Pandemic shopping had Virginia spirits consumers focusing on popular brands and larger size packages, with increased online and curbside orders last year shifting into overdrive. State officials are working to continue growth trends. “We expect to see continued growth in spirits sales for the long term, but short-term uncertainty can’t be ignored,” says Travis Hill, CEO of the Virginia Alcoholic Beverage Control Authority (ABC). “With 12 full months of Covid-19 behind us, we’ve seen higher than normal sales, despite losing about half of our retail on-premise purchases, which traditionally comprised 18% of our sales.”
A sharp focus on super-premium brands contributed to significant dollar sales growth. High double-digit gains from Tito’s ($40 a 1.75-liter), Hennessy VS ($37 a 750-ml.), Patrón Silver ($53), Crown Royal Regal Apple ($27), and 1800 Silver ($28) led the way in Virginia as overall spirits dollar sales grew 11.4%, gaining more than $118 million, to a total of $1.165 billion in 2020, according to Impact Databank. “Consumers focused on brands they knew, such as Tito’s, Jack Daniel’s ($25), and Hennessy,” says Hill. “They also gravitated toward larger package sizes, especially 1.75-liter bottles. Many customers shifted to purchasing online and picking up curbside, rather than going into the store.”
Ranked fifth among control states in spirits volume, Virginia increased volume by 9.1%, or 475,000 cases, last year to approximately 5.7 million 9-liter cases; the state is now approaching the 6 million-case mark. Spirits sales are off to a strong start this year but not expected to repeat last year’s historic growth numbers. Speaking in February 2021, Hill said, “While we’re in just the second month of the 2021 calendar year, spirit sales are showing growth consistent with that seen in 2020, but that will not continue once we get into March, when pandemic purchasing began in 2020.”
Like many states, Virginia adopted temporary measures to boost the economy during Covid-19 restrictions, including alcohol to-go. Now state lawmakers are pushing to make some of those temporary exceptions permanent. There are several bills pertaining to these issues currently making their way through the state legislature as of press time, including House Bill 1879, which will continue permitting restaurants with mixed beverage licenses to sell cocktails to-go with food. “Changes are anticipated because of strong support from lawmakers,” Hill says. “Of those, worth noting are a couple of bills that would allow a local government to adopt an ordinance extending the frequency and duration of a special event license, which could lead to increased spirit sales for licensees located in areas where these special events would occur.”
To increase in-store and online spirits sales this year, Virginia ABC is employing several marketing and merchandising strategies, including highlighting consumption occasions; shopping missions such as “restocking the bar,” which promotes experimentation with new and different spirits; and encouraging customers to increase their product knowledge with educational materials from ABC. “A new strategy includes collaboration with spirits distributors to host virtual events like cocktail-making classes, encouraging customers to purchase ingredients at their local ABC store ahead of time to participate in these events,” Hill says. “All strategies are contingent on a continued need for social distancing and will employ virtual solutions where possible, such as online ordering with curbside pickup statewide and home shipping in select areas.”
Virginia ABC has also been tapping social media to grow business and launched an Instagram account for its Spirited Virginia brand in January 2020, creating a new outlet to connect with customers and stakeholders. This added to a well-established portfolio of social media platforms for the agency, including four Facebook pages, a Twitter account, a LinkedIn page, and a Vimeo profile. “Now that the Spirited Virginia brand has both a Facebook page and an Instagram profile, it appears to be the biggest driver of customer engagement and sales among ABC’s social media accounts,” Hill explains. “These channels are also utilized each year for advertising for various promotions including Mini Monday, the holiday campaign and summer campaign. Facebook and Instagram advertising campaigns increase follower growth to these accounts and typically increase sales both online and in stores.”
In Virginia, all spirits are sold at the 392 state ABC stores. The organization is planning to open more stores to contribute to growth and help meet consumer demand. The Virginia ABC is aiming to open seven new stores in this fiscal year, with four new stores already operating. “This number is in keeping with new store trends from previous years,” Hill says.
Returning To Normal
As with businesses worldwide and in the U.S., Covid-19 severely impacted 2020 marketing activities. Multiple Virginia ABC programs were canceled or reduced due to pandemic-related issues, including government-mandated closing and reopening phases for retail outlets and licensees. There were also challenges, such as the need for in-store social distancing, reduced warehouse staffing, the need for warehouse social distancing, supplier inventory shortages, and website capacity issues. “We are looking to increase our programming as vaccinations and improved adherence to mask-wearing and social distancing continue to reduce spread of the virus and consumers are able to return to more normal shopping conditions in the coming year,” Hill says.
The Virginia ABC, like other retailers, is planning on the return of some of its marketing efforts introduced in years past, as well as introducing some new promotions inspired by an increase in e-commerce over the past year. “If feasible, we’d like to return to some of our more popular seasonal campaigns and promotional offers in coming year, including Celebrate Mom, Celebrate Dad, Door Busters, and holiday favorites with specials on Black Friday and Cyber Monday,” Hill says. “New this year will be virtual tastings offered by suppliers, which will replace the in-store tastings.”
Continuing and enhancing new fulfillment options such as curbside pickup and delivery are also happening in Virginia this year. “While not a new concept, the idea of both selection and convenience was reemphasized in 2020,” Hill says. “Consumers who can both find what they are looking for and can have it provided to them in the most convenient manner possible are more likely to make purchases.”
In 2021, Virginia ABC marketing efforts will focus on strategies to encourage consumers to try new spirits. “Campaigns will seek to increase consumer awareness and consideration with strategies, including improving product knowledge about spirits’ heritage, history, and usage ideas,” Hill says. “Marketing efforts will focus on consumption occasions and shopping missions to promote innovation and experimentation and make it less risky to try new products with Virginia ABC’s Mini Mondays and virtual tastings.”
While Virginia ABC sells spirits bottles across all price spectrums, 75% of all bottles purchased cost $25 or less, according to Hill. Last year, however, the three spirits brands with the highest value growth rates among the top 25 in Virginia cost more than $25 a 750-ml, and they were also the only three brands to exceed 30% sales growth in the same time frame. Ranked No. 14 by value, Crown Royal Regal Apple ($27 a 750-ml.) was the dollar sales growth rate leader at 38.8% to $12.36 million, increasing more than $3 million from $8.9 million in 2019. Posting 34.1% growth to $7.83 million last year, 1800 Silver Tequila, ranked No. 21, grew by approximately $2 million from $5.84 million in 2019. Operating from a much larger base, Hennessy VS, the No.-2 spirits brand by value, surged 32.8%, from $35.31 million in 2019 to $46.88 million in 2020.
Virginia’s overall sales value leader, Tito’s ($22 a 750-ml.), had the fourth-highest growth rate at 24.2% to $52.34 million, a whopping $10.22 million increase from 2019. And despite its cost, No.-5 Patrón Silver ($53 a 750-ml.) recorded the fifth-highest growth rate at 20.5% to $20.93 million—a gain of $3.55 million from $17.38 million in 2019. In all, eight of the top 25 spirits brands by value in Virginia posted double-digit growth. Other growth leaders included Jose Cuervo ($20 a 750-ml.) at 17.5%; Malibu Coconut ($17 a 750-ml.) at 14.5%; and Woodford Reserve ($37 a 750-ml.) at 14.3%. Seven brands experienced decreased sales in Virginia last year. The Virginia ABC offers approximately 4,000 SKUs ranging in price from $4 a 750-ml. of Aristocrat Triple Sec to $6,000 a 750-ml. of The Macallan M single malt Scotch.
Sales of Virginia-distilled spirits grew 15.2% in 2020. Based on sales of at least $50,000 last year, some of the fastest-growing of these local brands sold at state stores were Virginia Distillery Co. at 1,033%, Springfield Distillery at 255%, and A. Smith Bowman Distillery at 113%. While A. Smith Bowman is owned by Sazerac Co., the 113% growth is solely for products distilled in Virginia. Based on products with sales of at least $25,000 last year, some of the fastest-growing Virginia distilled spirits sold at Virginia ABC in 2020 were Three Crosses American whiskey ($39 a 750-ml.) at 227%, Old Cavalier Bourbon Cream ($30) at 128%, and Cirrus vodka ($40 a 1.75-liter) at 74%.
Emergency measures introduced in Virginia last year helped small distilleries grow, according to Hill. “Virginia distilleries received a big lift in 2020 when they were authorized to utilize their Virginia ABC store designation to ship spirits to Virginia residents,” he says. “The ability to deliver and ship to consumers helped distilleries continue operating while their tasting rooms were shuttered.”
Beverage alcohol retailers had a year like no other in 2020. No one knew exactly what to expect next. This year things are moving back toward normality and proportional business is expected to shift back to the on-premise. “As restaurants reopen, it will be interesting to see how consumers alter their purchasing behavior and how that will impact our performance,” Hill says. Spirits also face increasing challenges from hard seltzers and other emerging categories. “How consumers respond to overall product offerings such as hard seltzers and ready-todrink cocktails, as well as low and no alcohol beverages, will certainly impact sales,” Hill says.
Looking ahead, the spirits industry is expected to face competition from other emerging industries. “Adult-use cannabis is also likely to be legalized in Virginia in the coming years, so we’ll need to keep an eye on how the market responds to that product’s availability,” Hill says.