Digital is going to play a pivotal role in the drinks industry in 2019.
Contending with declining overall consumption [1], slowing on-trade [2], rising competition [3], price sensitive consumers [4] and mounting regulatory pressure [5], drinks companies will have no easy ride this year.
If everyone in England drank within the recommended government guidelines, there would be a 40% drop in value sales [6].
That’s unlikely to happen but drinks firms are responding as more drinkers opt for lower alcohol choices. No and low alcohol products are flooding every category. It’s in the industry’s interests to keep us drinking, whatever the ABV.
The global drinks industry is worth $1.3 trillion and is expected to grow in value by around 3.7% each year despite pressure on volume [7].
Brands need to fight for share and attention in a highly competitive market. Digital can enhance the drinking experience, help your brand stand out, reduce cost to serve and better predict and adapt your product to meet changing demands.
Research by Accenture suggests that food and drink companies could unlock an estimated £56 billion in value or 12% of the industry’s gross value added (GVA) over the next decade by harnessing digital technologies [8].
If you fail to embrace digital, you’re likely to fall behind the competition, lose market share or haemorrhage profitability.
Here are my 5 themes for the drinks industry in 2019 to stay on top of digital:
1. Data: the ingredient that counts most
There’s an ingredient that you might not think of adding to your drinks yet it’s the most important of all – data. Be it data about your product, its contents and provenance, or data about your customers, their attitudes, actions and desires, you can’t perform without it.
Product data
There’s greater consumer demand for transparency in what goes into drinks.
Alcohol labels are currently exempt from EU rules to reveal ingredients and nutrition information [9] and Scotch producers only have to reveal the age of the youngest whisky that makes up their blends.
Some producers though, like Compass Box, have been breaking with tradition.
Consumer trust was dented after a recent investigation found that more than a third of vintage Scotch whiskies were fake. The researchers used a carbon dating technique to determine the real age. Could digital put such tests directly in the hands of consumers?
Blockchain is being used by one distillery, giving buyers the confidence that the product they receive is exactly what the makers claim it to be.
In wine, Coravin has provided the technology to extract samples or glasses without opening the bottle. Could future models allow us to test a wine’s authenticity and quality without physical intervention entirely?
Customer data
The EU General Data Protection Regulation (GDPR) has forced marketers to get a greater handle on customer data. Consented engagement with drinkers can enable brands to harness rich consumer insight, target more accurately and cost effectively and nurture greater loyalty, spend and advocacy.
Last year BrewDog pledged to give away one million free beers to people who signed up to receive communications. Although pitched as an anti-advertising drive to convert craft beer lovers, the mechanic was conveniently timed a few months before the GDPR deadline to grow their consented database of fans.
Drinks brands should use every opportunity to sign people up – be it website visits, interactions on social media, entries to competitions or at physical events. Are there ways you can recruit people in bars and supermarkets too?
In 2019, data will grow its power. Product and customer data bring new wealth when shared.
2. Trading up experiences
Consumers are not just trading up their drinks, they want a premium experience too.
Digital is enabling this – enhancing physical experiences and creating entirely new digital ones.
In pubs and bars, NFC-connected glasses enable mobile ordering and Augmented Reality(AR) adds to the theatre of the cocktail experience.
Yet it’s in the rise of home drinking where digital really steps in.
Diageo’s thebar.com has helped millions craft cocktails at home and now extends to the Amazon Echo Show.
Talisker goes further with immersive brand storytelling on Alexa-enabled devices to enhance the at home drinking experience.
An enticing interactive AR experience in partnership with Shazam was launched last year with The Glenlivet Code:
Beyond content, Pernod Ricard’s Opn brings a connected cocktail library to the home through an ecosystem of devices, applications and services:
In beer, there have been many attempts to enhance the at home experience.
LG’s HomeBrew, being unveiled at CES 2019, is probably not the answer. Its capsule-based craft beer making machine aims to simplify and digitise the process of brewing your own beer but I’m not sure it will appeal.
In 2019, digital can transform your product and brand experience, wherever that is.
3. Every relationship matters
It’s going to be a tough year for consumer spending. People will probably go out less and spend less. But now is not the time to cut trade relationships, it’s a time to strengthen them.
Supporting on-trade and off-trade as well as direct consumer relationships through digital is essential for success in 2019. Diageo’s Bar Academy, for example, provides online training and education for the on-trade.
In 2019, every relationship matters.
Seedlip, the world’s first distilled non-alcoholic spirit, grew from direct-to-consumer foundations but is now widely available in premium on-trade and off-trade outlets.
Drinks brands are also looking to more digital partnerships for distribution.
Coca-Cola is now available on Uber and Lyft rides, Starbucks can be gifted on WeChat and Bowmore has released a whisky that’s exclusive to Amazon.
Amazon has recognised the value of its data to advertisers and has developed a data sharing platform. With data being more widely collected, will we see further insights from retailers and bars feeding back to brands?
In 2019, no single approach to market will win. Multiple and bidirectional digital interactions will enable brands to stand out and ride out a challenging year.
4. Liquid personalisation
Plenty of drinks brands now allow you to personalise the label. You might experience a personalised online experience too with a website or mobile app responding to your particular tastes and past behaviour. Now brands are starting to personalise the liquid product too.
In a rather crude way, Coca-Cola’s Freestyle vending machines let you mix drinks perfectlyto your preferred taste. More impressively, the robotic bartender Nino serves up custom cocktails in seconds.
When it comes to a custom brew or spirit distillation it’s a bit more complex.
IntelligentX beer uses Artificial Intelligence (AI) to brew each batch, using customer feedback to drive machine learning algorithms, matching what consumers want more quickly than anyone else can.
Johnnie Walker’s My Edition enables people to purchase whiskies that are matched to an individual’s flavour preferences. Despite the feeling of a custom match, there are in fact only six varieties of the product.
We’re unlikely to see truly personalised bottles come to light in 2019 but there’s certainly a shift to personalise beyond the label and the screen.
5. Continual innovation maintains salience
Physical innovation in drinks is costly.
Johnnie Walker recently introduced a Limited Edition variant in association with Game of Thrones called White Walker. It quickly became an Amazon Best Seller, reaching #1 in Grocery in the UK. But it soon fell off the top perch and slid down the Sales Rank to #53 in less than a month. A Black Friday price promotion provided a very short-lived rise in the ranks before its fall continued:
You can get a temporary spike in sales if you discount but consumers don’t buy when the price rises back up and it can create long term damage for the brand.
White Walker clearly attracted interest, but it didn’t last. Is the cost associated with developing and launching new products like this worth the sales they generate?
Digital can help drinks brands create the interest of NPD (new product development) or price reductions without significant impact on cost or time.
BrewDog has a culture of continual innovation with much of it being digital or having a digital component. It’s video on demand service The BrewDog Network is a great example.
Diageo uses digital innovation with many of its brands too. Examples include Gordon’s #YayDelay and Bailey’s Send Me a Sample.
One-off digital innovation can trigger interest but in 2019 brands need to adopt a culture that nurtures continual digital innovation to protect long-term sales, brand value and profitability.
Drink to that! 🍻🥂
2019 will be a pivotal year for drinks brands. Embracing data, digital experiences, relationships, personalisation and continual innovation will position you resolutely to weather this turbulent year.
Are you prepared to fully harness digital for your drinks company? Learn more about Rewrite Digital’s audit to elevate your digital maturity and effectiveness.
References
- Global decline in per capita alcohol consumption (Harpers, 2018); 57% of adults in Great Britain drank alcohol in 2017 vs. 64% in 2005 (ONS, 2018)
- UK on-trade volumes drop by 6% in 2017 vs. 2016 (Liberty Wines/CGA, 2018); On-trade share of all alcohol volume sales was 32% in 2016 vs. 47% in 2000 (Drinkaware)
- 64% rise in UK breweries 2012-2016 (CAMRA, 2017); 107% rise in UK distilleries 2013-2017 (WSTA, 2018)
- Consumers are holding back or buying different brands rather than pay normal retail price (Rewrite Digital/Amazon, 2018)
- 20% of UK adults drink more than recommended guidelines (YouGov/PHE, 2018)
- Alcohol sales would fall by 38% if everyone in England drank within guidelines(University of Sheffield/IAS, 2018)
- Global alcoholic beverages market valued at $1.3 trillion in 2017 and expected to reach $1.6 trillion by 2024 (Zion, 2018)
- Food and drink companies could unlock £56 billion over the next decade by harnessing digital technologies (Accenture, 2018)
- Alcoholic beverages containing more than 1.2 % by volume of alcohol are exempted from the EU Regulation on food information to consumers (European Parliament, 2011)
This post originally appeared on LinkedIn.
