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Major brands “reallocating” funds away from on-trade into e-commerce and DTC

Published:  02 July, 2020

The Covid-19 pandemic is facilitating a long-term shift among many of the world’s leading drinks brands’ strategies, it has been suggested, as owners begin to adopt a more “nuanced” approach to channel distribution.

The observation, made by the IWSR, takes into consideration the moves of major players Campari and Constellation Brands which have both shifted gears towards retail – and particularly e-commerce and social media – in recent months.

In Campari’s case, the Italian company reacted to fast domestic growth in e-commerce by taking a 49% stake in wine and premium spirits platform Tannico for €23.4m.

The company has an option to buy the business outright from 2025.

Constellation Brands meanwhile, announced yesterday it will acquire direct-to-consumer wine company Empathy Wines, founded by entrepeneur Gary Vaynerchuk. CEO and president Bill Newlands said the acquisition would help deliver growth while also accelerating its ability to forge deeper connections with its consumers, alongside providing rich consumer insights and analytics.

While there has been a wealth of support from brand owners to the on-trade such as Diageo’s Raising the Bar initiative, the IWSR noted that the one, three and five-year plans that brand owners put together in the autumn of 2019 will have largely been thrown out of the window since Covid-19 hit.

“We could even see a role reversal in terms of which brands and companies are successful in the new world we find ourselves in,” said Mark Meek, CEO of the IWSR.

“The more staid off-premise-focused brands and companies might be the ones that do well, at least in the short to medium term. Greater visibility and marketing in the off-trade and e-commerce, versus in the on-trade, could shake up which brands are considered successful and also in many cases leaders in innovation.”

In place of the old structures, there has been a “seismic shift in companies’ attitudes to digital activities”, from many brand owners viewing online storefronts primarily as an extension of their marketing departments.

Now, they are being recognised as “a far greater opportunity to build stronger relationships with consumers and drive purchases”, as well as capturing valuable data.

These insights were taken from conversations with brand owners such as Brown-Forman Corporation, which owns Jack Daniel’s.

In a recent call with IWSR analysts, Brown-Forman CEO Lawson Whiting said the company was “reallocating dollars” away from the on-premise and into “broad-based media”.

“That is a brand-building change happening there”, he said.