By Andrew Kaplan
Craft spirits companies are forging close relationships with loyal consumers and opening up new markets to find more of them, thanks to omni-channel distribution strategies.
An omni-channel distribution strategy for craft spirits is an approach where a brand coordinates all its sales and engagement channels—on-premise, retail, direct-to-consumer, and digital—so they work together as a single, connected system rather than separate silos.
For example, a consumer might begin their relationship with a craft distillery by ordering a whiskey online for direct shipping, and then later seek out that product in a brick-and-mortar retailer or perhaps a bar, thus driving demand for more traditional distribution.
“The past six to eight years have seen so many more options opening up for consumers when it comes to where and how they buy your product,” says Mike Price, chief commercial officer for the Nevada-based Frey Ranch Distillery. “We want to be available everywhere that they could possibly buy us.”
Omni-channel comes as much of the alcohol industry weathers challenging times, leaving craft spirits companies searching for new ways to keep their businesses growing.
Another craft spirits company, independent bottler Lost Lantern Whiskey, has successfully used omni-channel to open up new markets. As a result, today Lost Lantern’s sales are split 50/50 between online and brick-and-mortar.
Nora Ganley-Roper, co-founder and general manager, says Lost Lantern is able to track where its online sales are coming from and then target markets through brick-and-mortar distribution to build on that.
This is one reason why the San Francisco Bay market has been one of Lost Lantern’s most successful markets today, despite the company being headquartered across the country, in Vermont.
“Going through distribution is expensive because you need to make sure it sells, and knowing that there is demand there has been very valuable,” she says.
An Increasing Trend
Recent reports have uncovered a surprising trend amongst younger consumers: They actually like to occasionally put down their phones and venture outside to the local store or mall to do their shopping.
In fact, a recent report by VML titled “Trailblazers of Tomorrow” finds: “Businesses must prepare for an omni-channel future, with digital and physical playing key roles. Omni-channel retail must therefore sit at the heart of growth strategies moving forward.”
The craft spirits industry has been late to the party when it comes to omni-channel. Estimates are that only around 4% of total spirits are sold online today, with only around 15% of craft spirits companies selling via their websites.
“With all the different state laws, e-commerce [for alcohol] is very complicated, and really took some people much smarter than myself to figure out how to activate it and how to reach the majority of states,” says Price. “It’s still almost impossible via e-commerce to reach all 50 states.”
But Price says today, Frey is able to reach consumers directly in just over 30 states. It does this by working with e-commerce enablers like the online marketplace Flaviar. That company recently combined with Speakeasy, whose centralized fulfillment model allows brands to sell directly to consumers online while complying with the three-tier system. Brands are given the opportunity to own the data and analytics of their target customer.
“E-commerce is probably not going to sell more than traditional distribution, definitely not anytime soon,” points out Josh Jacobs, Speakeasy’s co-founder and CEO. “But if a brand like Frey Ranch can invest in driving e-com sales, then they’ll likely see more traditional distribution sales and more pull through their traditional distributor in other states as well.”
Another company facilitating omni-channel is Big Thirst, which allows craft distilleries to seamlessly process online orders through their website and fulfill them through a retailer network to consumers in more than 40 states.
“What we’re doing is combining the opportunity for online ordering and shipping with online ordering for delivery or pickup from a physical retailer near you and a marketplace,” says the company’s CEO and founder, Matt McGinnis. The company also allows consumers to click on the brand’s ads, either in a newsletter or somewhere else online, and buy the brand that way.
McGinnis says what makes his solution truly omni-channel is that instead of a potentially out-of-date store finder on a brand’s website, Big Thirst’s partner technology from Pour Now identifies where the buyer is logging in from and then presents them with various options: buying from the brand directly and having it fulfilled and shipped to them through Big Thirst, or from a local retailer that has the product in their inventory in real time if the craft distillery has distribution available in that state.
Also, Big Thirst aggregates all the data about purchasers so craft spirits customers and retailers can access it via a dashboard. “So our clients can get the best information about what sales they’re making, from what platform and which store.” This also allows customers to see any holes in inventory and thus boost sales.
Forging Close Relationships with Consumers
A foundational component of a successful omni-channel strategy for craft distillers has proven to be e-mail newsletters. These give the most loyal consumers the lowdown on anything from upcoming special releases, updated news about the company—like awards—to upcoming events. Online subscription clubs have also proven extremely popular with fans.
Ganley-Roper says Lost Lantern’s newsletters regularly feature news about special releases, for example. “If you have a special release and you’re building buzz and excitement and that sells out quickly, then that makes people more excited to be engaged next time and builds our newsletter, which then drives more sales. There’s a definite FOMO (Fear Of Missing Out),” she says.
“We think the direct connection to the consumer is so valuable,” she continues. “And the great thing is our evangelists move from online into stores, which helps with the other part of our business, getting those traditional distributors, getting those store relationships. It’s a whole picture win-win that way to have the end customer feel so connected and engaged with what we’re doing at Lost Lantern.”
Price says Frey Ranch currently has 40,000 subscribers to its online newsletter, which it fittingly calls “The Dirt” in keeping with the company’s farming background. This subscriber list is interconnected with Frey’s e-commerce strategy through which they were able to recently move 200 bottles of their latest offering in just 15 minutes.
“You just can’t do that anywhere else because we’re talking directly to the consumers that we know have an interest in our brand,” Price says. “If I tried to take those same bottles to the traditional channels, it’d be like a needle in a haystack.”
And yet, the online part of an omni-channel strategy requires a lot of time and energy to build, explains Ganley-Roper. “Convincing someone to buy something online is more difficult in the alcohol space,” she says. “I think that people will continue to gravitate more and more towards that as there are more interesting things available online, and people remember it as a solution, but the assumption currently is that people have to buy in-store, in person.”
A 360 Perspective
A section of the VML report predicts that social commerce (via social media and influencers) will become a big driver of sales for brands in the next 10 years. Though that would also be more complicated for alcohol companies, given the demographics of users of social media.
But it’s not that different from the brand evangelists that Lost Lantern has gained from its omni-channel strategy. “The beauty of this kind of approach is that we have built relationships with our customers both online and in person. So, I now know our best customers from online, and I’ll see them when I’m doing in-store tastings in the Bay Area of California or at a festival, and they have built that rapport with us,” says Ganley-Roper.
“I know them by name. They know us, and building that understanding of who they are and what makes them tick, and just that engagement is personally such a pleasure, because you actually get to see the person who’s enjoying your product. And for Lost Lantern, building word of mouth is the goal. And so it’s one of those things where, when it works well, it works from a 360 perspective.”
And the VML report also had some other advice that will probably come as no surprise to most craft spirits companies: “Through whatever channels consumers shop, they need their purchases to arrive fast,” it says. “It’s vital, therefore, that logistics is a key strategic pillar of any online or omni-channel seller.”