BUSINESS

Brewers in Latin America go straight to the customer.

SAO PAULO/BRUSSELS (Reuters)-COVID- 19 lockdowns have made home delivery of everything from fast food to aspirin normal. Brewers are taking advantage of this by delivering cold beer on demand to people who are still hanging out at home with friends even though bars have reopened.

Rafael Mazaia is from Brazil. It is cheaper for him to have beer delivered to his house than to drive to the store to buy a pack and risk them being warm by the time he gets home.

The 24-year-old investment analyst in the Sao Paulo area said, “There is no supermarket near my house. I’m too lazy to go to the market, and the drink isn’t completely cold there, so it’s better to order. “

Anheuser-Busch InBev, the biggest beer company in the world, saw orders for its cold beer delivery service, Ze Delivery, which it started in 2016 in its second-biggest market, Brazil, skyrocket from 1.5 million in 2019 to 62 million in 2018.

In Mexico, Heineken (OTC: HEIN) launched GLUP, a delivery service focused on selling cold beer directly to consumers, last year.

For this reason, Latin America has been a good fit for the format because most people there don’t have a lot of space for refrigeration and they like to get together for things like soccer games. This is especially true this year as fans get ready for the World Cup, which is the biggest sporting event in the world.

Even though lockdown rules are no longer in place, the segment is still growing.

Spiros Malandrakis, a drinks analyst at Euromonitor, said, “Home has become the center of entertainment, and there’s no better way to reach consumers than through direct retail.”

Michel Doukeris, CEO of AB InBev, says that online shopping doesn’t replace shopping in stores. He uses the example of friends watching a game together and running out of beer.

He said, “Most people don’t go out to buy more beer.” But if you can get the beer delivered in 30 minutes, you can have it more often before people think about opening a bottle of wine or mixing spirits.”

In 2021, sales on AB InBev’s e-commerce platforms, which are mostly run by Ze Delivery, grew by 62% to more than $500 million worldwide.

But what’s most important is that beer delivery brings in not only more money but also information about who buys when and what brands they choose.

This lets companies market to specific customers, keep track of their stock better, try out new products, and get better and faster feedback than with traditional consumer sampling.

For the first time, brewers can get this level of detailed information directly from the customer when they sell directly to them.

Doukeris said, “Just the value of that will pay for all the investments we make in direct-to-consumer by itself.”

Late to the party

Aside from a few small craft breweries, beer has been slower to get into e-commerce than wine and spirits. According to IWSR drinks market analysis, wine and spirits make up 40% and 42% of the online alcohol market, respectively, while beer, cider, and ready-to-drink beverages only make up 18%.

However, by 2025, beer and other drinks are expected to increase their market share to 28%, displacing wine and spirits, which are expected to drop to 32% and 40%, respectively, of a 66 percent larger online alcohol market.

Part of that is cold delivery, but most of the beer people order online is part of their weekly shopping. In developed markets, big brewers focus on selling systems and kegs that let people pour their own draft beer.

Last year, AB-direct-to-consumer Inbev’s sales grew at about half the rate of its Ze Delivery e-commerce platform sales.

“We know that most categories start with a very small penetration, and there is a kind of tipping point when the volume of e-commerce goes to more than 3 to 4 percent, and then it goes very, very fast,” he said. Brazil has gone past that point.

Since the pandemic started, AB InBev has expanded the Ze Delivery model to 10 more Latin American countries and is now looking at other markets outside of the region.

The global head of sales for AB InBev, Pablo Panizza, said, “As Latin America matures, we will definitely be willing to look at mature markets as well, because we know that consumers like convenience.”

The pandemic not only made people spend more time at home, but it also led to a temporary loosening of rules that had been stopping growth.

Some Indian states let alcohol be sold through food-delivery apps, and a few U.S. states let alcohol makers sell directly to consumers instead of going through wholesalers.

It’s not clear yet how long the easing in India will last, but a bill in California will try to make the easing there permanent.

There are, however, risks to growth, especially in emerging markets, where inflation is likely to rise sharply. Heineken has noticed that high inflation could cause people to have less money to spend, which could affect growth at some point.

But beer is known as “cheap entertainment,” as former AB InBev finance chief Felipe Dutra said during the last financial crisis, and even though prices went up, brewers were still able to sell more in the first quarter.

Part of the reason is that the pandemic is over, so even people who drink at home are likely to have more friends over.

“It’s very hard to put this back in the box,” said Malandrakis of Euromonitor. “It’s something that people are getting used to.”

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