Whilst the Covid-19 lockdown has seen the off-trade enjoy week after week of Christmas-like sales, the on-trade, and all the drinks companies that supply it, are facing catastrophe with every week that passes. It is forcing many businesses to make decisions they would never do in usual times. Like turning themselves into retailers and going direct to consumer. Richard Siddle argues it is the one aspect of this crisis that is actually a real force for good and could help transform the long term fortunes and futures of those companies that are the quickest to act and switch to DTC and home delivery. The genie is out of the bottle.
The impact of Covid-19 has already transformed how the on-trade and its supply base will operate in the future, says Richard Siddle.
From pulling rugs from under our feet to throwing our worlds upside down, no matter what comparisons we make, nothing quite sums up the impact the Covid-19 outbreak has had on the UK drinks, retail and most of all on-trade and hospitality sectors.
From being as fully operational as they could, the country’s huge network of bars, restaurants and bars, plus crucially the supply chain that supports it, suddenly saw their entire business stop the moment the Prime Minister, Boris Johnson announced a full lockdown of the on-trade on March 20.
Even though the health and business experts were warning this could happen the fallout when it came was brutal, and, for many, devastating. Businesses have since put in measures to help mothball, and protect themselves as best they can. As a result thousands of talented, hard working people across the on-trade and drinks industry are now on furlough until at least the end of June – and likely to be much longer.
But it has also resulted in arguably the most dynamic, creative, innovative and inspiring time in our collective business lives. Companies have transformed themselves, literally overnight, from being restaurants, bars and on-trade suppliers, to running full on direct to consumer and delivery services, servicing the whole country with ecommerce websites that have appeared out of nowhere.
So fast have so many operators changed the way they work it’s been hard to keep up. The usual rules and practices which 100% trade suppliers follow when working with their on-trade and specialist retail customers have been ripped up. We are now all working in the unknown. Uncharted waters where new rules and regulations apply.
On-trade only suppliers, including Jascots Wine Merchants and Berkmann Wine Cellars, have opened up their exclusive restaurant lists to create new DTC ranges and are switching their sales teams to work their contact books and Linked-in followers to get sales wherever they can. Chief execs and senior management teams are doing what they can to stay in business and keep their staff in their jobs. Furloughed or not.
Finding a way to stay in business and keep everyone employed was very much the initial objective for Jascots Wine, says managing partner, Miles MacInnes: “We were determined and do everything we could to keep everyone in a job. That has been the primary thing. We are so lucky to have such a committed team that have helped make this move to delivery possible.”
What next – post Covid-19?
The big question that has already risen is what happens to all these new trading models and ways of doing business when the lockdown is slowly lifted? Will we go back to the way things were? What sort of hospitality and on-trade landscape will we even go back to?
The genie, though, is out of the bottle. Businesses, on both sides of the on-trade fence, are having to transform how they work just to make a living. But they have also quickly found new, potentially lucrative, revenue streams by going direct, and offering their own delivery or click and collect services. Are they really going to give all that money up and cut ties with all these new customers they have just built relationships with?
Jascots has already seen the huge potential there is going direct to consumer and is now setting up its own dedicated ecommerce website, which will allow consumers to access its full range of 328 exclusive wines at normal trade prices. All delivered to your door in three days.
It has been able to acquire 1,000 private customers in the month it has been going direct, and hopes to be able to treble that in the coming months. What’s more a quarter of those new customers have re-ordered. This is not just vital cash flow, but crucially a new revenue stream that is going to be there whatever happens to the on-trade down the line.
Having a DTC channel in your business also gives you more control over your future. The drinks suppliers that have been forced into going direct, now realise they don’t need to put their entire livelihoods into the fickle hands of on-trade buyers and sommeliers who can pick and drop their wines and drinks from their lists whenever they want.
They, along with hundreds of restaurants and pubs, now have delivery systems that work and a growing database of loyal and local consumers who are more than likely to keep ordering even when with this crisis is over. Yes, the cost of managing individual customers orders might be more expensive, but that should be seen as a welcome new cost as it means you should be making more money overall, increasing revenues and improving your overall buying power.
Let’s also not forget arguably the most important of any wine supply chain – the actual wine producers making and supplying the wine. By going direct to consumer you are moving their wines faster through your business and getting cash back instantly once a DTC sale is made. Cash that can then be pushed back to the producer far quicker than the endless months waiting for it to wash through the traditional on-trade.
As restaurants face such an uncertain future, even when the lockdown is finally lifted, then home delivery will have to become a bigger point of difference as part of their offer. It’s exciting to think of the potential new ideas and innovations that will come down the line as more restaurants work with their suppliers to make DTC a valuable part of the on-trade offer as well. Which is already at the heart of the Berkmann DTC offer where it is also supplying wines for its restaurant customers to market to their own customer databases.
Grasp the DTC opportunity
Yes, there will be those who will grumble that going DTC is ripping up all the channel management rules and regulations that the industry abides by. How dare you go direct with wines you said were exclusive for me? Very soon such comments will sound as old fashioned as suggesting we all have a night in to watch a video.
MacInnes, noticeably, says Jascots has received 100% support from all its on-trade customers for what it is doing with DTC. For if it means they are still there to supply them post lockdown then good luck to them. It’s the view that 67 Pall Mall’s Ronan Sayburn MS stressed right at the beginning of the lockdown when he urged his wine suppliers to do all they can to sell their wines and keep in business.
Yes, those on-trade suppliers that have switched, or will turn to DTC, will need to tread carefully and be prepared for a backlash. Berkmann got its fingers burnt when it first announced its DTC plans, but providing consumers are not getting better treatment than trade customers then what really is the problem?
Why does one part of our industry – the off-trade – deserve to stay in business because the cookie has crumbled their way, whilst the other half – the on-trade – is being forced to stay closed for all our personal health and lives? Those in the off-trade who moan and shout and take to Twitter to complain about on-trade suppliers going direct to consumer should really take a long look in the mirror. For it’s not a nice look. At all.
Particularly for independent wine merchants who are effectively on-trade wholesalers with a retail arm. They can’t justifiably complain when fellow on-trade wholesalers do exactly the same and open up retail and delivery arms of their own.
DTC was coming like a fast train down the track long before Covid-19 came along. It’s just that everyone in the trade can now see it and its potential. So rather than curl up in a ball and complain about it, get excited, grasp the opportunity and make sure you are a business that is driving this change to home delivery. It’s what we all in our collective lockdown worlds now want.
We are all living in the most extraordinary period in our business and personal lives, and whilst the impact of the actual Covid-19 outbreak is stressful and upsetting, we are already seeing what an uplifting, dynamic and even revolutionary influence it is having on transforming both the on-trade and drinks industry that supports it.