Alcohol distributors see more B2C business as wholesale orders dip

Singapore

DESPITE a surge in online orders for booze amid the pandemic, alcohol distributors here are still dealing with the fallout from the closure of nightlife establishments as well as restrictions on group sizes and a 10.30pm curb on alcohol sale for those that reopened their doors.

Bigger industry players whose margins are driven by volume are bearing the brunt of the impact as revenue is slashed along with the diminishing nightlife here.

Wines and spirits distributor CornerStone Wines' managing director Clinton Ang said: "Smaller importers come from a smaller base whereas bigger ones have a broader base of customers, so unavoidably our impact will be more significant."

Outlets in the central business district that used to order "super high volumes are no longer the ones that are making money" for distributors, said Stefanie Goh, co-founder of artisanal spirits distributor Distilled, adding that with more people working from home, neighbourhood-based watering holes tend to fare better as traffic patterns change.

For instance, SG5, distributor for Asia Pacific Breweries Singapore, said that business is helped by traditional on-trade (sales at physical premises) like neighbourhood coffee shops.

People staying home more translate to higher consumption levels at neighbourhood outlets, said SG5's chief executive officer Alvin Chua.

That said, business is still down about 10-15 per cent as some of its customers such as clubs and karaoke bars remain shut.

CornerStone Wines' on-trade business, which accounts for about 80 per cent of its revenue, is now down about 20 per cent.

Sales have also been disrupted for wine and spirits group Pernod Ricard Singapore, which derives the majority of its revenue from the nightlife sector. "With consumer confidence in Singapore at a historic low, conservative spending by consumers has further impacted sales, particularly in the premium category," it said.

While Pernod Ricard Singapore does not disclose revenue numbers, its holding company Pernod Ricard Group reported sales of 2.24 billion euros (S$3.59 billion) for the first quarter ended Sept 30, slipping 6 per cent from the year ago period.

This comes amid lower sales from travel retail but supported by resilient off-trade sales in the United States and Europe and partial reopenings of on-trade establishments.

At Barworks Wine & Spirits, there has been a "big drop in sales due to safety measures and shorter operating hours", said Gregory Ong, sales and operations director. Sales fell about 30 per cent, particularly due to losses from hotels and entertainment outlets and exacerbated by a lack of tourists and events, he said.

Meanwhile, smaller, more niche players The Business Times spoke to said their wholesale business remained resilient, helped by customers who took their businesses online as well. "Our retailers were still taking stock because they were also doing a lot of e-commerce," said Distilled's Ms Goh.

E-commerce also swung the other way for Distilled during the lockdown, accounting for 80 per cent of the business compared with just 20 per cent before the pandemic.

With the reopening of watering holes in Phase 2, the e-commerce segment at Distilled now accounts for about 30 per cent of business.

Even as the surge in off-premise sales tapered down since Phase 2 and dining was allowed again, Corrine Chia, co-founder of craft beer distributor The Drinking Partners, said that the off-premise sales during the lockdown period had indeed helped "buffer the drop in wholesale business".

Similarly, Pernod Ricard Singapore said that the growth of the off-premise sales have partially compensated for the drop in the nightlife business. Brands like Chivas, Absolut, Martell and Jacob's Creek have "delivered significant sales growth" during the circuit breaker till today.

Still, there is a need to accelerate the sector's recovery, particularly through the extension of alcohol servicing hours and increasing capacities at on-premise establishments, said industry players.

Establishments serving alcohol are sacrificing hours' worth of revenue due to shortened hours and group sizes limited to five people. The Business Times earlier reported that bars could be seeing up to a 50 per cent increase in revenue should restrictions be lifted.

With the industry still challenged, Barworks' Mr Ong is ramping up efforts on the B2C (business-to-consumer) front. For instance, with more people drinking at home, he said that there are plans to launch a private sales catalogue for Christmas and the Lunar New Year. Revenue from e-commerce and private sales have grown to about 20-25 per cent versus just 10 per cent previously, he added.

For CornerStone Wines, its B2C segment now accounts for around 40 per cent of overall business, compared with just 20 per cent previously.

It also recently held a three-day warehouse sale. Mr Ang said that with overall business still hit by lower on-trade sales volumes, there was leftover stock. "It's logical to reward our customers with a warehouse sale rather than to have inventory sitting on our books," he added.

The Drinking Partners' Ms Chia highlighted the importance of building strong ties with consumers.

Producers, distributors and venue operators that have forged tight relationships with their consumers, especially with the aid of social media platforms, can respond to feedback and adjust quickly, she said.

READ MORE: Three bars and pubs to reopen for two months under nightlife pilot