Thought Leadership 2020: What Now?By Cesium Group
Dozens of chief executives, business owners, buying bosses and marketing experts opened their laptops and joined a Zoom call on 18 June, hosted by the Cesium Group, to air their thoughts on the future of the drinks industry, and help each other to find a best route to thrive in the new normal.
State of play
When it comes to actual sales, the results are mixed, depending on the market, according to one chief executive, as countries forced on-trade venues to close for months on end, particularly in Europe, which has cut off a key channel for many producers.
“There has been virtually zero trade on some of our brands,” they said, “in particular in the on-trade and the wholesale channel.”
Travel restrictions have left a gaping hole where sales of more expensive, premium wines and spirits in duty free shops should be. “Travel retail is an important channel selling premium-value products.”
Lag time is a big concern for large producers, because shipments kept going into countries that were closing down. They believe there will be an even greater impact on sales in the second half of 2020.
“There will be winners and losers, certainly, in this crisis,” one wine-business owner said. “It’s about gaining share today then sustaining it.” While parts of the UK trade are opening, venue owners are in crisis. Many have burned through whatever cash they had on rent and bills, and don’t have the means to support staff from 4 July.
One contributor said those that can open don’t know how they’ll earn enough money in a socially distanced summer. As a result, brewers don’t know how much beer on-trade partners will need.
“We have to make our decisions about four weeks before a customer wants to order.”
Some venues won’t reopen at all, which means suppliers lose key customers. One director noted he had 700 on-trade customers, and seemed certain some would not be back in business soon.
Though the e-commerce sector has revelled in rising sales, but some are struggling to meet demand One CEO said it has been “an interesting journey in the past few months”. The company’s premium spirits sales rose, and customers now buy far more per transaction than before. Retailers with an online platform may want to consider stocking “large-format brands and magnums that can help with that kind of frequent purchasing,” the CEO said.
However, retailers who are only just starting to scale up their online offering face challenges of their own.
“Online is incredibly expensive to run,” said a contributor. “I don’t think anybody would have planned to grow their business fourfold overnight because it’s difficult to resource and to fund, but it is a great opportunity in lots of ways.”
Companies that are agile and can redistribute staff from areas that are struggling and place them in digital-first roles will be the ones that reap the benefits, as one industry director found.
“We always knew it had potential, but at the time, we didn’t have the resources or the capability to unlock that. So earlier this year, we recruited e-commerce experts, and we set up a small working party, dealing with the customer.”
Retail bosses have seen a dramatic change in how much people spend and when. By and large, customers are visiting shops much less frequently, but when they do, they’re stocking up.
“We need to settle on a view as to whether this is going to last and if it is, there will be some structural changes that we’ll need to make to our ranges,” said one contributor.
With demand outstripping supply for now, promotions are on ice. One good example is Champagne. Sales of Champagne plummeted at the start of lockdown in March and April, but appear to be returning to normal despite no price reductions.
“People are prepared to buy at full price at the moment as opposed to buying Champagne on promotion,” said a director. Festivals Hundreds of live events, such as Glastonbury Festival and Ascot have been cancelled or brought online. One marketing director spoke about a product promoted in partnership with a festival which became a virtual, live-streamed event last month.
The brand built a “gaming engine” that allowed people to walk around the “festival” online, engage in gamification and learn more about the company. Some brands are selling cocktail kits in the run-up to virtual events. The marketer said it lets people feel “more physically involved.”
The lockdown has led to a flurry of software launches designed to streamline operations and reduce contact between customers and staff. Live chat features on company websites, one CEO said, can “reduce the gap between customers and the company” and build loyalty.
One director pointed out that 60% of their company’s e-commerce sales now go through a mobile app.
As sales have been disrupted, budgets to pay staff have been stretched. Most firms have furloughed workers, and some have also started to cut jobs to stay afloat, but they are also determined to keep talent motivated and committed to coming back.
One managing director, tasked with building a team over Zoom, said the pandemic has altered what the firm looks for. Previously, the interview would have focused on the candidate’s skills, but now their personality is also a top priority.
It may seem counterintuitive to develop new products now, but some have prioritised innovation. One drinks industry CEO said that developing new products will be “absolutely critical” in the coming months, not least because it will help to support the on-trade. “The trade is looking for innovation because they’re looking for things that are going to make them more unique,” they said.
But innovation doesn’t need to be restricted to what goes on the shelf. “I don’t think consumers are going to go back completely to their old shopping habits,” one speaker said, saying they are now more likely to use multiple platforms to buy what they need. Suppliers will need to innovate on their supply chains and routes to market to keep up. “We’ve got to find a better way of getting product from its manufacturing source to its end use,” they said.
Adam Keary, UK MD, Camden Town Brewery; Alexei Rosin, UK MD, Moët Henessy Europe; Andrew Day, CEO, MMI.LC DUBAI UAE; Charlotte Jefferies, CEO, 31Dover; Chris Milton, sales director, Thatcher’s Cider Company; Cristian Lopez, corporate export director, Concha y Toro; Daniel Showering, owner, Brothers Drinks Co; Elizabeth Newman, category director – BWS, Sainsbury’s; Gordon Dron, CEO, Proximo; Hugh Sturges, MD, Jeroboams; James Kowszun, COO and group finance director, Bibendum Wine; James Sutcliffe, marketing director, Monster Energy; Joseph Walsh, head of Europe, Distell; Luke Maga, MD travel retail, Distell International; Neil Jardine, MD, ILLVA Saronno Holding; Pietro Mattioni, global commercial director, illy Coffee; Tommy Danvers, creator, 808 Whiskey