Constellation Brands Bypasses Stores to Boost High-End Liquor Sales

As many consumers pull back, Constellation Brands is leveraging D2C to attract higher-income customers.

The beer, wine and spirits giant, parent company of a wide range of popular alcoholic beverage brands including Modelo, Corona, Svedka and more, shared on a call with analysts Thursday (April 6) discussing its latest earnings report that demand for the company’s “mainstream brands” has been lower amid inflation. Conversely, however, many consumers are seeking more premium options.

“Our higher-end brands also have strong growth in our emerging and rapidly expanding direct-to-consumer channels and international markets,” CEO Bill Newlands told analysts on a call.

“Over time, we expect our portfolio to continue to migrate toward the higher end and for these higher-end brands, channels and markets to support our top-line growth acceleration.”

Newlands noted that premium brands tend to perform well on direct-to-consumer (D2C) channels and that, by selling right to these customers, the company can drive higher margins on its most luxury products.

This focus on premiumization helps protect the company from much of the inflationary trade-down that firms that target lower-income consumers are seeing, with high earners continuing to splurge on nicer wine and liquor.

“We have seen very little trade down against our portfolio,” Newlands said. “Certainly, there has been some, it appears, but it tends to occur at lower price points than ours.”

Constellation Brands accelerated its efforts in the D2C space back in 2020, when brands of all kinds were investing in the channel, acquiring eCommerce wine company Empathy Wines. Yet, as many brands began downplaying their D2C efforts in the years following, noting the return of consumer mobility and the shift away from the stay-at-home economy, Constellation Brands has continued its initiatives in the category.

The alcoholic beverage giant notes on its site that, in addition to driving sales from Empathy Wines, the company has also taken the brand’s eCommerce capabilities to create sites for a handful of its other wine brands with more D2C sites “in development” in an effort both to boost margins and to improve its marketing ability.

“Constellation’s effort to develop and implement a true omnichannel strategy across its portfolio of brands is unbelievably ambitious; it is just not happening in the category of beverage alcohol today,” Jon Troutman, the company’s vice president of direct-to-consumer marketing, said in a statement. “The idea of blazing an entirely new trail, similar to what we’ve seen develop in some other consumer goods categories, is an incredibly exciting challenge.”

Certainly, D2C alcohol sales have increased since pre-pandemic. A PYMNTS survey of more than 3,200 U.S. adults from the first quarter of 2021 found that 15% of consumers had purchased alcohol online for delivery at a later date. Of those, 80% of consumers who had begun doing so more often during the pandemic planned to maintain some or all of their increased ordering.

Notably, however, a report released earlier this year from Sovos ShipCompliant, which offers automated compliance tools for alcoholic beverage brands and retailers, in partnership with wine industry data provider Wines Vines Analytics, noted that direct-to-consumer (D2C) wine sales are on the decline.

The study, which drew from data from more than 11,000 U.S. wineries, found that D2C sales volume was down 10% year over year in 2022 and average order value decreased 2%, the first decline in the 13 years on record. The data provider attributed the decline to the return of on-premises drinking.