Many longtime stable and large industries have been completely disrupted by the advent of the smartphone, GPS technology, streaming services and the web/apps. The most oft-cited is Uber disrupting the highly regulated taxi industry, dollar shave club disrupting the razor industry, iTunes/Pandora/Spotify disrupting the music industry, Twitter/FB/Craigslist disrupting the newspaper industry, and Amazon disrupting -- well -- almost every consumer goods industry.
The alcohol industry has largely remained unaffected. The wine industry has a robust direct-to-consumer web business via common carriers, but beer has largely escaped that due to the fact that beer is heavy relative to its price, making it more difficult to make money considering shipping costs.
Enter localized home delivery.
IF YOU CAN'T BEAT 'EM, JOIN 'EM. Most of the disruptors in an industry barge in and shoot from the hip. Uber is the prime example. They would enter new markets without consulting with local regulators. They'd ask for forgiveness, not permission. That often backfired (as it did here in San Antonio, where the City Council moved to ban Uber for a year until they negotiated a peace. But Uber is now taking a more traditional approach to new markets, meeting (and working with) local regulators, hiring seasoned lobby pros, and learning how to play politics just like any other big company.
There are several alcohol home delivery tech companies popping up including Minibar, Thirstie, DrinkFly, and Saucey. In the cities they service, you go to their website or more likely their app, you order the booze you want, and it's delivered in one or two hours. But perhaps the largest -- or at least the most well-funded of these (raised $18 mil), is Drizly. And the young 20-something founder of Drizly, Nicholas Rellas, figured out right out of the gate that you can't fight City Hall when dealing with the alcohol industry, particularly in Boston where even happy hours are illegal. As he puts it with some hyperbole, "You don't disrupt a $100 million dollar industry run by 20 families."
"Instead of acting as the great disruptor we could accelerate the existing industry," says Nicholas. "We started with the Mass. Liquor Code….. and dove into the law to expand our knowledge of how the system worked."
NO LICENSE REQUIRED. Instead of getting a license, Drizly opted to work within the three-tier system. Drizly contracts with liquor stores with home delivery in each market who provide the product and deliver it. In its simplest terms, the Drizly app simply connects the consumer with the nearest delivering liquor store and passes off the order to them, so Drizly never touches the product and therefore doesn't require a license. Each account carries at least one Drizly-provided iPhone with a driver's license scanning ability so that they can monitor underage access.
Drizly makes money by charging the liquor store a stair-stepped monthly fee based on sales through the Drizly app. Other apps sometimes charge a percentage of each order. In our research, we've found that all the major booze delivery apps follow this model of working within the three-tier system.
"Regulation had been the barrier," says Nicholas, "but mobile has changed that. Not in a way that deregulated the industry, but mobile devices now allow companies to co-exist with these complex regulations.
"It's rare that all participants of an industry can find value in new technology in a way that no one is disrupted, in a classic sense, but that's just what we've done."
We note that Drizly has inked a "strategic alliance" with the Wine & Spirits Wholesalers of America, as well as a development deal with MillerCoors.
WE TEST ONE OF THESE APPS. To test out an app, BBD ordered beer and liquor from MiniBar in San Antonio. Setting up an account was easy: Just enter your name, address, and credit card info. I ordered the products and hit send. I got a confirmation email. About 15 minutes later, MiniBar emailed me and said one product I had ordered was out-of-stock and recommended a similar product. I emailed back yes. About 45 minutes later, a deliveryman from a liquor store about 5 miles away appeared at my door. I tipped him and collected my goods. (Ed. Note: He did not card me. While I get that I'm 47 and look even older than that, I would think MiniBar and apps like it would demand drivers scan everybody's ID. I believe Drizly requires it). By the way, A-B brands are all over the MiniBar website.
WAITING ON THE WORD GO. But there's also an 800-pound gorilla waiting to pounce when they get the chance - Amazon Prime. Prime, where available, is Amazon's same-day delivery service of consumer product goods. The service has expanded to include to delivering alcohol in three markets: San Diego, New York City and its hometown Seattle. And you best believe they're looking to add to that list. So far, Amazon is following the Drizly model: partnering with local package stores to deliver the "last mile." My fear: That Amazon gets licenses in major markets as a retailer and attempts to circumvent the three-tier system. But so far, so good.
Why is this important? As Amazon Prime Now and Drizly and others get into the same-day delivery game, beverage alcohol will play a role. And how the industry and regulators handle this new phenom will be important in determining how it fits into our three-tier system.
One final thing: ABI yesterday just purchased a home delivery website called BeerHawk in the UK. www.beerhawk.co.uk So they clearly see the value in this space.
BEERNET SIDEBAR: Video: The lengths people will go to get a beer. (Drone delivers a beer to neighboring farm): https://www.youtube.com/watch?v=J2ks4ZnVLgs&feature=youtu.be
This isn't the first time somebody's made it rain beer. Back in 2014, Wisconsin's Lakemaid Beer used drones to deliver beer to ice fisherman. But the FAA saying "the delivery operation violated its ban on using drones for commercial purposes" quickly shot down the seemingly foolproof plan. Even though Lakemaid hadn't charged any money on these test runs, "the publicity garnered from the deliveries still qualifies them as commercial use," per Atlantic. Regulations regarding commercial drone operations should be finalized by June of this year, per Fortune.
A-B STRIKES A DEAL IN OK: KEEPING CURRENT BRANCHES
Anheuser-Busch has reached a deal with Sen. Clark Jolley, the senator behind the bill that would prohibit A-B from owning branches beyond five years, that would allow the company to keep its distribution business in the state if the lawmaker's proposed state question on alcohol reforms passes.
Eric James, senior director of sales and marketing for Anheuser-Busch Sales of Oklahoma, told NewsOK.com: "Not being forced to sell our business is something that allows us to continue to work with stakeholders and the Legislature to help with modernization and give consumer what they are looking for," James said. A-B supports the sale of cold, full-strength beer in grocery and convenience stores, he said.
Under the deal, the Legislature would still would be able to revisit the issue in two years in order to force A-B to sell its distribution business in the state in one to three years if SJR 68 is approved by voters in November in the form of a state question.
JANUARY TAX PAIDS DOWN 1.3%
Yesterday, the Beer Institute reported domestic tax paid shipments for the month of January was down 1.3% for the month to 12,756,000 barrels against an easy -6.5% comp last January. But one month of shipments doesn't mean much, so don't touch that dial.
LATEST NIELSEN: BEER POSTS ITS WORST SET OF THE YEAR
I know, I know. It's just a week of data. But after a sound performance in last week's Nielsen data, most likely due to the Super Bowl timing, beer is back this week with its lowest post of the year with the post Super Bowl blues. The latest Nielsen data stretching to February 20 reveals overall beer volumes to be down 3.3%, that's low enough to bring YTD volumes in the red as well, down 0.3%.
Every segment is at least a few points behind their YTD volumes. FMBs still hold the title of the top performing segment and no other segment is really close to taking that designation away. FMBs are up 13.7%, and the next highest growth in volume comes from imports, up 6.2%. Super premiums follow, up 3.5%; and craft as defined by Nielsen (which may exclude some flavored brands included in others) is up 2%.
MillerCoors volumes are down 4.9%, and YTD its volumes are down 2.1%. THe brewer saw its category share decline 0.5 points. Miller Lite and Coors Light are down, 3.3% and 3.4%, respectively. This tumble has dragged their YTD volumes into negative territory as well. A week ago both of the brand's YTD volumes were up low single digits. Coors Banquet, however, continues to be a bright spot for the brewer, up 6.9% in the latest set and up 8.9% for the year.
Consequently, Coors Banquet is one of their three brands in Nielsen's "top ten growth brands." The remaining two are Redd's Green Apple Ale, and Henry's Hard Orange.
Anheuser-Busch volumes declined 5.7% in the latest data and are now down 2.6% YTD. The brewer experienced the largest loss in category share down 1.3 points.
Bud Light and Budweiser have been off to a slow start in 2016 and they didn't pick up any slack in this latest set. Bud Light is down 7.6%; now down 4.2% for the year. And Bud is right there with it down 7.5% in the latest set and down 3.9% for the year.
Michelob Ultra and Stella Artois continue to be two of the company's most reliable sources of growth, up 18.4% and 18%, respectively. As such, both of the brands are in Nielsen's "top ten growth brands" along with Best Damn Root Beer.
Crown's volumes grew 13.4% in the latest data and up 15.7% YTD. Constellation continues to outpace all major brewers in total category share, up 1.0 points. The Modelo franchise is up 21.4% and the Corona franchise is up 8.6%. Constellation holds two - Modelo Especial and Corona Extra, up 21.8% and 8.9%, respectively.
BIG WINNERS SO FAR IN THE PAST YEAR: KINKY BEVERAGES?
Bump Williams of Bump Williams Consulting, citing the 52 week period ending January 24 from IRI, has found that "Founders Brewing Co. and Firestone Walker Brewing Co. both experienced growth of over 70% in their sales vs. year ago and are practically dead-even when comparing absolute sales levels. Another vendor that jumps off the page is Kinky Beverage Co. which has seen their sales nearly quadruple over the last 52 weeks." Ed. Note: Kinky makes Kinky FMBs targeted toward upscale women.
"While a lot of these gains can likely be attributed to the rapid gains in Distribution coverage across the US, there is still a lot more room for companies like Kinky Beverage Co. to grow in this area as the current levels of CWD (category weighted distribution) still sit well below the leaders in the FMB segment," writes Bump.
Until tomorrow, Harry
"An inconvenience is only an adventure wrongly considered; an adventure is an inconvenience rightly considered." - Gilbert Keith Chesterton
---------- Sell Day Calendar ----------
Today's Sell Day: 1
Sell days this month: 23
Sell days this month last year: 22
This month ends on a: Thurs.
This month last year ended on a: Tues.
YTD sell days Over/Under: +1
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