Why channels and route-to-market matter more than product category in complex beverage systems

In the beverage industry, strategy has long been organized around product categories: Beer vs. soft drinks, premium vs. mainstream, alcoholic vs. non-alcoholic. These distinctions remain useful – but in complex route-to-market (RTM) environments, they are no longer the primary drivers of success.
What increasingly determines performance is not what you sell, but how and where you sell it. In fragmented, multi-layered markets, channels and RTM configuration outweigh product category as the critical levers of growth and profitability.

The illusion of category-centric thinking

Category thinking assumes that similar products behave similarly in the market. It leads to strategies built around brand positioning, pricing tiers, and portfolio architecture.

But the truth is, premium beer sold in a nightclub, supermarket, and rural kiosk behaves like three entirely different businesses, with different margins, price elasticity, consumption occasions, and different competitive sets.

The same SKU can be a high-margin prestige product in one channel and a low-margin volume driver in another. Category alone cannot explain this variability.

Channels define the economics

In complex beverage systems, channels – on-trade, modern trade, traditional trade, e-commerce, wholesale – are not just distribution pathways. They are economic systems with distinct rules.

Consider three simplified examples:

• On-trade (bars, restaurants): High margins, strong brand influence, low price sensitivity
• Modern trade (supermarkets): High volume, strong price competition, promotion-driven
• Traditional trade (small shops): Fragmented, logistics-heavy, relationship-driven

The same product must be priced, promoted, and distributed differently in each context. A strategy optimized for one channel can destroy value in another.

This is why leading beverage companies are increasingly organized around channel strategies, not just brand strategies.

RTM complexity changes the game

In many markets – especially emerging or fragmented ones – RTM is not a single pipeline but a multi-layered network:

• Direct distribution vs. distributors vs. wholesalers
• Exclusive vs. shared routes
• Urban vs. rural coverage models
• Formal vs. informal retail

Each layer introduces trade-offs:

• Control vs. scale
• Margin vs. reach
• Speed vs. cost

A poorly configured RTM can erase the value of even the strongest brands. Conversely, an optimized RTM can unlock growth for otherwise undifferentiated products.

The primacy of execution

In complex RTM environments, execution beats positioning. A perfectly crafted brand strategy is irrelevant if the product is not available in the right outlets, cold chain is inconsistent, sales force is misaligned with channel priorities, or incentives do not match desired behaviors.

Availability, visibility, and activation – the fundamentals of execution – are channel-dependent. They cannot be managed effectively through a purely category-driven lens.

When channels trump categories

Several recurring patterns illustrate this shift:

1. Occasion over product

‍Consumers do not think in categories – they think in occasions.

A consumer choosing a drink at a party, lunch break, or convenience stop is influenced by context more than by category boundaries. Channels are proxies for these occasions.

2. Margin pools are channel-specific

Profitability is often concentrated in specific channels, not categories.

For example, premium spirits may generate the most profit in on-trade, while soft drinks may rely on modern trade for volume but on traditional trade for margin.

Understanding where value is created requires a channel lens.

3. Competitive sets shift by channel

Your competitor in a supermarket is not necessarily your competitor in a bar.

In modern trade, price and shelf space dominate. In on-trade, brand image and bartender recommendation matter. In traditional trade, availability and relationships win.

Thus, competition is channel-relative, not category-absolute.

The strategic implication: Design RTM first

In complex beverage markets, strategy should start with RTM design, not product categorization.

This entails:

• Segmenting channels precisely: Not just “on-trade vs. off-trade,” but sub-channels with distinct economics and behaviors
• Defining channel roles clearly: Which channels drive volume? Which drive margin? Which build brand?
• Aligning RTM configuration accordingly: Direct vs. indirect distribution, sales force specialization, pricing, and promotion architecture
• Adapting the portfolio to the channel – not the other way around: With products tailored to channel realities, not forced into them

From product-led to system-led thinking

The deeper shift is conceptual.

The traditional approach starts with the product → defines the strategy → pushes through channels.

The emerging approach starts with the system (channels + RTM) → defines how value is created → adapts products accordingly.

This is a move from product-led thinking to system-led thinking.

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In complex beverage RTM environments, product category is no longer the primary axis of strategy. Channels and route-to-market configuration determine where value is created, how brands compete, and what execution looks like – ultimately, who wins.

Companies that continue to organize around categories risk misallocating resources, misunderstanding competition, and missing growth opportunities.

Those that master channels and RTM design, on the other hand, gain a decisive advantage – not because they have better products, but because they operate within the market more intelligently.

In today’s beverage industry, the real battleground is not the shelf – it is the system behind it.

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