How Craft Brands Can Succeed in the Covid-19 Era

Craft brands have been in the spotlight across wine, beer, and spirits in recent years, with products from small producers becoming increasingly sought after over mass-marketed products. Consumers are seeking out fresh discoveries, and are increasingly prioritizing the production methods, ingredients, and stories behind craft beverages.

But the onset of Covid-19 has presented a new challenge: While consumers are increasing their home consumption and retail alcohol sales are up, most craft wine and spirits brands have not benefited. As much of the on-premise sector remains shuttered and many consumers turn to e-commerce to limit in-store purchasing, there is no salesperson or sommelier to champion small brands or encourage the consumer to try something new.

“People can’t go into retail stores and have that tactile, visual experience,” says Erik Segelbaum, the Washington, D.C.-based founder of consulting firm SOMLYAY. “The brands that are the super-industrial, commercial, well-marketed brands are selling like gangbusters.” And just as people turn to their favorite comfort foods to cope with the stress of the pandemic, they turn to familiar wine and spirits brands, too.

Though it might seem like the persistent effects of Covid-19 will decimate the craft beverage movement, craft brands can indeed set themselves up for success by targeting the right retail partners and finding creative ways to sell directly to consumers.

Acquiring New Retail Placements

While stay-home mandates and on-premise closures have resulted in retail sales spikes — as of June 13, off-premise sales were up 26 percent year-over-year for the entire Covid-affected time period — retailers are still working to manage this unexpected business shift.

“They’re still in survival mode,” says Nicolas Palazzi, the owner of PM Spirits in New York, an importer and distributor specializing in artisanal spirits brands. “They have no energy or time to do any outreach or take sales calls. They’re reacting to demand, and that demand is for mainstream brands because that’s what people know.” In the first six to eight weeks of the pandemic, most of Palazzi’s sales through existing retail accounts were for inexpensive items.

Brian Larky, the founder of Dalla Terra Winery Direct, has experienced similar difficulties when attempting to secure new placements for his portfolio of family-owned Italian wineries. For example, although off-premise Prosecco sales remain strong overall, it’s difficult to find new accounts for Larky’s craft Prosecco producer, Adami. “The big guys that are in [large retail shops and retail chains] have been in there for a long time,” he says. “We’ve got to go shoulder our way in as an independent producer.”

“Retail stores aren’t taking on new products, and they’re just buying what sells,” says Segelbaum. “It’s a cyclical supply and demand cycle.” Therefore, it’s more important than ever to maintain existing relationships with off-premise clients; Jen Collins, the New York market manager for El Silencio Mezcal, notes that personal touches like one-on-one outreach and thank-you notes can go far.

Despite the challenges, it’s critical to seek out new retail placements in order to compensate for lost on-premise business, particularly because the restaurant industry is likely facing a slow recovery. “It’s pretty unlikely that on-premise is going to amount to much, sales-wise, this year,” says Palazzi. “It would be a mistake to wait it out [without adapting right now].” PM Spirits’ business was split about evenly, dollar-wise, before the pandemic hit.

Depending on state laws, it may be advantageous to pursue new or increased placements in grocery stores. “Understandably, people are looking for one-stop shopping during the pandemic,” says Colby Frey, the CEO and co-founder for Frey Ranch in Fallon, Nev. “They have to pick up groceries, so they’re grabbing whiskey at the grocery stores, too.” While it can be difficult to obtain these competitive placements, local brands may have a leg up; Frey notes that because distribution is limited to their home market of Nevada, consumers know the brand and seek it out.

Other craft brands are getting creative with their sales strategies. The Tennessee distributor for Pinhook Bourbon in Midway, Ky., which releases new vintages of bourbons and ryes each year, pre-sold the producer’s 2020 high-proof bourbon to retailers via email before bringing in the inventory. This motivated retailers to commit based on limited availability — particularly because the distributor oversold their allocation. Pinhook has since rolled this strategy out for special releases across other markets.

New brands launching during the pandemic are faced with a unique situation: Though they are entering into an unusual and competitive market, starting from zero means that any new placements represent big growth. “I’m happy when I sell a couple of cases because I’m brand new,” says John Livanos, the CEO of Stray Dog Wild Gin, which was initially focused on restaurant and bar placements when it launched in February. The brand quickly redirected its sales efforts to retail stores.

Word of mouth has helped Jake Sherry, a co-founder of Catskills-based Isolation Proof Gin, connect with small retail shops in the Catskills and in New York City. The product, which was rebranded pre-launch in light of the pandemic, has resonated with local shops because it is produced locally and made with New York State ingredients.

However, Sherry admits that there is a limited ceiling for growth, so he’s also been cold-calling local liquor stores, rather than big outlets. “I think we’re too small to really have any success in a place where the bottom line is how much they can move,” says Sherry. “Where we’re going to do well is where owners are passionate and want to share stories behind products.” Many shops are too busy to meet with him, though, so Sherry has sometimes found success dropping off sample bottles for buyers to taste at their convenience.

Connecting with Consumers

But consumer interest in craft beverages hasn’t simply disappeared due to the pandemic. Rather, consumers don’t know how to find, or feel confident purchasing, new items without a trusted expert’s guidance. Craft brands that can find ways to market and sell directly to consumers will therefore find success in this market.

“For me, DTC business is everything,” says Katy Wilson, the founder and winemaker for Sonoma Coast producer LaRue Wines. Direct-to-consumer (DTC) sales have become increasingly important for American wineries, increasing 7.4 percent in value to reach $3.2 billion in sales in 2019, according to Sovos ShipCompliant.

“For those of us that had those pieces of the puzzle already in place,” adds Wilson, “we have been able to be a bit more nimble in our marketing strategies and how we respond to the changing landscape of the situation.” Since March, the winery has been exclusively focused on DTC sales.

The DTC market is easier to navigate for American wineries than it is for international wineries, or any kind of spirits producer. While American wineries are able to ship wine directly to consumers in 46 states (plus the District of Columbia), fewer than a dozen states allow for spirits to be shipped directly to consumers. Even when DTC spirits shipping is legal, costs can be prohibitive unless brands are shipping high volumes. Sherry is legally allowed to ship Isolation Proof Gin to consumers in New York State, but shipping often costs half again what the bottle does.

Some brands, including El Silencio and Stray Dog, have found it worthwhile to work with third-party services like Thirstie and Reserve Bar, which enable them to sell directly to consumers through partner retailers in different states. “We’re extremely excited to launch the newest portion of our website in a few weeks that enables consumers to buy Silencio directly from the site,” says Collins, who notes that pre-Covid, El Silencio’s business was 90 percent on-premise.

Others have developed in-house solutions, like Pinhook Bourbon, which recently launched a text-to-buy service called Breeze. Consumers can text the number 926-848 with a screenshot or description of the Pinhook bottle they would like, and the service will find a bottle at a retailer that will ship to them and complete the transaction via text.

It isn’t enough to have craft products available to consumers, though; communicating and marketing to consumers is just as important. “Any type of visibility right now is key,” says Collins. “Since the shelter-in-place mandates, being active and engaging on social media is efficient and beneficial.” El Silencio’s marketing team also geo-targets consumers on social media platforms to target the product’s optimal audience.

Livanos agrees. “Social media outreach has been more successful than I thought,” he says. “We’ve gotten some organic outreach through social media that I never thought existed.” Livanos has also been conducting media outreach, finding success with small local papers and Greek publications with audiences that Stray Dog’s Greek origins resonate well with.

Enacting Strategic Partnerships

Seeking out partnership opportunities with industry members, online retailers, or influential figures can also help bring increased awareness to craft brands at low or no cost.

“We’re quickly learning that online retailers are beginning to serve as digital advertising agencies and are eager for partnership,” says Alice Peterson, the CEO of Pinhook Bourbon. Many of these large online retailers already work to target and acquire new customers, and they will allow brands to use that data for brand-specific campaigns to drive traffic to their sites. Peterson also recommends that brands offer online retail partners good photo assets for all of the SKUs they carry, which can help capture the consumer’s interest by sight alone.

Listing retailers on a brand’s website can also provide a mutually beneficial partnership opportunity. In exchange for placement on its location-specific retailer list, Pinhook will often ask for priority placement in search results on the retailer’s site or a robust description to educate consumers about the product.

Without the ability to travel to different markets due to Covid-19, Palazzi has redirected some of that time to alternative promotional avenues, participating in interviews, podcasts, and Facebook groups. He’s also been conducting personal outreach to individuals in his network to explore opportunities for virtual tastings, Instagram Live discussions, or educational sessions with tasting groups.

Livanos has been doing the same. “Get with the right people who want to promote your product,” he says. “There are people who are still seeking out new things.”

In addition to hosting virtual tastings, Wilson has found success in partnering with restaurants like Anton’s in New York to promote sales while giving back. For one day in May, she pledged 30 percent of LaRue’s online wine sales to the restaurant’s employee fund, which both businesses promoted via email and on social media. “Nurture your current customers,” says Wilson, “but also look for and pursue partnership or collaboration opportunities that honor your values as a brand and drive visibility within the communities that align with those values.”

As craft brands work to weather this new beverage sales landscape, owners and team members try to look at the upside. “Maybe if it wasn’t for Covid,” says Livanos, “I would have much less off-premise business than I do now.”

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