2020 is here, bringing with it a brand new decade and an opportunity to reflect on the trends that will shape the beer, wine & spirits industry over the next year (and beyond).
Here are 5 critical trends and predictions from 3×3’s team of experts:
1. THE HARD SELTZER CATEGORY WILL ENTER A NEW KIND OF GROWTH PHASE
2019 was the year of seltzer domination. 2020 will be the year of seltzer maturation (a different kind of category growth).
What do we mean?
Hard seltzer is unlikely to achieve the same mega, meme-fueled growth rates that it enjoyed last summer, but there’s no doubt it will continue to trend upwards as the category cements its place as a year-round staple and reaches news customers.
“Growth” in 2020 also implies new brands from new players. Think Bud Light Seltzer — which raked in $5 million from their high-profile Superbowl campaign featuring Post Malone (relative to Truly’s $9.2 million and White Claw’s $24.2 milion) — as well as Corona Seltzer and Molson Coors’ “Vizzy”.
These major manufacturers are gunning for a piece of White Claw’s pie, which was the fastest growing brand in the 3×3 Retail Network last year. Even as White Claw and others lose some market share to these new entrants, the overall category will grow in size.
Alongside entirely new brands, expect new formulations from the existing players. Truly, for example, recently launched a hard lemonade. These products will attempt to turn seltzer enthusiasts into brand loyalists as new options hit shelves and the market gets more competitive for the first time.
Finally, we predict that “crafty” seltzers will emerge in 2020. Well-known craft brewers like Two Roads and Wild Basin are already slated to launch their own products. Plus, we’ll likely see seltzers that focus on healthy / organic ingredients, higher ABV, and other attributes that appeal to a niche, but growing set of customers. If you’re a retailer that has done well with a curated craft beer lineup, consider adding these emerging offers into the mix.
Over time, hard seltzer could experience the same kind of craft renaissance that struck beer — a few major national brands account for the bulk of volume (White Claw, Bud Light Seltzer, etc.), while the remaining share goes to a diverse, experimental array of smaller craft seltzer brands.
2. BEER WILL CONTINUE TO INNOVATE AROUND WELLNESS, SIMPLICITY, & NOVELTY
“Wellness” has been trending across the food and beverage world thanks to younger generations of consumers who are more health-conscious.
This trend caused many in our industry to predict that low-and-no alcohol beverages would take off in 2019. Some were even concerned that certain segments of millennials would quit drinking altogether.
But there was no booze-pocalypse last year. Quite the opposite.
Top sellers like White Claw and even Twisted Tea are far from alcohol-free. In fact, they are as, if not more alcoholic than beer.
Thus, Seltzer’s impact on our industry goes beyond the eye-popping sales statistics — it also nuances our understanding of how “health & wellness” intersects beverage alcohol.
Instead of low-to-no ABV, the key to seltzer’s appeal seems to lie in the simplicity, novelty and “health-forwardness” of the brands and ingredients.
Hard seltzer typically boasts a low calorie, low carb and low sugar count. Other FMB innovations, like hard coffee, boozy tea and kombucha, emphasize similar “nutritional benefits” that signal as better-for-you to the health-conscious (but not necessarily sober) consumer.
They’re easy to drink, easier to justify, crisp, refreshing, novel and just as effective as beers.
So, in 2020, expect beer brands of all shapes and sizes to double down on their innovation efforts. We’re talking brand new and often health-forward flavored malt beverages that take seltzer as their inspiring success story and delve deeper into other niches.
CBD and vitamins & minerals could play a bigger role, as will transparency (think ingredients / nutritional labels that will be used to market a product’s simplicity / “wellness edge”).
3. DIRECT-TO-CONSUMER SHIPPING IS ON THE COME-UP
In the age of e-commerce, it was only a matter of time before DTC shipping came for beverage alcohol. And it looks like that time is finally arriving.
In 2019, U.S. wineries shipped more than $3.2 billion worth of wine directly to consumers. Modern wine clubs (Bright Cellars, Winc, Vinebox) are going strong.
DTC delivery gives consumers wider access to more interesting wines, whether they’re buying directly from a favorite winery across the country or getting a curated shipment from a wine club.
And in 2020, thanks to shifting state legislation and evolving consumer preferences, DTC could see bigger growth beyond wine. Patrón, which started selling its Tequila through Instagram Story ads last year, expects e-commerce to represent 20% of its business by 2030.
But, while DTC growth is all but certain over the next year and beyond, it doesn’t mean the end of real-life retail. DTC represented just 10% of the market in 2019, and last June’s Supreme Court ruling leaves a lot on the table for states. As laws shift, some states could entirely ban DTC alcohol shipping while others open up their borders to all.
Store owners should use this transitional moment to prepare.
Think: what does DTC offer the consumer? Convenience, certainly. Selection, in some cases. But what DTC fundamentally lacks is experience, expertise and discovery.
So make these qualities your mantra. Differentiate. Give consumers a reason to close their laptop and walk into your store.
The best way forward is developing an expertly-curated product line-up and a smart, customer-driven in-store experience. Promote your industry knowledge and taste-maker status, and build an inventory of varied and interesting options to hone your competitive edge against the simplicity offered by DTC.
4. HIGH STAKES TARIFF DECISIONS WILL LOOM LARGE (AND HIT HARD)
“Worst case scenario, importers will give up on big wine producers in the EU, particularly in France, and we’ll lose our connection to those wines. Shelves could be empty of European wines. That will limit choice — you won’t even have the opportunity to pay double for a product.”
– Jeff Nedeau, 3×3 Principal Sales Executive
In October of 2019, the U.S. imposed the first of a potential slew of tariffs on European goods — a 25% tax that applied to most kinds of wine imports from France, Spain, Germany and the UK.
This tariff has hit the industry hard (particularly many independent retailers).
One data source shows that exports from France dropped 44% in value between October and November of 2019. Increased wine prices in stores are also causing drastic shifts in sales.
Store owners are feeling the impact on inventory. Importers have been hesitant to place orders until heftier tariffs are off the table, as they could be suddenly forced to pay the higher duties.
Which brings us to the will-they-won’t-they story of 2020: a 100% tariff on nearly all wine made in Europe.
Late last week, the U.S. Trade Representative’s office soothed concerns when they released a statement saying they would not raise the 25% tariff — for now. And earlier this month, the U.S. de-escalated a separate retaliatory threat of 100% tariffs on French sparkling wine.
While this concession should bring a sigh of relief, the industry remains on edge: if another conflict should arise, will wine and spirit imports be on the chopping block again?
This looming question should incentivize smart, proactive research into domestic alternatives, like American Single-Malt whiskey and wines from the West coast or Finger Lakes regions (or even South America).
Retailers, distributors and importers should continue to work closely and with a lot of trust. Consider this article from Seven Fifty Daily about how to get involved in advocacy efforts. Building strong relationships now will help should tariffs increase or reappear in the future.
5. CONSEQUENTLY, THE INDUSTRY WILL EXPLORE EMERGING WINE FRONTIERS
“Among millennials, I have heard more interest in natural wines, organic wines, pet-nats, and orange wines than I’ve ever heard about any type of wine besides rosé.”
– Conner Downey, 3×3 Sales Operations Manager
In light of the existing 25% tariff, domestic wines are poised for growth this year. Varieties like Cabernet Sauvignon and Cabernet Franc are coming back into focus for consumers. Franc, especially, is seeing a resurgence in the U.S. by way of New York state wineries in the North Fork and Finger Lakes regions.
Here, we can also point to Stags’ Leap Cabernet Sauvignon, a premium brand that saw significant growth within the 3×3 Retail Network from 2018-2019. The Napa Valley brand could see continued growth as consumers shift toward traditional Old World varietals produced domestically.
Also on the rise: low-intervention (sometimes called “natural”) wines, which have unconventional flavor profiles and are made with simpler techniques than mass-produced traditional styles.
They check a lot of boxes: for consumers, finding a natural or biodynamic wine produced with minimal intervention is an adventure (and tasting it, often an experience). We know that younger buyers flock toward experiences over products, and these wines deliver both.
For retailers, these wines are a good inventory investment, in part because of the regions that produce them. Many hail from the U.S. (Nathan Kendall in the Finger Lakes, NY and Ridge Vineyards from Sonoma County, CA), while others are sprinkled around the world in countries not slated for retaliatory tariffs (Australia, Chile).
Spend some time researching these options if you’re a wine-heavy retailer.