third party sites and cutting prices on CUB-owned platform BoozeBud.
“They’re the wholesaler, the manufacturer and now they want to be the retailer. It’s pure greed,” Comiskey told 7News Brisbane.
CUB responded saying that losing a pub customer would be very disappointing and that itcontinues to work with the Comiskey Group.
“Like most businesses in a rapidly evolving market CUB constantly reviews its business strategies, including ecommerce. We are assessing our ecommerce strategy during the second half of 2020 to determine whether it’s right,” a CUB spokesperson told Brews News.
CUB went on to say it had already ruled out pursuing a direct-to-consumer subscription model, but the dispute highlights the difficulty of getting the balance between manufacturer and venue or bottle shop right, especially as brewers expand into digital platforms to compete for an ever-greater slice of a finite pie.
It’s a multi-faceted issue. Big brewers and smaller independents face different challenges, and brewers are still learning to get it right.
Flood of online platforms
During COVID-19, online alcohol platforms flooded the market as businesses attempted to capitalise on a captive home-based audience caused by lockdown restrictions.
Third party or aggregate platforms such as Get Drinks Delivered, Bopple, Hello Drinks and Amazon’s Beer Wine and Spirits platform have sprung up both during COVID-19 and prior providing overwhelming choice for consumers, and brewers have seen them as a chance to get some of their core range beers to a wider audience.
Sam Holloway, Professor of Management and Entrepreneurship at the University of Portland and creator of online curriculum Crafting A Strategy, said that while COVID-19 forced craft breweries into unfamiliar online territory, it also opened up new markets and customer segments previously not on their radar.
He said that innovations in sectors as disparate as airline tickets sales, grocery shopping and investments had forced incumbent firms to create new purchasing experiences, as consumers increasingly expect to complete purchases via mobile.
“Craft beer was late to this game because we all loved the experience of visiting taprooms… and while people like me still love taprooms for these experiences there are other segments who prefer to bring that experience home,” he said.
Holloway explained that this could also provide a competitive opportunity for independent brewers to level the playing field with major brewers and their “craft” acquisitions, many of which already had platforms set up.
Swinburne University of Technology lecturer Dr. Jason Pallant agreed and said that the trend is a smart move for the whole industry.
“If we look across the broader retail service sector, we’ve seen everybody going through the same evolution, and the same speeding up of things that were already happening over COVID-19.
“What it comes back to is that this is how consumers shop and how they evolved – they see an example and then they expect that.”
But signing up to third party platforms or launching your own direct-to-consumer model can have its pitfalls, as New Zealand’s Garage Project found out when it moved into the Australian market with its own platform.
Direct-to-customer – a natural evolution
If moving to more diverse sales models is inevitable and has only been accelerated by COVID, then it’s up to brewers to traverse the space and keep customers and bricks-and-mortar stockists happy too.
Dr. Pallant said that for smaller brewers, different channels, from retail stores and venues to aggregate or brewer’s own websites, satisfy different consumer demands which can work in a brewer’s favour.
“To me they serve very different needs and purposes, and actually the overlap and competition is not as much as we might think,” he said.
“It doesn’t change stockist sales that much, allowing more hardcore fans to support that brewery directly.”
Pallant said that it was a balancing act, but it’s a space that brewers need to be in.
“You don’t want to miss out on anyone that has evolved to become an online shopper, you’ve lost them if you can’t offer that.”
But as the Comiskey example has shown, one of the main issues with diversifying your sales platforms is pricing.
“It is an important discussion for people to be having, as we don’t want to anger stockists as they’re such a massive part [of a brewery’s trade],” Dr Pallant said.
While it’s important to get this balance right, it might not be a dealbreaker for breweries wishing to support their venues and other stockists whilst also opening another channel for themselves.
“As we’ve seen in fashion, if I take Nike as an example, you can buy the brand direct or from Footlocker and usually they’re the same price.
“The view that you can’t sell direct because you have stockists, that’s a view that evolves over time. It will become more commonplace in brewing – it comes back to this idea that this is where the consumers are so we have to all be doing it.”
Diversifying your offering so limited releases and alternative offers are available on your own direct-to-consumer channel will reduce crossover and cater to a loyal fanbase, while a shifting mainstream audience will be serviced on other platforms and outlets.
“Someone coming directly to you, they know you and your beers so you need to offer your core range, but they are also interested in stuff they can’t get elsewhere – experimental sours and that kind of thing.
“So that’s a very different proposition to the couple of parts of a range that will be in a mass stockist.”
Having a smaller section of the core range on major platforms will allow people to be exposed to the brand, before they go on to explore the brand further on a brewery’s own platform.
“The best way is a combined strategy where things support each other,” Dr. Pallant said.
Accessing new customers
Dr. Gavin Northey, lecturer at Griffith University, said that the online trend will also bring in new consumers to the growing industry.
With Australia’s changing demographics comes a focus on ‘premiumisation’ trends implying people are drinking ‘less but better’, as well as major influence from Asian cultures which, he explained, tend to be more modest drinkers as well as more technologically-engaged.
“[We are seeing the influence of] cultures which are way more accepting of e-commerce.
“That changes things for a brewery. If that’s the case then the younger generation might not be the types to go to those live venues bars and clubs, they may still be going to restaurants, but they might get the types of people more willing to use their mobile phone to buy something.
“It’s a social change that we’re seeing happen in the developed world, and one that’s important for breweries to keep at front of mind.”
However there is a danger of fragmentation with so many different platforms – sending customers to multiple different platforms can induce fatigue in buyers – a ‘death by choice’ situation which may lead to one final ‘winner’ in the vein of Uber or AirBnb. But Holloway was not concerned.
“[A] benefit of fragmentation increasing is that innovation and access to market increase for more firms and more diverse firms,” said Holloway.
“Consolidation has historically ruled many industries – as soon as new sources of value are created, incumbent firms swoop in and roll-up the industry to use scale advantages.
“While these may drive prices down they also remove the number of choices a consumer has. In craft beer in particular choice is king. We’ve created a very promiscuous consumer base who expects to try something new every time. These new online channels really capitalise on promiscuity and fragmentation.”
Independence and major platforms
One of the hallmarks of Australia’s craft beer scene has been its focus on independence. But when an online platform like Amazon (which has similar attributes to corporate brewers in that it is owned by a foreign entity with profits going overseas and pays minimal tax in Australia) features independent companies, it can problematise the concept of independence.
Dr. Pallant suggested that the question really centres on what a brewer values in its business and brand.
“It is a tough one and I think it depends. There are two ways you can look at it. Independence implies that no one is controlling what the brewery does, in terms of telling them that they must produce this because it is the most profitable or sells the most, whereas distributing through Amazon is just a way of people being able to access your products, so there is a slight difference but I can understand, it comes back to branding and positioning.
“If your positioning is ‘we’re for our local community’, be it the Mornington Peninsula, or Byron or whatever, it’s a bit strange to say we are selling through this conglomerate.”
However these ideological concerns often play second fiddle to paying the bills.
“From a practical standpoint, you are potentially losing out on customers. You don’t have to be on a platform like Amazon but you need to be offering something so people who are not near you can access your products if that’s the direction you want to go,” Pallant said.
He said part of independent beer’s allure is that it’s harder to come by, and Brisbane’s Range Brewing is one of those that is benefitting from working the supply and demand equation.
“At the start it was hard to find a Stone & Wood Pacific Ale, for example.
“Now they’re everywhere, so it’s less exciting for me to see a Stone & Wood because I can access it all the time, but from a mass distribution point of view it makes sense.
“It comes back to the goal, and the branding and positioning of that brewer. Are they just for locals and accept that that will limit their ability to get their beer to people, or are they saying we’ve got great craft beer and everyone should be able to access it, in which case it makes sense [to list on a bigger platform]?”
Listen to Sam Holloway on the Beer is a Conversation podcast where he discusses independence, growth ceilings for craft beer and more.