With summer pretty much ruined for the foreseeable future thanks to extreme heat, wildfires, drought, and other climate-induced dangers that seem to be getting worse rather than better, I’ve been thinking nonstop about the future of both our planet and our industry.
Spoiler alert: I’m not optimistic about either.
That being said, my lack of optimism about the wine and spirits industry is based entirely on my position as a professional, rather than a consumer. Things will be fine for those of us who like shopping for booze, but I don’t a see a bright future for independent retailers in particular, or specialty retailers who rely on their product knowledge for their position.
Here’s why:
Across the board, the internet has made subject matter experts less and less relevant. Now, with the rise of social media influencers, critics and experts have never been less important. An amateur Instagram account that whores itself out for free samples, and generates 100k+ followers while doing so, is now more important to suppliers than most retail buyers. Why? Because few retailers are actually out there driving sales and doing their own marketing to consumers. As a result, retailers are becoming less important to suppliers and producers. They’re simply the point of sale, nothing more.
In addition to the loss of status for retailers, third-party marketing sites like Drizly are moving retailers further and further away from the customer. When you purchase alcohol from one one of these sites, you’re still purchasing from a store like Mission, you just don’t know it. More importantly, the store doesn’t know you either. That means the third-party marketing company controls the relationship with the consumer, which is more valuable than anything. I know small retailers in LA that are 100% dependent on these companies at this point, facilitating sales that they have no control over, losing both consumer awareness and margin in the process.
With product selection at an all-time high and no end in sight to the amount of new brands entering the market, customers have never had more selection than right now—which means they’ve never been more discerning, as well as overwhelmed! While alcohol sales continue to grow overall, the amount of sales happening at any one location is thinning out.
As more customers begin to treat bottles of alcohol like a one-time only vacation (meaning: “I’ve already been to Paris, so next year I’m going to Greece”), brands have to create new adventures as fast as they can to get repeat business. While it may work for the brand, it’s exhausting the capacities of small retailers who wind up with dozens of specific batches and barrel numbers that don’t sell evenly.
I don’t see consumer interest in whiskey slowing down anytime soon, but I do see consumers narrowing their focus. That means the boutique side of the market is becoming saturated.
I believe that boutique burnout is what led to record sales this year for LVMH, Diageo, Campari, and other huge drinks companies that have grown like Amazon during COVID. As of this morning, Diageo is up 16%, posting sales of $17.7 billion.
Why does that matter?
Find me a small, independent retailer that makes a healthy profit selling Diageo products. With Total Wine, Costco, and other big box stores offering low prices based off volume purchasing and scale, there’s no way they can compete.
That’s not a problem so long as enough consumers are willing to support alternative brands or pay a higher price now and again, but that’s not what’s happening right now.
Fear often leads us back to the familiar. With inflation, COVID, social violence, drought, anxiety over finances, and a general malaise about the workplace from our country’s working class, it’s no wonder the most familiar brands are thriving.
-David Driscoll
