Master of Malt was founded in the 1980s and over the years it has been a mail-order business, a subscription club and a physical shop. In its current iteration, it is one of the world’s leading online retailers. The company claims to deliver the best end-to-end ecommerce experience available anywhere in the world. Judging by the number of awards it has collected in recent years, the claims may be valid.
Master of Malt head buyer Guy Hodcroft explains: “The basic model for Master of Malt is that we carry most things. We have 50,000 products in stock. If you are after an obscure Lithuanian black leaf liqueur that you tried on holiday or a Mauritius rum, we will likely have it.
“What really separates us from other online retailers is assortment, range and expertise. It is all those things. If you call our service team or use our online chat function, you will speak with someone who knows what the product is and knows the difference between column still distillation and pot still.”
We are ploughing the investment straight back into the business. We have probably grown our warehousing by a third in just the last year.
Master of Malt and parent company UK-based Atom Group were acquired by Anheuser-Busch InBev’s (AB InBev) global growth and innovation team ZX Ventures last year. Hodcroft says: “We are ploughing the investment straight back into the business. We have probably grown our warehousing by a third in just the last year. Mechanisation is the next big thing to handle the orders. We are investing in software development to improve the functionality of the site. It is mostly capex [capital expenditure] projects.
“On the marketing side it is all about virtual reality and augmented technology to bring our distillery tours to life,” adds Hodcroft. “We are using drones and 3600 tours to do that. Delighting customers starts when they are ordering their booze — not when they receive the bottle. People are researching. They don’t want to just buy booze; they want to research it and find out who is making it. For an online retailer content is of critical importance. We want to partner with brands to help them build their brands and at the same time build our brand. The customer wins — they get incredible experiences and delicious drinks.”
For AB InBev, the Master of Malt acquisition was attractive on several levels. It offers a new sales channel with the potential for incremental sales growth for the beverage alcohol sector. Online is currently relatively underdeveloped, representing just 2.2% of global beverage alcohol sales, but is growing rapidly. It also gives AB InBev an entrée into the world of spirits. Atom Group also has an owned-brands subsidiary, Atom Brands, and is wholesaler and importer through its Maverick Drinks unit. Master of Malt had a 30% rise in turnover in 2018.
A less recognised benefit accruing from online retailing is greater access to real-time consumer insights. Master of Malt, after bolstering its internal analytics capabilities, is able to provide bespoke in-depth category and trend research. With a greater window into the consumer, the retailer can more quickly respond to consumer trends and better tailor its assortment to match demand.
This first glimpse at consumer trends highlights the increasingly experimental nature of the online consumer. “We are seeing a shift from whisky to more categories. Gin is growing. It is really that diversification away from whisky that it is fuelling a lot of the growth. People want to try new stuff. That’s not to say that whisky isn’t also growing.”
The biggest-selling spirits categories in the last 12 months (from February 2018 to February 2019) in volume terms across Master of Malt trade and retail were whisky, gin, liqueurs, rum and vodka. In whisky, single malt sales were up 16%, while US whiskey soared by 26%. English whisky, a relatively new category, is gaining traction, with sales up 24%.
There’s strong interest in new Scotch whisky distilleries. We’re also expecting increased momentum behind Irish distilleries as more of their own liquid comes on stream.
“There’s strong interest in new Scotch whisky distilleries,” Hodcroft says. “We’re also expecting increased momentum behind Irish distilleries as more of their own liquid comes on stream. There will be further innovation in Scotch from new and existing distilleries alike, and we’ll see more crossover between whisky and entertainment — like Diageo’s Game of Thrones collaboration with HBO.”
Japanese whisky was up 43%, but Hodcroft believes that interest is “softening” due to the lack of availability. “Our sense is that the consumer is moving on, although there is still interest in whisky from other parts of Asia such as Taiwan and India,” he says. “Indian producers like Paul John are making fantastic single malt whisky now.”
Flavours boost gin interest
Gin remains a significant category for Master of Malt, with volume up 41% year on year. Flavoured gins and gin liqueurs dominate, especially violet and rhubarb variants. “Violet and rhubarb were the flavours of the year in 2018, but passionfruit or lemon gin is my guess for 2019,” reveals Hodcroft.
While UK-produced gins hold the largest share, Japanese and US gins are growing rapidly, with sales up 27%. “Gin is a democratic category — a brand doesn’t need to be owned by a large company for it to do well,” says Hodcroft. “For the remainder of 2019 and into 2020, we expect largely more of the same. Gin has not waned, and we don’t expect it to anytime soon. The trade and trade media drive a lot of the talk of gin fatigue. For the average man on the street, they are really interested in the new flavours. It still has a long way to go.”
Local is a significant purchase driver for gins, according to Hodcroft. “We expect this, and the importance of gin liqueurs, to continue to be key themes. I also think we’ll see more expressions released in the Japanese gin category.”
Spiced/flavoured rums soar
Rum is emerging as an alternative to premium whisky, with unique, limited expressions in the £50+ ($66+) bracket proving increasingly popular. Spiced or flavoured ‘rums’ soared over the past year, with volume sales climbing 53%. UK-produced and UK-blended rums grew at 46%, perhaps overlapping with the consumer interest in local gins.
Rum is an increasingly interesting category for us, and while we’ve seen significant growth, this hasn’t been across the board.
“Rum is an increasingly interesting category for us, and while we’ve seen significant growth, this hasn’t been across the board,” says Hodcroft. “We’re seeing pockets of opportunity emerge — particularly for a premium spiced rum, retailing at £40+ ($53+).
He notes that white rum, dominated by Bacardi, only accounts for 4% of its rum sales. “Looking ahead, I expect further interest at the premium end of the market, along with UK-produced rums. Spiced rum is only at the beginning of its growth trajectory; expect more diverse flavours to come through.
“Rum at the top end has the potential to be a competitor to whisky. As single malt Scotch with an age statement becomes harder to get, it is relatively easy to get a 12yr rum for £50 ($66). We see huge interest in different rum styles.”
Master of Malt has seen the liqueurs category climb 53% year on year, largely due to the extraordinary growth in gin liqueurs. Whisky liqueurs are suffering slightly. Coffee and herbal liqueurs are performing well.
“I predict even more sweet gin-based liqueurs to come on to the market in 2019-2020, especially those made in a ‘sweet shop’ style. Contrastingly, I also expect to see growth in drier, mixable liqueurs,” says Hodcroft. “Amaro styles are also set to increase.”
While vodka at large suffers from competition from gin and is largely flat in the domestic global market, Master of Malt has seen its vodka category sales climb 36% year on year.
Flavours remain important, although ‘straight’ vodka is performing best, with a significant trend narrative concerning base materials and countries of origin. Big brands continue to dominate sales.
“While our vodka category is faring better than the wider market, I do expect challenging competition from gin and gin liqueurs to start to take effect in 2019,” says Hodcroft.
Low-/no-alcohol spirits, tequila, mezcal and vermouth are four other ‘trending’ categories where Master of Malt expects to see further significant growth in the next 12 months.
From February 2018 to February 2019, the fastest-growing categories in percentage terms across Master of Malt trade and retail were syrups (+78.6% year on year), vermouth (+75%), mead (+64%), sake (+59%) and rum (+56%). None of the categories grew from a particularly small base (with rum ranking as one of Master of Malt’s top-selling drinks), demonstrating the strength in cocktail-related sales. It indicates that adventurous consumers are increasingly willing to try their hands at at-home mixing.
To see such impressive sales growth is not only testament to some of the new products and initiatives driving these categories forward, but also to the willingness of consumers to try new things.
“Beyond rum, none of these are what you’d call a ‘mainstream’ category, and to see such impressive sales growth is not only testament to some of the new products and initiatives driving these categories forward, but also to the willingness of consumers to try new things,” says Hodcroft. “There’s now absolutely no reason that customers can’t get their hands on the same top-quality liquids as professional bartenders, and we’re seeing this in the purchasing decisions.”
Three key future trends
The Master of Malt team has identified three key ecommerce trends set to disrupt the online drinks retailing space in 2019 and beyond.
Voice search, personalisation and meaningful content are three key drivers already shaking up the online commerce space, and the retailer believes they will come to the fore in drinks in the next 18 months. “Consumers are used to shopping for grocery online, but the drinks sector is notoriously behind when it comes to ecommerce,” says Master of Malt editor Kristiane Sherry. “There are all kinds of reasons for this, from regulatory challenges to a historical lack of consumer acceptance. We’re now seeing a game of catch-up.
“The lines are blurring between social, content and ecommerce. Customers expect a tailored experience when shopping online, a retail space that is now a natural habitat. Drinks retailers need to take this seriously.”
This content is courtesy of Global Drinks Intel magazine and provided to the IWSR with permission for publication.
- Irish Whiskey
- Mixed Drinks
- US Whiskey