Food And Beverage DTC Business Sees A Sharp Rise In Pandemic Season

Food and Beverage DTC Business Sees a Sharp Rise in Pandemic Season

2023-01-13 11:16:05

By : JSB Market Research

In : BLOG

During the pandemic time and right after it, the DTC food & beverage business is creating its legacy and competing strongly against retail challengers with the rise in subscriptions and demand for service across different food and beverage products. While high price and environmental concerns are the key challenges, the continued trend for the DTC model in the Coronavirus-stricken world has launched a huge impact on the industry.

When several months of lockdown were applied around the globe, the food and beverage DTC took a new turn with restaurants and bars pushed to the sideline of competition, and delivery services such as meal kits and wine boxes found relevance among consumers. In this post, we will take you through the best examples of successful DTC food and beverage brands and how they fared in the pandemic years as well as what to look ahead to in the post-pandemic era.

Boosted Sales, Increased Online Service, and Quick Subscriptions

In 2020, the total sales for Pasta Evangelist rose by 300%. The company was later acquired by Barilla (an Italian food giant) in the middle of the pandemic time. Here, every month its competitor Gousto was able to deliver 4 million meals in the United Kingdom, raising in funds $41 million. In the section for beverages, Wine List, an alcohol brand also gained new customers who during lockdown contemplated treating themselves to goodness.

Also, a physical coffee retailer – Grind began to see a rise in selling its products on the internet. Another area where the food and beverage DTC found success throughout the pandemic period is quick subscriptions. For instance, in the quarantine period, Grounds & Hounds Coffee Co reported a growth of 35% in their figures for monthly subscribers.

The CBD brand Equilibria said that subscription-based offerings had an improved demand, which shot up in March 2020 by 100%. By 2023, we can promise massive growth in subscriptions for DTC food and beverage with an estimated rise of 75% for online players.

Sustainable and Healthy Living as DTC Food and Beverage Market Drivers

During the pandemic, people became more conscious about their health. The idea of sustainable and healthy living thus led to an increase in healthy food and beverage choices, giving a new boost and opportunity to use the DTC model to key manufacturers. A visible trend is a desire for a healthier lifestyle, which has resulted in no or low-ABV drinks. We also find a growing preference for vegan food and drinks. One such example is All Plants, a vegan delivery service.

As far as beverage leaders are considered, the fastest-growing is oat milk from the mini-category as a vegan alternative to dairy. A fine instance is the brand Minor Figures, which offers carbon-neutral oat milk. It saw a spike in demand as a planet-friendly and plant-based beverage. But an issue is DTC drink brands that utilize single-use plastic, which is not eco-friendly. Yet in the pandemic time, people kept their concerns about plastic packaging at bay.

But in the post-pandemic era, people are looking forward to environmental-friendly brands. There is also a new base of users who prefer non-alcoholic beverages, giving a fine platform to BrewDog, a craft beer brand to launch in 2020 as the world’s first alcohol-free bar. Thus, DTC brands can follow the consumer priorities of healthy living and planet-focused sustainable products to position themselves better in the market.

Competition to DTC Food and Beverage Players from Retailers

It is important to note that retail competition from supermarkets. So, even if the DTC model picked up the pace, one cannot let go of the fact that local supermarkets hit record high grocery sales, along with the supermarkets online doing the same, with a 10% sharp rise in 2020 alone. During the lockdown, CPG giants such as Coca-Cola, Pepsi, and Nestle made profits from the direct-to-customers model.

According to Sarah Loos from Twitch, a gaming platform, advertisers in the last year’s crisis did follow the customers online and spent on digital media ads, which grew over 7% in 2020. So, the dollar spent for acquisitions online after the restrictions ease will improve the service flow. By the end of this year, the growth expected in this case is by 22%.

DTC Food and Beverage Model Challenges and Conversion

According to a Global Food & Drink Analyst at Mintel, Ayisha Koyenikan, lower-income households find the huge premium price for meal kits and recipes unappealing, even though we can see that consumers look forward to the DTC format. But the pandemic time posed severe recession for such groups. Thus, subscription services need to meet basic convenience. To retain new customers, they have to change their perception of value.

The sudden rise in food delivery subscriptions fared well during the pandemic period. But the future of it depends on the demand for DTC and user preferences for environmentally friendly and healthy options against the challenge of legacy retail. To mitigate the higher price point by the DTC model in comparison to the supermarket competitors in the post-pandemic years, the providers have to rework their strategies.

As for the top DTC food conversion, the fastest market share occupiers are wine, chocolate, coffee, meal delivery, miscellaneous food, fresh juice, meat, and tea. Across all industries, the conversion rate for an average e-Commerce website in the United States is 2.63%. Thus, a massive opportunity results for the manufacturers of DTC food when they also have an online retail presence.

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