Craig Maske can’t seem to keep his shelves stocked. And he’s not alone.
Like many retailers across the country, Maske, partner and general manager of the three Sherlock’s retail shops in Atlanta, Georgia, has been struggling with frequent outages of major, top 20 spirit brands. It’s predominantly with Crown Royal, Patrón, and Hennessy, he reports, but impacts wine, too, especially early on with bag-in-box wine brands like Bota and Black Box.
The shortages began at the start of the pandemic last spring, improved somewhat over the summer, but have accelerated this fall and holiday season, and now increasingly impact major Champagne brands as well.
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“If I wanted to buy 20 cases of Hennessy, my distributor might send me one,” says Michael Bradley, manager of Crazy Bruce’s Liquors outlets in Bristol and West Hartford, Connecticut. “Some customers walk out because that’s what they came in for. Some of those items like Hennessy and Patrón, they’re almost a category by themselves and customers only want that brand name.”
A demand surge is largely to blame for supply chain issues: Patrón (up 40 percent) and Hennessy (up 38 percent) have boomed year to date as of November 1 according to IRI channel data. Nielsen reports tequila up overall 55.5 percent, Cognac up 56.2 percent, and ready-to-drink cocktails up 131 percent for September and October.
Corey Bronstein, senior vice president and general manager of New Jersey wholesaler Allied Beverage Group, reports that the expansive growth his retail customers have been experiencing has made it impossible for his company to replenish fast enough. “We were simply out of stock on key brands. We’ve never seen increases like this, especially in Cognac which is a bear to keep in stock—primarily Hennessey, Rémy and D’Ussé,” he describes. Shutdowns and restrictions on Pennsylvania’s state-run liquor stores sent many residents across the border into New Jersey to purchase, Bronstein explains, which added supply chain pressure. Ohio and Maryland retailers also received a flood of Pennsylvania shoppers.
The outages come in waves, says Dustin Mitzel, CEO of the four Happy Harry’s Bottle Shops in Grand Forks and Fargo, North Dakota. “At the start we experienced wholesalers not having adequate inventory to meet accelerated demand on items, like box wines, for a couple of weeks but that settled out through the summer,” he explains. But then in July, out-of-stocks on a growing number of spirit and ready-to-drink brands started becoming more frequent.
Now, Champagne supplies are increasingly short as well, says Bronstein, with consumers “celebrating missed moments at home,” he believes.
What Suppliers Are Saying (Or Not Saying)
Many retailers report chronic outages and short-term disappearances of certain SKUs. Sometimes their distributor partners can warn them what to expect; for example, some were told that Patrón’s distillery was focusing exclusively on 750ml bottles of blanco tequila for a period of time, which meant that the producer’s secondary items like XO Café and Citronage would fall out of stock.
However, most retailers say that, in general, suppliers have been largely silent about the cause of the outages, or what to expect, leaving retailers to accept whatever case quantities their distributors are able to dole out.
A spokesperson for Patrón says the pandemic “is changing the frequency of bottling, which is causing an inventory shortage across the U.S. There’s still plenty of Patrón but due to the pandemic, the 60 hands that make every bottle need a little more time and space.”
Similarly, a Diageo spokesperson replied to requests for comment this way: “With the continued high demand of Crown Royal in recent months, coupled with the ongoing impact of COVID-19 on our production in terms of protocols and precautions, a handful of our bestselling whiskies may be temporarily out of stock in some U.S. locations. We are working to resolve this as soon as possible.”
Jonathan Yusen, president and managing director, Americas, for William Grant & Sons, says that the pandemic made some outages inevitable but manageable. “In the first few months of the pandemic, we were able to maintain strong continuity of supply on our most important SKUs, but we did experience periodic out-of-stocks of other SKUs that were lower on the priority list. As the pandemic continued through the summer, we were able to increase production capacity and have since improved service levels even on those lower priority SKUs,” he says. The supplier relaunched super-premium Milagro Select tequila as the boom in agave spirits accelerated through the pandemic, putting pressure on bottle supply that has just recently eased.
Other suppliers, including Campari, Moët Hennessy and Proximo, either declined to respond or didn’t reply to requests for comment.
It’s not just the liquid causing trouble. E. Lloyd Sobel, Breakthru Beverage’s chief commercial officer, says increases in home consumption have impacted glass and aluminum which has impacted beer, hard seltzer, and wine categories. “Many industries are experiencing COVID-related supply chain disruptions. Within beverage alcohol, a significant shift from on-premise to off-premise retail and an associated spike in consumer demand for 750ml and 1.75L sizes has led to some shortages.”
Retailers Pivot to Meet Demand
“Whatever the reason for the outages, I have to solve the problem the best I can; as a retailer we have to substitute as appropriately as possible,” says Scott Arndt, COO of Massachusetts retailer Austin Liquors in Shrewsbury and Natick, and Dub’s in Mansfield. For example, he’s been told to expect no more Godiva chocolate liqueur through the holidays, so he added Mozart liqueur to his inventory and posted shelf talkers suggesting it as an alternative. “But it’s tougher with things like Crown Royal which are much more specific,” Arndt says. “If we don’t have them, our customers may just go to another store.”
The general agave boom, however, has boosted brands beyond Patrón, he describes, with a number of tequilas vanishing from shelves. Arndt says ultra-premium brands like Don Julio 1942, and smaller high-priced brands including Casa Azul, have benefited from premiumization among his customers.
Maske has tried moving Hennessy customers to alternative Cognacs, like Tesseron Composition. But when he does receive products that are in limited supply, he has to decide how to stock them. “Do I put six on the shelf and let that run out until the next day? Or stock them all at once? There’s no good way to handle this,” he shares.
Smaller Brands Are Also Impacted
For emerging brands, the difficulty in converting consumers during the pandemic when sampling opportunities are rare has been magnified by supply chain shortages. For Roy Danis, president and CEO of Conecuh Brands, getting enough Clyde May’s Alabama Whiskey produced and bottled has been very challenging, as bottlers slow production due to pandemic safety concerns. Consequently, Clyde May’s has also been forced to manage outages all across the country.
Transportation, too, has been problematic. “Items we want might be available but getting it to our location in the upper Midwest proved a challenge,” says Happy Harry’s Mitzel. “There were dozens of truckloads in the late summer that couldn’t get to market. If we were going to get a truckload from a group of California wineries for a promotion, we’d normally get that in a couple of weeks, but lately we couldn’t even get a date of arrival predicted. It’s not only ‘Can I get the product?’ it’s ‘Can I get it and get it here?’”
Bronstein says retailers should continue to expect the unexpected. “I’m sure like many general managers at distributors, I have spent more time on logistics and procurement in these last nine months than in my entire career. As holidays approach, we are seeing pantry loading again,” says Bronstein.
But retailers also are reporting positive side effects, like upticks in secondary cocktail ingredients—vermouth, amaros, bitters, and mixers—and experimentation with new brands if their go-to was unavailable. “As time went on, people started exploring and getting into some niche things they typically wouldn’t have at home. They are really exploring our selection in a way I hadn’t seen in some time,” says Mitzel, who is also seeing a boom in bar accessories.
And sales remain brisk in North Dakota, despite period product outages, for which Mitzel, like most retailers, feels incredibly fortunate. “Every month has been surprising,” he says. “People continue to shop and buy things at a level I just don’t normally see.”
For this reason, Bronstein reminds the trade to keep out-of-stock headaches in perspective. Like many wholesalers, Allied’s team has devoted significant energy and resources to support struggling restaurant customers and on-premise sales reps with new sales tools and take-out solutions. “It has been heartbreaking to watch this unfold for our on-premise customers and we are here for our internal and external stakeholders,” he says.