The Next Normal: Driving Successful Beverage Alcohol Marketing Operations in 2021

A Shock to the System

Bars, nightclubs and restaurants aren’t the only places to feel the impact of the pandemic. Even the traditional role of distributor/wholesalers within the three-tier system has been impacted by new market dynamics.

Today, distributors are reacting to off-premise growth with a laser focus on delivery and restocking, leaving the promotional burden squarely on the shoulders of suppliers. This new dynamic means the marketing professionals at breweries, distilleries and vineyards must find new ways to be relevant through on- and off-premise promotions and marketing execution.

According to Barry Marek, former SVP of sales at Fetzer Wines:

The distributors can’t really do a lot right now. With everything that’s going on at retail, they’re essentially limited to just taking orders and delivering product. They’re building [fewer] displays. The retailers don’t want them [distributor reps] in the store any longer than they need to be in the store, so their access has become much more limited. Getting anything new going is really difficult. The impact of the distributor, which has been the primary passthrough from supplier to retail, is really becoming less important through all this. What’s really important is what [suppliers are] doing to influence the consumer more directly. So [the] direct-to-consumer business is more important than it ever was before.

In addition to extra responsibilities, marketers must also contend with a faster pace of change. Last year, a marketer might have months of lead time to plan the launch of a new product. Today, marketers must plan, execute and deliver premiums and branded materials that distributors will accept and support. And they must do it all on increasingly tight timeframes. In some regions, on-premise promotions are already in demand; in others, marketing remains off-premise.

Marketers must juggle these constantly shifting requirements, which is why partnering with a third-party provider with a built-in nationwide supply chain and experience working with all types of promotions makes sense. Especially when many agree that the industry will likely never go all the way back to pre-pandemic business as usual.

The Perfect Pitch

Marketers understand that they can no longer rely on the standard catalog of promotional material that has served them well, season after season. They must find new ways to allocate budgets, reach audiences and, most importantly, secure slots in distributors’ monthly business objectives (MBOs).

According to Josh Halpern, chief sales officer of FIFCO USA, the standard catalog is gone. “We need to really start to ask, what will happen in the future and how will consumers’ spending habits adapt?” he notes. The key is understanding where consumers will buy wine, beer and spirits, and what types of activations will impact their purchase decisions.

Such understanding begins with data and trend analysis and looking at marketing budgets in new ways to fit the “next normal.” In many cases, capital must be redeployed toward marketing items for off-premise promotions. It’s critical that marketers rely on tools to capture consumer data and turn this knowledge into actionable promotional planning.

Determining how to shift from glassware and neon lights (on-premise) to branded wearables or backpacks (off-premise) is on the minds of marketers today. And while data can support these critical decisions, an efficient supply chain ensures the production and delivery of these new promotional materials meet today’s abbreviated marketing timelines.

Speed and efficiency in promotions can make or break a distributor pitch. Today, suppliers must provide the marketing execution, so simplifying the campaigns, focusing on one or two well-timed promotions versus a full year’s worth, and making it seamless for distributors to take on a product are critical elements of any presentation.

“Everyone who is smart is simplifying,” says Dave Duffy, chief marketing officer of Stem Ciders. “We’ve got to get back to simplicity in everything we do including very clearly defined, differentiated marketing programs.”

Veteran marketers like Duffy agree that distributors don’t want 12 months of programming for a brand or brands. They simply won’t provide the MBO slots for this type of proposal. For the programs that distributors do accept, suppliers should maximize the impact of limited funds by providing 10 high-quality items rather than 25 average items. Savvy supply chain expertise, deep knowledge of retail environments and a data-driven view of how to reset the promotional catalog can help suppliers claim those elusive MBOs.

Helping Marketing Budgets Go Farther

Simplicity goes beyond marketing plans. Distributors simply don’t have capacity for excess promotional inventory so they want to see a commitment to smooth operations: How do suppliers reduce space required for inventories? Save on shipping costs? Minimize waste? Maximize labor?

Every dollar is critical, so distributors want to be assured that suppliers allocate their budgets to important initiatives and consumer-focused promotions, not logistical hurdles or fixing supply chain inefficiencies. Outsourcing these “burdens of execution” can turn non-working dollars into working dollars that drive revenue for suppliers and distributors alike. For suppliers, more efficient execution of marketing promotions drives top-line volume. It also impacts bottom-line profit by reducing the total cost of ownership of those promotions.

Automation of administrative tasks, logistical challenges, technology issues and inventory management are more efficiently handled by a third-party expert rather than by marketers who should be dedicated to brand building.

For example, marketers may want to explore new ways to tie their marketing initiatives to macro-trends such as the “better for you” movement that emphasizes so-called healthier alcoholic drinks such as the proliferation of non-alcoholic beer brands. (Every major brewery is expected to introduce non-alcoholic beers in 2020/2021. In addition, this ongoing “better for you” trend is expected to drive growth at a CAGR of 18.3% through 2022.³)

Smaller suppliers, in particular, must prove that they have the necessary consumer demand and volume potential at the retail with timely and relevant data. “The only reason distributors are taking anybody who is unproven is that there is already chain placement, particularly off-premise,” Duffy notes.

Accelerating Operations

As the beverage alcohol industry changes in response to the pandemic, with off-premise consumption rising significantly, many consumers have embraced e-commerce. In May 2020, online sales of alcohol through retailers and new digital platforms like Drizly were up a full 339% from the previous year.⁴

To maximize their efforts in the brick-and-mortar world, these same suppliers are rethinking the three traditional vectors of marketing promotions: Speed, cost of goods and cost of freight. In particular, speed is more critical than ever. Because of today’s uncertainty, traditional ordering windows for bi-annual, trimester, or even quarterly promotional demand planning will quickly evolve. Suppliers must be able to operate in 30- to 60-day windows to avoid material waste and missed opportunities.

According to Josh Halpern of FIFCO USA, speed is now the most critical vector:

In the past, most companies would say, ‘Speed matters less because I’m going to place my order and I want freight to not be more than X percentage of the cost of the good. Easy to manage.’ I think you will see companies now say, ‘There’s going to be a cost indifference, because now I’m concerned with ordering 30 days out versus 3 to 6 months out.’ They’re going to need to focus—and spend—more on the speed vector, which previously was the least important vector in order to stay flexible in ever-changing market conditions.

With one- and two-month timeframes becoming the standard, suppliers can turn to external merchandising partners with built-in supply chains to meet deadlines and reduce costs.