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Fueled by the pandemic, grocery stores have made significant investments in selling digitally, with wine being an essential growth category for online sales. With estimates of ~$6B in wine sold through online grocery by 2025, Jessica Kogan, Chief Growth & Experience Officer of Vintage Wine Estates, gets into the trends, key success factors, and the opportunity that online grocery represents.
Detailed Show Note:
Vintage Wine Estates (Ticker: VWE)
- 11th largest wine holding company in the US
- 12 wineries, a couple of digitally native businesses, 12-15 lifestyle brands
- Heavy focus on DTC
Online grocery trends
- By 2025 - 22% of Americans will buy groceries online (i.e., anything not in-store and digitally enabled)
- Alcohol is the fastest growing segment for online grocery - by 2025 - $5.97B in wine online from <$1B in 2018 vs. $7.97B DTC from wineries in 2025
- Target saw 4x amount of alcohol when bought online vs. in-store purchases in 2021, most of which was wine
- Digital grocery brings up basket size and provides more flexibility for consumers (e.g., curbside pickup; Target provides lots of flexibility)
- ~50% digital is pickup, ~50% delivery today
Post-pandemic trends
- Wine DTC is seeing slower growth, but online grocery is continuing to grow
- Covid led to increased investment by grocery in online
- Grocery has goals of going beyond grocery into becoming a “lifestyle” store, e.g., leaning into wellness
Why consumers enjoy buying wine online
- Feel overwhelmed by the selection of in-store
- Like learning about the background and story of brands
- Often use phones in-store to learn more about brands
- Gen Z - born digitally, love stories & authenticity, committed to wellness - makes wine compete w/ RTD cocktails and hard seltzers
- Consumers are more open to taking risks on new brands online
Selling into grocery stores
- Believes in-store demo events are powerful
- Making the story accessible and easy (e.g., QR codes on labels) key
Selling in online grocery
- Uses Salsify (a “PIM” - product information manager) to publish info to grocery stores, allows producers to control data shown to consumers
- 94-95% of searches for wine are by varietal (or basic descriptors like red/white), not by brand
- Digital algorithms - can’t buy ads due to Tied House Laws, but can influence algorithms w/ customer reviews or customers saving products
- Using metadata to show up as recommended product vs. search displays helpful
- Being in the “above the fold” carousel of products where consumers don’t need to scroll down is vital for sales, as big as being on the end-cap in-store
Tips for brands for online grocery
- Have a website w/ e-commerce - helps understand the whole process
- Go w/ distributors to stores w/ digital info for products
Future trends for online grocery
- Virtual tastings will continue
- More information on wellness and wine
- Women to play an essential role in connecting w/ customers since most grocery buyers are women
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