The old adage that necessity is the mother of invention was certainly accurate over the past year for brewers, as they sought out new channels given that on-premise accounts were largely shuttered. “While there was interest in direct-to-consumer (DTC) beer sales before 2020, Covid-19 pushed some brewers to consider it,” says Bart Watson, chief economist at the Brewers Association (BA), the trade group that represents small independent brewers.
Indeed, DTC beer sales—including to-go and delivery sales from breweries and online sales via third-party carriers—are seeing renewed interest at a time when brewpub and taproom sales have been adversely impacted. A recent survey conducted by the BA found that 79% of craft brewers sell beer to-go, while 23% offer direct delivery to consumers’ homes in local markets. A smaller but notable group, comprising 13% of the whole, ship direct using common carriers, largely due to state and local restrictions on the practice. Most beer shipped to consumers is intrastate, the survey found, although 11% of the respondents said they sell more volume DTC out-of-state than in-state.
As with the restaurant business, craft brewers were forced to turn to to-go and delivery sales when the pandemic shut down or severely restricted their on-site service, and according to Watson, that pivoting helped offset dramatic sales declines. While total draft beer sales of craft brews plunged 50% in 2020, at-the-brewery sales fell just 12%, Watson notes, driven by strong to-go sales. “To-go sales have always been a big part of brewery sales, but with the shutdowns last year, brewers ramped it up in volume and strategy,” he says. “It became core to what a lot of them were doing, while in the past, it was an add-on. To-go sales helped to soften the blow.” According to Nancy Trigg, president at Arryved, whose online platform allows breweries to create online stores to sell products for curbside pickup, to-go, and home delivery, online transactions shot up to 40% of customer transactions at the height of the pandemic last year. By the first quarter of this year, thanks to reopenings, the figure was down to 8%. Although the need for pickup and delivery has diminished, Trigg believes it’s here to stay. “Consumers like to-go beer sales,” she says. Watson, meanwhile, adds that in May 2020, 38% of craft brewers reported offering home delivery, as compared to just 6% prior to the pandemic.
But it’s online sales that have emerged as the most controversial DTC strategy. While rules and regulations vary, 12 states and Washington, D.C. currently allow direct shipments from breweries to residents, including Ohio, Virginia, Kentucky, and Nevada, as well as Oregon, Vermont, and New Hampshire— markets that over index when it comes to per-capita craft beer consumption. According to Larry Cormier, vice president at Sovos ShipCompliant—which provides go-to-market compliance software for the beverage alcohol industry—prior to the pandemic, 40% of craft beer drinkers purchased beer online. In the past year that figure has jumped to 57%. “The pandemic has added fuel to the fire,” Cormier says. Watson agrees with this statement. “The online market for beer is small but growing,” he says. “We see overall strong growth ahead as beer and alcoholic beverages have lagged in online sales compared to other products.”
Earlier this year, the BA and Sovos ShipCompliant released a report on the DTC beer shipping landscape, comparisons to the inroads made in DTC wine shipping and the opportunity ahead. According to the report, which surveyed more than 500 regular craft beer drinkers, “DTC beer shipping is quite popular among regular craft beer drinkers and it appears to be highly desirable when it comes to future purchase intent.” The report further concludes that “the current beer shipping laws no longer suffice as they inhibit not only the breweries selling the beer, but the potential purchasers from being able to try new brands that may not be available locally.”
An overwhelming majority of the craft beer drinkers surveyed (84%) said they would like to purchase beer via DTC shipping and that current laws should be updated to make it legal in more states. Pointing to the troubles some craft breweries have accessing distribution, Watson says, “if distribution channels continue to get more difficult for small brewers, there will be a need to balance traditional sales with DTC sales. Many small breweries are already rethinking this.” In a recent BA survey of its members, 70% of respondents said they would consider shipping beer via common carrier to consumers in their states if it was legal to do so.
Cormier says the success US wineries have had in DTC sales serves as a great example for breweries. “While 46 states now allow DTC wine sales of some sort, 15 years ago it was 0,” he says. “The fact that beer is starting off with 13 states that allow is actually a good start.” For some wineries, the practice has become pivotal to their business. “It’s become their lifeline,” Cormier adds. But he notes that the expansion in DTC wine sales into a $3.7 billion business was the result of a largely unified industry push, whereas within beer, support is much more fractured.
Other Half Brewing—with 3 locations in New York and one in Washington, D.C.—is among the breweries that ships beer to consumers. Its DTC markets include New York, New Hampshire, Vermont, Pennsylvania, and Washington, D.C. “We only ship 50-100 cases a week,” says co-founder Andrew Burman, noting that while the practice removes the distribution and retail tiers, working with shippers like UPS and FedEx adds another level of difficulty. “It can be hard to control,” he says. “It’s a hard way to make a dollar.” Still, Burman notes that in today’s on-demand marketplace, driven by retailers like Amazon, “people want to get things easier than in the past. As brewers, we must make the product easier to access.”
Jake Goodman, CMO at WeldWerks Brewing in Greeley, Colorado, says that while his company doesn’t ship beer DTC, they receive 3-5 inquiries a day from out-of-state consumers. “We’ve considered it, and may look into it in the future,” he reveals. “The diversity of the revenue stream is appealing.” But for now, Goodman says, WeldWerks is committed to building out distribution in Colorado.
Beer wholesalers are opposed to any further expansion of DTC beer shipping. “I don’t know that the pandemic is a reason to change the rules,” says Craig Purser, president and CEO of the National Beer Wholesalers Association. He questions whether there’s been increased interest among consumers in direct beer sales in the last year, noting that many like “the accountability and convenience that retailers make part of their e-commerce platforms.” Purser also notes that the BA report polled only craft beer consumers and not the broader mainstream beer base. Further, he says that support of DTC beer sales via common carrier is anathema to the great care that craft brewers take in brewing and distributing their products. “It’s interesting that brewers who require distributors to take such care of beer—including keeping it refrigerated at all times—would pivot to putting this perishable product into the hands of common carriers,” he says. “Do beer consumers really want their $40 case of beer stored in the back of a FedEx truck and left on their front porches in the direct sun?”
Some retailers are concerned about the impact an expansion of DTC sales would have on their beer business. “We’re not thrilled to have to compete with our suppliers,” says Jonathan Blue, chairman and managing director at Blue Equity LLC, operator of the 24-unit Liquor Barn chain in Kentucky, which at press time was being acquired by e-commerce player GoPuff. “While out-of-state beer shipments haven’t been a big factor, DTC shipments by Bluegrass State breweries have been very challenging,” Blue says. “It’s taking a direct hit to our bottom line.”
In Ludlow, Vermont, Jared Mailhiot, manager of Brewfest Beverage Co., says DTC beer sales haven’t had an impact on his store even though he’s seen several breweries move to the DTC channel in the last year. “I can’t blame them for doing it,” he remarks. “If a beer isn’t available through traditional channels, it makes sense.” But the retailer says that if the practice becomes prominent, “it could mean a big change and some disruption for us.” Mailhiot and Blue agree that when it comes to customer service, DTC can’t compete with traditional retail. “Consumers rely on retailers for their knowledge of the product, so there’s only a certain amount of benefit to buying direct,” the Vermont merchant says.
Battle Likely To Go On
Industry debate over DTC beer shipments is likely to continue. “The fight will get more intense,” Goodman says. Still, he and other brewery interests believe consumer demand will force changes. Cormier expects that within 5 years as many as 45 states will permit the practice, given the inroads made by wine. Watson agrees that the DTC channel, while not accounting for a large share of beer sales, will grow in the next 5-10 years. “For some small producers, it may be a viable route to market,” he says. “Three-tier isn’t going anywhere,” adds Goodman. “But consumers don’t care about three-tier. They’re going to keep pressing for what makes life easier.”