The spirits and liquor industry supply chain has evolved through different eras of varying complexity. As a global industry that cuts through regions, governments and belief systems, a lot of details are involved in sorting out appropriate logistics for alcoholic beverages as they are produced and transported to consumers.
Other factors that affect the supply chain of spirits and liquor include the fragile nature of many products, quick shifts in demand, tracking systems that fight counterfeits among others. All of these contribute to the changes and twists that we keep seeing as long as alcoholic beverage distribution is concerned.
The spirits and liquor industry supply chain is divided into different categories from production to consumption. These levels include:
- Wineries, breweries, distilleries, brand owners and importers.
- Wholesaler distributors
Wineries, breweries, distilleries, brand owners and importers
The first group in the supply chain categories mentioned above can be generally classified as the producers. These are usually the primary source of products and are responsible for initiating the supply chain processes.
Wineries, breweries and distilleries all have their own independent and internal supply chain systems. Before the advent of the sophisticated production systems that we have today, subsistence brewing processes that served specific localities were the order of the day. Increased demand and brand growth has caused these processes to be expounded, evolving into what we have today.
In a summarized view, this category transforms raw materials into inventory and delivers finished goods to the market.
This category is responsible for bulk movement of products away from the production centres and closer to the consumers. They include transportation and logistics companies, franchise holders, brand ambassadors and everyone involved in the bulk movement of products across regions and distances.
Wholesale distributors are usually responsible for warehousing, storage, regulatory compliance, handling and certain value-add services that are required, such as repackaging.
Order fulfilling, import and export services, standard control, custom bottling and labelling, and inventory tasting are all crucial aspects that are handled by this category of participants in the supply chain.
These are basically pubs, bars, grocery stores, restaurants and anywhere that the final consumers can purchase the alcoholic beverages for use, which in most cases is eventual consumption.
This category is also involved in storage, local distribution and delivery services, pricing, advertising and PR services for consumers.
Putting all the above stages together gives us an overall supply chain system for the spirits and liquor industry that can be a handful with the current size of the market.
What is the Size of the Spirit and Liquor Market?
The Alcoholic Beverages Market was valued at $1,344 billion in 2015, and is projected to reach $1,594 billion by 2022. This is a significantly huge market that involves a high number of constantly working parts.
Before the advent of improved technological systems like the ones we have today, both in terms of production and logistics, alcohol production and distribution was highly localized. Every wine, spirit and liquor was identified to a particular locality, down to individual families.
Perhaps, this is a tradition that has been retained over the years, despite how far these things have traveled. Real names and origins of products have remained, and consist of the originality that is most often associated with brands.
Back then, it was easy to move barrels from place to place, covering just a few miles without needing any special monitoring system. Records where easy to keep and when necessary, validation could be carried out even in person and directly.
What Has Changed in the Spirits and Liquor Industry?
Time passed and brands went offshore, crossing boundaries and encroaching into cultures. Increased demand, exploding market size and changing regulatory systems in today’s market has required closer attention to be paid to the spirits and liquor industry supply chain.
Thanks to technological evolution, processes today are emerging that are enabling companies and brands to tackle the enormous logistic challenges involved in the spirits and liquor industry effectively.
The constantly changing demands by customers require a robust tracking system that can offer efficient feedback mechanism. Blockchain technology is being used today to monitor the behavioural trends of the end user and enhance adjustments at any level required.
Brand protection and the fight against counterfeit production has proven to be a difficult battle in the spirits and liquor industry. Traditional methods of fighting this vice have been plagued with so many loopholes that have rendered it ineffective.
Blockchain is an authenticity-proving technology that is being used today to track and identify original brands more easily and in a cost effective way. The tamper-proof, transparent and immutable characteristics of blockchain technology has endeared it to industries where supply chain management plays a role.
Once information about a product is fed unto the blockchain, its movement can be tracked all through the distribution process without any chance of tampering. This alone introduced a confirmed integrity level for products that are transported even hundreds of miles away from the point of production.
Using this same tracking processes, wineries, distilleries and breweries can follow-up on the constantly changing drinking patterns of consumers from different parts of the world. This provides very useful information that helps in planning ahead and making accurate forecasts during production in order to avoid waste and maximize profit.
Looking at a Practical Implementation
Volum’s implementation of blockchain on one of its portfolio companies in Airtab shows us exactly one of the unique ways as to how the spirits and liquor industry supply chain has evolved. This particular implementation uses blockchain to enhance social drinking and enable alcoholic beverage companies that subscribe to the platform scale effectively.
This particular platform provides an app that can be used to locate specific pubs, bars and restaurants that are close to an individual for moments when they need them. At the same time, it provides the opportunity for social networking between people of like passions when it comes to drinking and hanging out.
The processes involved in this case are blockchain-enabled, down to the transactions. This takes away several logistical headaches and overhead costs in terms of internal administration. Blockchain makes everything transparent and largely automated, eliminating paper-based operations, and even older computerised systems and replacing them with a more trustworthy system that eliminates human interference to a very large extent.
The spirits and liquor industry is a dynamic ecosystem that is in constant evolution. The changing demands of consumers and the adjustments of regulatory frameworks implies that the custodians of distribution systems must make necessary changes. This will enhance industrial functionality, brand protection and proper service delivery.
For a market of this magnitude that is laced with even more upside potential, the benefit of emerging technologies cannot be overemphasized, especially in the consideration of how the spirits and liquor industry supply chain has evolved.