Move over, electric cars and space exploration: The world's most famous entrepreneur is jumping into the online alcohol biz. Here's advice from someone in that industry.
Last October 12, Elon Musk tweeted that the Tesla-branded Tequila, “Teslaquila,” which started out as an April Fool’s joke, was "coming soon"; he filed for a trademark that same week. Although Musk has had success in many avenues, from electric cars to flamethrowers, he may not have realized the challenges he faces to break into the alcohol industry, especially if he plans to sell his agave liquor online.
As the CEO of Thirstie, I work with alcohol brands marketing through ecommerce, so I just might have some sage advice.
That advice may be warranted because, today, online alcohol sales are still in their infancy, with less than 1 percent of wine, beer and spirits purchased digitally. Government regulations aside, brands are struggling with how to strategize their internet presence as well as obtain and use the data received from sales in their overall marketing campaigns.
Although consumers will frequently visit a liquor brand’s website, it’s rare for them to make a purchase without being redirected to a third-party site. This is cumbersome and confusing and negatively impacts the overall purchase experience. More importantly, it becomes difficult for brands to own customer data, because they are isolated from their customers by a three-tier, governmentally regulated system.
As we move deeper into 2019, brands like Musk’s Teslaquila should: 1) be aware of the significant challenges they face in joining the world of ecommerce; and 2) learn what opportunities exist for doing just that in an age when data often seems more valuable than oil.
If Musk chooses to join the liquor industry, he’ll need to face the harsh reality that launching a liquor brand online is not the same as launching an automobile’s website. The same could be said for celebrities pushing out their own alcohol brands, such as Drake’s Virgin Black American Whiskey and Conor McGregor’s Proper Twelve Whiskey-- both relatively new to this industry. There are numerous legal and regulatory challenges involved with the sale of adult beverages that these newbie entrepreneurs have to be aware of, and strategize around.
Although the primary goal of the 21st Amendment to the Constitution was to repeal the nationwide prohibition on alcohol, it resulted in a number of federal, state and local laws that govern the manufacturing and sale of alcohol. In accordance with the second article of the Amendment, alcohol producers are able to sell directly only to licensed distributors, who themselves can sell directly only to licensed retailers. This three-tier system creates a lengthy process before a six-pack or bottle of wine actually ends up on the consumer’s doorstep.
There aren’t many industries in the United States today where a constitutional amendment dictates how a brand may operate its business. Unfortunately, for those in the adult beverage industry, the 21st Amendment ensures their path will be incredibly difficult.
Accordingly, before Musk embarks on this journey, he’ll need to understand the challenges posed by this system, and how data loss from a marketing perspective is a real issue. Musk will also need to realize that he can’t just sell Teslaquila from his website as if it were a flamethrower. He won’t, for example, be able to include elements as basic as the price of the product, a customer support line and the ability to order or pre-order a product right then and there.
That said, the obstacles he’ll face, if he goes down this path, can be managed if they're approached with the right solution.
Although the pitfalls of venturing into the liquor industry can be almost as painful as a SpaceX rocket exploding, there are plenty of opportunities to consider. For one, digital alcohol sales are beginning to take off. According to a 2018 study by Rabobank, U.S. online alcohol sales hit $1.7 billion in 2017, a relatively small total dollar value, but online sales are growing at a rate of 30 percent year over year, with the growth of online channels outpacing that of brick-and-mortar retailers.
A massive opportunity exists for brands to take advantage of this growing trend. Musk has several channels he can look to, to sell his products on, such as Amazon or third-party platforms like Drizly. The most effective and efficient strategy for brands, and for Musk, to consider, however, is to build their own brand marketplaces, just as Moët Hennessy -- a business partner of mine -- did with the launch of its own site, Clos19.
The marketer of Dom Pérignon, Veuve Clicquot and Belvedere Vodka established its own marketplace in 2017, allowing consumers to purchase custom bottles such as a single-malt Glenmorangie whisky that's been aged for 41 years, and to have them delivered right to their doorstep. This fits into Musk’s philosophy of creating a customized environment and will allow him to access customer data -- the "holy grail" for many consumer packaged goods (CPG) brands, and something they can’t capture or own when selling on other sites.
Another advantage of ecommerce is that it enables Musk to offer customers a more personalized experience compared to that of brick-and-mortar stores. It allows the sales "aisles" to shift and change based on what a consumer has previously purchased -- so the shopping experience feels more bespoke.
For example, a brand such as Elit By Stolichnaya, widely considered an ultra-luxury vodka, includes personalized messaging with bottles, making them perfect for gifting. Brands such as Elit clearly would benefit from ecommerce capabilities, because they could take the personalization aspect of their products to the next level, and reflect this fact in their online marketing.
Additionally, ecommerce enables brands to not only collect behavioral, but transactional, data, for the first time. This enables consumers' entire path to purchase to be captured digitally, so that brands can insert themselves into the conversation at an earlier stage, which ultimately helps them sell more product.
As a result, alcohol brands like Teslaquila should embrace new tools and technologies more than ever to heighten their visibility and overall growth. If he is serious about the industry, Musk must consider the opportunities in front of him, just as he did when he created the Tesla Model 3, to take advantage of an untapped customer base.
Although the internet has been around for decades, brands in the liquor industry are still testing the waters when it comes to ecommerce. This is the time for Elon Musk, the visionary, to step up to the challenges this journey entails, by embracing a revolutionary approach to alcohol sales through ecommerce. If this is managed correctly, Musk could be a leader of yet another industry and add another great product to his growing portfolio.
Source: ENTREPENEUR (emphasis by SDLAW*)
*Liquor licence lawyers, Simon Dippenaar & Associates, Inc., is a law firm of Cape Town Lawyers specialising in liquor licence applications. Contact us on +27 (0) 86 099 5146 or email email@example.com.