A recent craft spirits survey found that direct-to-consumer shipping generated an average of nearly 40% of total craft distiller sales- for those able to take advantage of the channel- in 2020 [see WSD 03-31-2021]. It's clearly a channel that's become increasingly important for the craft spirits industry, and indeed was a topic that we kept coming back to during a panel discussion at the recent WSD Summit.
The panel included: Margie Lehrman, ceo, American Craft Spirits Association; Tom Mooney, ceo & founder, Westward Whiskey; and Matti Christian Anttila, founder, Grain & Barrel Spirits.
"I think we'll look back on 2020 and really see this as the turning point for that [DTC] channel for the spirits industry," said Matti. "I think that will be one of the biggest things that will come out of COVID for our industry, is just having a viable direct-to-consumer channel."
Tom agreed, saying: "I think that's one of the interesting things about 2020 in general, that we all know what it felt like to be in 2020, but I think as the dust settles or smoke clears, or whatever metaphor we want, we'll realize that it was an awful year to live through, but it was a foundational year in terms of beginnings - whether it's for us at Westward or for all of us as a craft spirits community, for for the beverage alcohol industry as a whole, that we're going to trace back to 2020."
The expansion of DTC and e-commerce "wouldn't have happened as quickly as they did or in the way it did were it not for that crisis," Tom added.
DTC CHANNEL AS A POINT OF ENTRY. Westward actually launched its own DTC program last year.
At the start of 2020, the distiller's revenues were split pretty evenly between tasting room visitors, on-premise, and off-premise. "Pretty much in a matter of days, the first two-thirds went away, and we were left in a really interesting place where we could either curl up and hide under the desk and cry or completely reinvent who we are," said Tom.
Fortunately for Westward, their home state of Oregon legalized direct shipping in the state, and the distiller began shipping to Oregonians by the end of April. "That then was backed by a digital ad buy. We'd never done anything like that. If you'd asked me a year ago, 'Can you meet someone, who's never heard of Westward and never tried it, and get them to buy a $69 to $99 bottle of whiskey without ever trying it or even seeing the bottle?' I wouldn't have thought that was possible," he said.
"One of the big learnings and what became one of the big drivers for our business was it can be done," said Tom, adding, "Most of the people who are in the brand, most people who have a bottle of Westward at home today, learned about it online, and most likely had it shipped to their house. It's a remarkable change in paradigm about how to build awareness and trial."
Tom pointed out that their DTC program led to greater sales growth at retail, rather than detracting sales from the channel. "We found that DTC was a great way to bring people into the brand, but it's much better for the brand to scale by making that traditional wholesale healthy as well," said Tom. "In the end, what would have been the traditional business for us grew by over 100% over the last few months of the year. Then we were able to add to that DTC more as a marketing vehicle or a point of entry."
Grain & Barrel views DTC similarly. "The DTC piece is a really nice thing to have, but we really look at it as saying it's great to drive trial, especially when you can't do it in person and maybe give people access to the product in some markets where they might not be able to find it at retail," but "at the end of the day, the core of the business is going to be through wholesale generally."
"I think the way we see it is it could be potentially an on-ramp for the wholesalers to also know what products are working," added Margie.
BRAND BUILDING IN NEW WAYS. At the onset of the pandemic, Matti said he wasn't too worried about their flagship brand, Dixie Vodka, because of its strong off-premise presence, but he worried about their whiskey brand, Chicken Cock. The whiskey is certainly premium, starting at $60 and going up to $300 a bottle. "I really wondered whether something that definitely wasn't as much of a staple, that was more of a luxury item, would be able to overcome the challenges of the pandemic," said Matti.
But the brand ended up growing 250% in 2020. "It was all driven by digital."
Moreover, Grain & Barrel launched a new brand in 2020, High Goal gin. "Normally we would be pretty hyper focused on establishing flagship accounts in both the on-premise and off-premise, but what we're doing [instead] is it's really heavy DTC," said Matti, "and that's affecting where we're spending, so it's a lot more on digital advertising, a lot more through Facebook, Instagram." That's allowed them to get more information about their consumers straight from the source, rather than only relying on retailer partners to provide feedback.
He continued: "Even though [DTC] won't necessarily be the biggest driver of our sales, it will be a great tool for us as we launch the brand and really get to know how it performs when out in the real world. And that's been a big change, and I think it's going to really influence how people launch products and really taking cues from the other parts of CPG that maybe weren't necessarily top priority for spirits companies."
Indeed, that direct line to consumers through digital connections has proved invaluable for Westward as well. Pre-pandemic, Tom said the company knew "next to nothing about who actually goes into those accounts and buys our brand." But in the COVID environment, the distiller had to "rebuild our brand in the other direction, by engaging directly with consumers, then finding ways to point them toward retailers and other places where they could enjoy the brand."
"And so we understand our brand so much better now than we did a year ago, and we try to act on that in a number of ways," said Tom. For instance, they plan to still offer virtual distillery tours.
"Look, nobody needs another Zoom call when we can finally all go out and have a good time, but we shouldn't just lose a lot of what we realized works," he said. "I think we've learned how to do things differently, permanently. That doesn't mean we won't welcome the return of things we've always enjoyed and know works, but we've just got a lot more to work with in the toolkit than we had before or than we realized we had before."
