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Welcome to this week's edition of the BWAB Newsletter đź‘‹
A quick gulp of NA news, interviews, and musings from around the internet.
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The double edged sword of DTC sales
Our friends at proofnomore.com wrote an interesting blog post on our website about the economics of running an NA brewing company. Here's a little preview -- read the entire article here​
The economics of the NA industry
For many new brands or retailers that are coming onto the Non Alcoholic sector, a common route to market is by doing Direct to Consumer (DTC) sales as this is often the easiest and fastest way for a nascent brand or retailer to move product. However, doing DTC sales is often a “double edge sword” as the more successful you are at it e.g. you are fulfilling more orders, the more difficult it actually is to make a profit especially if you factor your time in pick/packing orders when you can use this time for more strategic/high level business duties. This dichotomy is mainly due to two factors, shipping & handling costs and Customer Acquisition Costs (CAC).
As a business that does both Non Alcoholic (NA) distribution in the New York City area and online DTC sales via our web-shop at Proof No More, DTC is a very tough channel to actually make money in, with a relatively low value to weight product with added costs like boxes, pack materials, tape, pick/pack labor costs, breakage/damage, customer service, and then the killer part shipping.
This is opposite of selling a relatively high value & easy to ship product like clothing or even high end wine with a value of $700-900+ and shipping costs of $45-55. The value proposition in doing DTC sales for say $50 worth of NA beer and the shipping cost is $35 shipping to Zone 5 or about 70% of the value of the beer becomes hard for most consumers to swallow. Due to this low “value to weight”, almost all companies selling NA online subsidize the shipping and handling costs, not charging the customer the true cost of these expenses which eats into margins as very few customers would be willing to pay actual shipping costs. Also, when a new company is starting out DTC, their shipping rate discount off list price isn’t that much until you start shipping say 400+ orders per month do you start to see significant shipping discounts from FedEx/UPS.
Scaling is surviving
DTC selling is all about economies of scale and finding that transition point of doing it yourself out of your home to when you out source it or move to a dedicated facility and hire full time employees to pick/pack/ship is the question and varies from business to business.
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O'douls... people have opinions.
After posting this article last week, there was a lot of chatter on facebook about O'douls. I'd say mostly bad, but some surprising defenders out there as well. What do you think?
A little bit of news
Speaking of starting breweries... here is a Forbes article from February that dives even deeper into the dollars and cents of it all -- As The Non-Alcoholic Category Continues To Grow, Booze–Free Beer Will Be The Space To Watch
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What are your favorite ways to buy NA beer? Hit reply and share!
Cheers,
Logan 🍻
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