The Australian liquor industry is experiencing a significant transformation in the way it operates and engages with consumers. This is driven primarily by digital transformation, which has reshaped the overall retail landscape, and evident from the accelerated shift to e-commerce during the pandemic.
Following which, the majority of fast-moving consumer good (FMCG) categories now have elevated levels of e-commerce sales. Direct-to-consumer (DTC) sales have also emerged as a potential area of growth, and this shift is in response to greater consumer expectations, the proliferation of online channels, and the advent of new business models such as marketplaces.
Shift to online: Wine sales are heavily over-indexed in e-commerce compared to other alcoholic drinks
When it comes to the online sale of wine in Australia, the shift to e-commerce accelerated during the pandemic with wine sales being heavily over-indexed in e-commerce compared to other alcoholic drinks. Euromonitor’s e-commerce solution reveals that the sale of wine in Australia accounts for more than 37 per cent of alcoholic drinks sales online, while just 23 per cent of sales are made through traditional bricks-and-mortar retail channels.
The seasonal preferences of consumers also come into play for sales over the course of the year. For instance, red wine performed the strongest in Australia’s winter months of July to September, with 40 per cent higher sales compared with online sales of still white wine. On the other hand, during the summer months when temperatures are highest, white wine exceeded red wine by 25 per cent in the first quarter of 2023.
Additionally, analysis has shown that consumers still prefer to purchase sparkling wine in-store, due to the tactile experience of interacting with the product and the gratification of purchasing a product with a high price point in-person. However, Australian shoppers tend to prefer purchasing still red and white wine online, given the superior selection and information that online retailers provide.
On the other hand, bulky and often impulse purchased categories such as Ready-To-Drinks (RTDs) are more heavily indexed at bricks-and-mortar channels. This is given consumers’ preferences in terms of temperature, as well as the shipping and handling of products. However, spirits and wine have a much higher share of sales through e-commerce. Further segmenting the wine category, still white wine and still red wine have much stronger proportional sales in e-commerce channels compared with sparkling wine.
Potential of direct-to-consumer sales
The Australian wine industry is experiencing a significant transformation in the way it operates and engages with consumers. This is primarily driven by digital transformation reshaping the overall retail landscape, with direct-to-consumer sales emerging as a potential area of growth in the industry. This shift is in response to greater consumer expectations, the proliferation of online channels, and the advent of new business models like marketplaces. The rise of these models signifies a significant evolution in the retail sector, impacting how retailers and brands collaborate.
The prospect of DTC sales is especially promising, as consumers are increasingly seeking personalised experiences and direct connections with wineries and vineyards, and DTC offers a unique avenue for such engagements.
When it comes to beer, traditional brick-and-mortar stores still dominate in Australia. Beer is more of an impulse purchase than wine, with an absence of collectors and aficionados as with wine. Most liquor stores carry a wide range of both traditional beer and craft beer, negating a key draw for buying wine online, namely the availability of smaller, difficult-to-find brands. Furthermore, drive-throughs proliferate in Australia, making heavier purchases practical.
Despite the many benefits of the DTC model, it is not without its challenges. The future prospects for DTC are not as flawless as they may have previously seemed. Several challenges have emerged that cast a shadow over the sector, including a softer consumer sentiment, and the initial novelty of DTC has worn off for some. Furthermore, challenges of this model remain, including increased competition and greater responsibilities for brands.
Evolution of consumer preferences
The palate of Australian consumers is evolving, with younger consumers of legal drinking age in particular preferring easy drinking products with a light and fresh flavour profile. This sees consumers shifting away from heavier flavours such as Shiraz in wine, towards lighter still rosé wine and sparkling wine.
Consumers are also becoming increasingly educated when it comes to wine and are seeking sophisticated drinking experiences. This shows that there is certainly demand for in-store experiences. For instance, consumers still prefer to purchase sparkling wine (including Champagne) in-store because of the tactile experience of interacting with the product and the gratification of purchasing a product with a high price point in-person.
Within beer, consumers are moving away from traditional strong-tasting beer to those with a fresher of lighter taste profile, hence Corona is the most popular imported beer in Australia. Flavoured beer – such as fruit – is also increasing in popularity, especially among younger consumers, and there is a plethora of interesting craft flavours and varieties available to the consumer.
The RTD category has also performed well in Australia, driven by the growing popularity of products like hard seltzers. As part of their appeal, RTDs offer consumers a more convenient method of enjoying their favourite cocktail flavour combinations. New product development is particularly strong in the RTD category with many new brands jumping on the premiumisation trend, resulting in higher quality products for consumers.
Sober-curiosity and moderation on the rise
According to Euromonitor’s research, the trend of moderation has continued to grow in Australia in the last two years, with more consumers becoming ‘sober-curious’. This group of consumers do not necessarily abstain from alcohol altogether but aim to reduce their consumption. Younger consumers in particular have been embodying the ‘less but better’ mantra when it comes to alcohol consumption. Mindful drinking and sober curiosity, dry venues, and NoLo focused retailers are blurring the lines between the alcoholic and non-alcoholic universes.
New formulations are targeting a plethora of consumption occasions; with more of them increasingly replacing simplistic de-alcoholising approaches and experimentation with new ingredients. This makes the NoLo landscape one of the most innovative and exciting in the alcohol ecosystem. This once niche trend is now established, evolving, and holds much untapped potential. Overall, health and wellness concerns are likely to remain at the forefront of consumers’ minds, with the moderation trend, sober curiosity, and sugar avoidance shaping innovation in the liquor industry.
The liquor industry has been evolving over the years, driven by factors such as digital transformation and the rise of sales through channels such as e-commerce and DTC. Additionally, changing consumer lifestyles and preferences led by new trends have unveiled new opportunities for retailers and industry players to identify where they fit in, and to tap onto these potential areas of growth.
This article was written by Euromonitor International’s Head of Research, Tim Foulds, and Research Analyst, Arshad Mawla and originally appeared in the 2024 Leaders Forum issue of National Liquor News.
