Population growth, prepared cocktails, trading-up trends, the ongoing popularity of spirits, new retail store openings, and remodelings all contributed to another year of steady gains throughout the nation’s 17 control states last year, but thus far 2020 has been a rocket ride amid the Covid-19 crisis. As the off-premise boom occurred at retail across the country, control states saw sharp sales rises in the first quarter.
From February 1 to March 22, New Hampshire saw total sales jump 17% to $109 million compared to the year-earlier period, including a 21% increase to $70.8 million for spirits and an 11% bump to $38.2 million for wine. Total volume was up 14% to 767,000 cases during the period. In Pennsylvania, wine and spirits sales accelerated from a 5.8% gain in January to 12.3% in February, before surging 57.9% to $181.3 million March 1-17, when the state closed its Pennsylvania Liquor Control Board (PLCB) stores and online sales. That move resulted in significant border bleed to the neighboring markets of Delaware, New Jersey, and West Virginia, where retail outlets remain open. On April 1, the PLCB announced it would resume limited online sales, with consumers able to purchase up to six bottles from a slimmed-down catalogue of top-selling wines and spirits, to be delivered to homes or non-store residences.
Ohio and Virginia also reported rapid gains. Ohio’s spirits sales were up 14% year-on-year in February to $76.7 million, and jumped 52% to $85.2 million March 1-22. Case sales leapt 26% from February 1-March 22, to 766,000 cases. The biggest single sales rise during the period was $7.16 million on March 20. By comparison, the biggest day of sales during the year-earlier period was $4.28 million on Friday, March 1. In Virginia, meanwhile, ABC store sales were up 59% to $30.1 million in the week through March 21.
Fueled by powerful growth from Tito’s vodka ($20 a 750-ml.) and Fireball whisky ($15), spirits growth in control states exceeded gains in license states for the fourth straight year in 2019. Tito’s, the No.-1 spirits brand by volume in control states, zoomed upward by 21.3% to 2.2 million cases. No.-3 Fireball increased 12.7% to 1.43 million cases. No.-7 Jim Beam ($18) and No.-10 New Amsterdam vodka ($14) each grew 5.1% in the control states, to 891,000 and 879,000 cases, respectively. In all, spirits volume grew 4% in control states in 2019 to approximately 50.78 million cases, according to NABCA/Impact Databank. By comparison, spirits volumes in license states rose by approximately 2%.
All of the top ten control states by spirits volume showed growth in 2019, with Mississippi, the No.-10 control state, posting the highest rate at 5.1%. No.-4 North Carolina posted the second-highest growth at 4.7%. “North Carolina communities—especially metro markets—are growing in population, which feeds demand and boosts both on-premise and off-premise sales,” says Agnes Stevens, administrator of the North Carolina Alcohol Beverage Control Commission. “The state of North Carolina is experiencing substantial growth in a lot of communities.”
No.-5 Virginia recorded the third-highest growth rate last year among control states at 4.4%. “Our seven new stores generated nearly $8 million in sales,” says Travis Hill, CEO of the Virginia Alcoholic Beverage Control Authority (Virginia ABC). “Virginia ABC oversaw eight store remodels and four relocations to improved market areas, enhancing customer service and accessibility.”
Dollar Sales Growth
Buoyed by a healthy tourism industry in 2019, the spirits dollar sales growth in Michigan easily outpaced the rate of volume gains. In all, spirits sales during fiscal 2019 increased 5.8% in Michigan to just over $1.5 billion. “We’ve been cashing in on the hospitality, entertainment, and tourism industries, and you can see it with the amenity of beverage alcohol and the growth we have versus our size,” says Pat Gagliardi, chairman of the Michigan Liquor Control Commission.
The rate of spirits dollar sales growth in Pennsylvania, the No.-2 control state by spirits volume, was also significantly greater than volume gains in 2019. Dollar sales of spirits in Pennsylvania increased 4.6% in 2019 to roughly $1.5 billion, on a 2.9% volume increase to 7.9 million cases. Thanks to premiumization, Tequila, whiskies, and Cognac helped set the pace in the Keystone State. “Cognac is seeing a surge and Bourbon growth persists, and we continue to see consumers spending extra money to trade up to premium offerings in those categories,” says Tim Holden, chairman of the PLCB.
For the PLCB’s Fine Wine & Good Spirits stores, spirits marketing plans are part of broader brand awareness and product promotion strategy. “While we take advantage of the typical media tactics, we continue to shift a portion of advertising from traditional to digital media,” Holden says. “During the holiday season, we used Google ads for the first time, and we intend to use them moving forward. We also invested significantly in paid search advertising to make sure Fine Wine & Good Spirits appears when consumers are looking for products.”
Social Media Prowess
Facebook is the PLCB’s top-performing social media platform, both for generating sales and engaging consumers. In the last three months of 2019, Facebook generated more than $500,000 in Fine Wine & Good Spirits sales. While much smaller than Facebook’s reach, Instagram is the PLCB’s second-best performing social media platform. “We currently have more than 300,000 followers on Facebook, as compared to 9,400 followers on Instagram,” Holden says. “We continue to work to grow our Instagram presence because we see significant opportunity with that platform.”
Email remains one of the PLCB’s most important marketing tools, with more than 262,000 consumers signed up to receive messages directly from Fine Wine & Good Spirits. “During the 2019 holiday season, we saw a 60% increase in revenue generated from marketing emails,” Holden says. “As we collect more consumer data, we will be able to use it to tailor messaging for consumers.”
The PLCB’s most popular promotion last year was on Cyber Monday, when it offered 10% off online purchases and free shipping to a home or business address in Pennsylvania on orders of $50 or more. In a separate e-commerce promotion, the PLCB offered a mystery box that allowed consumers to mix and match red and white wines. “Another noteworthy and wildly successful e-commerce promotion is our ongoing Third Wednesday release of highly allocated spirits that are also in high demand,” Holden says.
With more than half of its stores renovated in the last eight years, the PLCB’s goal is to have all units renovated or refreshed within the next year and a half. It has plans to add two new Premium Collection stores in 2020 and convert one standard Fine Wine & Good Spirits store into a Premium Collection store to meet increasing demand for upscale wines and spirits.
Fine Wine & Good Spirits also debuted its Taste & Learn Centers in 2019. “These centers provide a dedicated education space for the public to experience tastings and learn about wine and spirits in a small, intimate setting conducive to learning,” Holden says. As of March 2020, however, the Taste & Learn Centers had been shuttered due to Covid-19.
Bourbon Barrels Rolling
Product availability is creating more excitement across Ohio, and consumers are buying products to start collections, particularly when it comes to Bourbon. This was accelerated by the Ohio Division of Liquor Control’s single-barrel program, which had 23 releases last year, attracting many repeat customers. “These offerings are truly one of a kind for Ohio consumers,” says Division of Liquor Control superintendent Jim Canepa. “Our team carefully selects each one with the assistance of master distillers.”
Canepa says Ohio consumers are also trading up on high-proof spirits and moving over from beer and wine to spirits. “Consumers want lower-calorie and lower-sugar options,” he says. “They’re also drinking less, but when they choose to enjoy an alcoholic beverage, they’re choosing higher-end options.”
The Ohio Division of Liquor Control began the rollout of a new wholesale ordering solution in March. Previously, wholesale accounts ordered by phone, mail, or email to their assigned wholesale agency. Bars and restaurants now have access to ordering online anytime, and agencies can also use the new site to fulfill orders or place orders on behalf of their wholesale accounts. Additionally, agencies can set up pick-up and delivery options for their wholesale accounts to choose from, with accounts paying for the order prior to pick-up.
Benefits to the system include freeing up agency employees to strengthen other areas of their business and give wholesale accounts some control over their orders. “This update has been a long time coming,” Canepa says. “We’ve heard feedback from agency managers and bar and restaurant owners that our process was tedious and outdated. We knew a change was needed to bring another aspect of our enterprise into the 21st century. Our team has worked with these stakeholders to create a site that’s easy to navigate and beneficial for everyone.”
Members of the Ohio Division for Liquor Control are working with broker and supplier partners to evaluate 20 pilot stores and then create a product set at each store that follows a cluster model. This includes precise measurements of each store and its storage area, in-person visits to discuss product assortment and placement, and rigorous data analysis to determine the store’s optimal product set. “Our team is taking a granular look into the way products make their way into stores to better serve our agencies and their customers,” says director of agency operations Gerry O’Neil. “We want the right products in the right areas, so consumers have what they want when they want it.”
Another goal of the test is to get new products to stores faster while also helping agencies understand how to best merchandise them. The test is expected to run until the late fall and, pending the results, the process will be implemented statewide.
Elevated Shopping Experiences
In fiscal 2019, Virginia ABC’s gross sales topped $1 billion for the first time. Sunday sales continue to play a role in the rising revenue, increasing by 7.4% in fiscal year 2019 to $79 million. Ready-to-drink cocktails (RTDs) are also a significant trend. “Consumers are in the market for beverages that deliver innovation and quality, along with convenience,” Hill says.
Virginia ABC’s main initiatives this year include rolling out a new p-o-s system, licensing system, and retail concept in collaboration with OSK New York, a creative communications agency. “This new concept leverages customer and marketplace information to create a new type of engagement, new types of product organization, and an elevated shopping experience and materials palette,” Hill says. “This merchandising strategy is data-driven, using market research and historical product sales to determine the ideal product assortment for the store while maximizing the space-to-sales ratio.”
Supported by significant investments in retail operations and social media marketing, the spirits industry in control states looks primed for continued growth—so long as Covid-19 is resolved quickly. Speaking before the ongoing crisis had taken root, Hill remained optimistic about the spirits industry and expects ongoing sales growth in both the retail and restaurant segments. “As the spirits category continues to expand its market share, Virginia ABC is well positioned to serve demand through store growth and its online ordering platform,” he said.