The COVID-19 pandemic isn’t the only thing pushing food and beverage brands into the direct-to-consumer space. In fact, the shift to a D2C model was picking up speed well before 2020, bucking the industry’s heavy and long-standing reliance on traditional retail channels.
A D2C movement fueled by convenience and subscriptions
Between 2015 and 2019, food and drinks brands represented the fastest growing sector in direct-to-consumer sales, according to a Digital Shelf Institute report. This rapid growth was fueled by a change in consumer shopping behaviors away from brick-and-mortar stores and towards more convenient, cheaper, and subscription-based online offerings.
The pandemic kicked the trend into overdrive. This year consumers are traveling shorter distances, avoiding crowded places, and working from home. Empty shelves in grocery stores mean shoppers often can’t get hold of every item on their shopping lists. Mercatus reports that more than 10% of grocery shopping is now happening online, and predicts that figure will grow to 21.5% in the next five years. Analysts are confident that the unique buying behaviors we’re seeing during the pandemic won’t be going away.
Food and beverage companies have had to adapt. Brands ranging in size from fledgling startups to global giants are now recognizing the untapped value in selling directly to their customers, not just as a matter of survival in a rocky retail landscape, but as a means to increase loyalty and thrive in the long term.
Which food and beverage brands are winning at D2C?
According to a report by Research and Markets, the global food and beverage eCommerce market is expected to grow from $14.9 billion in 2019 to around $22.4 billion in 2020. This is thanks in large part to the growing number of younger shoppers using phones to purchase groceries online, improved loyalty programs that reward repeat purchases and referrals, and better tools for understanding and responding to evolving buyer behaviors.
To lend some context to this trend, let’s take a look at some examples of brands that have found success in transitioning to a D2C model, both before and during the COVID-19 pandemic.
Ugly Drinks
Ugly Drinks is a counter-culture beverages brand specializing in flavored sparkling water. When the pandemic hit, it further incentivized their existing mission to sell directly to consumers.
There is a D2C revolution going on,” said Ugly CEO and Co-founder Hugh Thomas in a profile with Accenture. “I don’t think any one channel is the right answer. It’s a mixture of all of them, and we’re trying different strategies across all of those.”
Ugly takes full advantage of D2C to offer high-quality, branded merchandise. This inspires their engaged community of fans to share user-generated content, such as Instagram selfies in fashionable beanies, caps, and jackets emblazoned with the company’s logo.
Tessemae’s
When traditional retail channels became less reliable, organic condiment brand Tessemae’s saw an opportunity to expand their D2C product line to include new online-exclusive meal kit pouches, a range of shelf-stable salad dressings, and specialized keto diet multi-packs containing their best-selling sauces.
Grenade
Protein snack bar makers Grenade saw the impact COVID-19 would have on their best-performing retail channels, and so took the opportunity to expand their D2C presence.
It’s been about giving consumers the best online experience, with it becoming more difficult to go out and shop,” says Sophie Thomas, Digital Marketing Manager at Grenade. “More and more customers prefer to shop online as opposed to when they’re out and about.”
KIND
Top snack brand KIND invested big in D2C as early as 2017. Having already established a direct route to their customers, this year saw the company propelled to the top spot on Amazon, driven by a tectonic shift in consumer behavior that saw more and more people shopping online. Introducing “build-your-own” subscription boxes allowed KIND to quickly test and launch new products and boost customer loyalty.
&Soda
&Soda describes itself as a “clean drinking alternative for the next generation”, selling 5% ABV mixed drinks directly to locked-down, health-conscious consumers. The closure of bars across the US and Europe has sent off-premise sales skyrocketing this year. Nielsen reports a 141.5% annual increase in D2C sales of alcoholic drinks. Low-calorie, hard seltzers such as &Soda’s are enjoying especially strong growth, accounting for 9% of all off-premise alcohol sales.
How do you craft the perfect D2C journey?
Whether you’re a food and beverages brand considering the first steps towards selling directly to your customers, or you want to expand or improve your existing online offering, Yotpo has the tools and advice to launch and sustain an effective D2C strategy.
Here are a few strategies for creating a successful customer journey.
Meet your customers where they are
The grocery store shelf is no longer the frontline of food and beverage retail. Today your customers are everywhere, all of the time.
They’re scrolling through social media at 3 am and engaging with email and SMS on their phones. They’re browsing and buying more of their pantry essentials from home.
To reach your next customer, your new marketing strategy needs to incorporate these online channels, and use well-timed and highly personalized messaging to build trust and boost sales.
Offer a subscription service to bulk buyers
Food and drink products lend themselves neatly to subscription services, as online grocery shoppers are more likely to purchase consumable items in larger quantities or multipacks.
Reach out to your customers with a convenient subscription offer just as they’re about to run out of their most recent purchase, and offer benefits such as free or discounted shipping on their next order. Subscribers are not only a source of predictable and recurring revenue, but they offer mountains of information about which products your customers are enjoying the most.
To learn more about creating a recurring revenue model like this, check out our subscriptions chapter in our eCommerce Retention Course.
Reward your most loyal shoppers
Loyalty programs are a great way to supercharge lifetime value and foster high-quality, long-term relationships with your most valued customers. Rewards — such as discounts, redeemable points, samples, and exclusive access — offer added value to first-time buyers and lay the groundwork for a more ambitious loyalty strategy.
Once you’ve identified returning customers, you can cross-sell, up-sell, or offer exclusive benefits such as free samples of newly launched or overlooked products. You can also look to real life brands for inspiration by checking out our list of the best loyalty program examples.
Build a referral program that works
The best referral programs create word of mouth and turn happy customers into highly effective and trusted brand ambassadors. Offer different kinds of rewards for referrals, such as store credit, free samples, express delivery, and product discounts. A points-based reward system promotes repeat referrals, as loyal customers can snowball their accumulated credit for even greater rewards.
Syndicate your customer reviews
Incentivize customers to rate and review their favorite products, then highlight these endorsements across each of your marketing channels, from traditional print advertising to online listings with large retailers.
With Yotpo you can syndicate your existing reviews to Walmart.com, increasing traffic, improving your visibility, and building credibility around your product. For brands in the UK transitioning into D2C, this powerful syndication tool is a vital part of any expansion roadmap into the US.
The future of food & bev is direct customer relationships
Nobody can predict how shopping behaviors will evolve as things return to normal, but it’s clear that food and beverage consumers had already been shifting towards online shopping for years. As traditional retail faltered in 2020, the brands that saw the most success were those who had established relationships with their most loyal customers.
The pandemic may have accelerated this shift, but the D2C trend looks set to continue into next year and beyond. By partnering with an integrated marketing platform like Yotpo, your business can take the first steps towards selling directly to your customers and building your brand.
