March 7 (Bloomberg) -- Some companies use in-home shopping parties to get customers to spend on items like jewelry and Tupperware in the company of friends -- and a lot of alcohol. Diageo Plc is going straight to the fun by shipping liquor and bartenders to clients’ living rooms.
For 2,000 pounds ($3,300), the world’s largest distiller will deploy a bartender to make tiki-style cocktails such as Mai Tais and Zombies for you and 19 friends in your own house. Mixologists are also on offer for vintage cocktail nights, which promise hipster favorites like Negronis and Vespers.
“At home, people are confident enough to make a gin and tonic, but the cocktail scene is still new,” said Kenji Jesse, who’s running the bartender training program for the service. So far, he’s trained up 10 mixologists, all of whom were participants in Diageo’s “World Class” competition to find the world’s best barman, for the new service, which has so far held two events.
While still in its infancy, the program is a signature offering from Alexander & James, an online premium liquor shop set up last year in the U.K. by Diageo. The world’s largest distiller is counting on the site to get consumers to trade up by reaching them directly. Like fashion websites that suggest matching sandals for the dress you’ve bought, Alexander & James pairs glassware to spirits for the perfect pour. Recipes for the cocktail Missionary’s Downfall -- rum, peach schnapps, mint -- suggest using a 49-pound bottle of Ron Zacapa 23 rum and drinking from a 12-pound tulip-shaped tumbler.
The Internet is the next frontier for Diageo and its closest rival Pernod Ricard SA, which are looking for ways to grow their businesses in developed markets like Europe, where discounting and fragile consumer confidence have hit sales. Long restrained by the established interests of middlemen retailers and bars, Alexander & James and Pernod’s SipStor “flash sale” site, where products are sold for a limited time, are turning the distillers into next-generation retailers.
By going straight to customers and showcasing higher-priced liquors, Diageo can capture a slice of the booming online retail market without alienating the outlets that sell its biggest brands such as Johnnie Walker whisky and Smirnoff vodka. It’s also a faster-growing segment -- European online sales will gain 72 percent to 323 billion euros ($444 billion) in 2018, researcher Mintel predicts, a period in which total retail revenue in the region overall will rise about 18 percent.
“What we’re trying to do is make ourselves differentiated to give us a competitive advantage,” said Patrick Venning, Pernod’s U.K. marketing director.
The bottles of alcohol on Alexander & James range from 25.75-pound Ketel One vodka to 1,980-pound The John Walker whisky. SipStor gives customers a limited window to buy drink packages like Absolut Elyx vodka with six branded martini glasses for 120 pounds and Havana Club Mojito packs. Both websites operate in the U.K., and Alexander & James in Germany, and have potential for expansion, the companies say.
Diageo shares slid 0.4 percent to 1,851 pence at 3:26 p.m. in London. Pernod rose 0.2 percent to 84.35 euros in Paris.
Diageo and Pernod are the first of the big liquor makers trying direct sales online, though the former has tested the water with Johnnie Walker Houses in Asia -- three stores that sell pricey and bespoke bottles of their biggest Scotch brand.
While drinks companies are well-versed in marketing their products, they’re new to selling them, according to Trevor Stirling, an analyst at Sanford C. Bernstein.
“Online sales are going to be an interesting experiment for them, but I don’t know whether it’s going to transform the market,” Stirling said by phone.
Brands that stick with one or two routes to market are “going to come unstuck,” said Helen Blackholly, senior director at consultant Alvarez & Marsal. That will herald a necessity for companies to adapt the way they sell, she said, adding that “the whole retail environment we see today could start to change.”
While creating a website and putting in place systems to package and deliver purchases may have been costly to set up, it could be less expensive than the price of buying space to promote brands in a supermarket, Blackholly said. The distillers declined to comment on the start-up costs.
Interacting directly with customers on the Web also gives companies access to previously unavailable information about their shoppers, such as which websites directed them to the site and what they look at on the site itself, providing a window on how drinkers shop -- data usually amassed by retailers. That allows them to target customers more effectively in their marketing.
“What’s going to be gamechanging is the direct access to consumers,” said Antonia McCahon, Pernod’s head of digital marketing. “When we do have more control over how we communicate with them, it does have a knock-on effect.”
At 2,000 pounds, the parties might be lucrative for Diageo, though they are clearly not for everyone. Should they take off, Diageo’s Jesse says he may train as many as 40 more mixologists for the service.
Whether that happens remains to be seen. After a London promotional launch in January, where cocktails included Vesper Martinis with Tanqueray gin, and Old Fashioneds, one guest said she doesn’t see herself making the parties a habit.
The cocktails “were all skillfully mixed and a pleasure to drink,” Lucie Kerley wrote. “But it’s definitely not one of those, ‘I’ll-have-one of-these-dos-every night’ type of things.”
But you could, because for 2,000 pounds, you do get to keep the glasses. The bartender has to go home.
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