Bars/Pubs Value may be Down, but there are Opportunities in On-Trade Alcoholic Drinks

At the global level, the bars/pubs category has been shrinking, showing a net decline of US$7.4 billion from 2008-2013; however, these figures alone don’t tell the whole story about how global drinking habits are evolving. The decline has been primarily due to two key regions, including Western Europe (which accounted for more than a third of global cafes/bars value in 2013) and Latin America, each of which showed value declines in 2013 due to consumers cutting back on drinking amidst economic difficulties and tougher alcohol-related legislation.

This is not to say, however, that bars/pubs haven’t been growing in other smaller markets, and even more importantly, that on-trade alcohol consumption isn’t growing within other restaurant categories. Key markets in the Middle East and Africa and Asia Pacific have seen strong growth in bars/pubs value in recent years, and in many developed markets, consumers are showing a willingness to spend on drinking outside the home, albeit only when it seems “worth it”. This has resulted in an opportunity for operators to sell alcoholic drinks that offer high value for the consumer, whether in the form of more interesting, complex flavours; house-made speciality beverages; or indulgent dessert drinks.

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Special occasion beverages have high appeal

With this need to maximise value has come a trend away from “every day” alcoholic beverages like beer, and toward those that are more special occasion-oriented, such as wine and spirits. In fact, on-trade beer volume declined in every region except Asia Pacific and the Middle East and Africa, in both of which it was strongly outpaced by other categories.

Growth in on-trade value RSP further suggests a trend toward premiumisation. Despite beer volume declining in five world regions, four of those saw an annual value increase, growing by as much as 10% in Latin America and Middle East and Africa.

Cider/perry offered the strongest growth worldwide, as the small category saw a global volume increase of 8% in 2013. In North America in particular, ciders have come to be seen as lighter, less bitter beer alternatives, and have received an added boost due to the gluten-free trend.

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On-trade opportunities:

These global trends have led to a number of opportunities for operators in developed markets, including the chance to sell more alcoholic drinks in non-traditional service environments, maximize appeal to modern consumers by offering more unique and interesting options, and broaden alcoholic drink occasions with indulgent dessert drinks.

In the broader dining-out space, there has been a global trend toward more casual formats, especially in developed markets where many consumers can afford to dine out regularly. This has also meant that consumers are looking to casual – and even limited-service – formats, for a much broader range of occasions. Consumers are thus growing much more open-minded about drinking alcohol during quick-service meals, opening up an opportunity for fast food outlets. This trend has so far manifested particularly prominently in the fast-casual niche, where alcoholic drink offers mesh well with the higher quality dining experience and higher-income clientele.

Another trend that has been particularly notable in developed markets is that of more unique, speciality alcoholic beverages, including craft beers, house-made soda mixers, barrel-aged cocktails and other unique cocktails. Though this trend encompasses many different menu terms, the goal of all of them is to communicate to the customer that a particular beverage is special, unique, and somehow worthy of the added cost of an on-trade drinking experience. This can also be achieved through unique flavour pairings, such as those using herbs, spices, vegetables, unique textures and fruit flavours.

Inspired by the same set of benefits, indulgent cocktails also add value to the dining experience for developed market consumers. These cocktails combine the alcoholic drinks menu with desserts, offering consumers a way to indulge either before, during or after their meal. Examples include ice cream blended with all manner of alcoholic drinks, including, spirits, beer and even wine. More traditional cocktails can also be made to appeal to post-dinner customers, with sweeter flavours, creamier textures, and indulgent ingredients.

Alcoholic drinks establish an identity

Moving forward, alcoholic drinks will continue to offer an opportunity for operators who are looking to maximize their concept’s appeal, drive higher average checks throughout evening dayparts, and perhaps more importantly, define their brand. Even beyond the financial benefits of an effective alcoholic drinks offer, such beverages can help to define the identity of a restaurant concept, much in the same way that speciality beverages can.  Particularly unique or proprietary alcoholic drink options allow restaurants to differentiate themselves, sending a message to consumers about what kind of occasions the concept serves, what kind of experience it offers, and whom its target customer should be, all very powerful benefits for operators looking to set themselves apart.