New Study Identifies Threats to On-Premise Operators

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Study finds new venues pose a serious challenge to on-premise operators.


The economy may be thriving and jobless rate down, but on-premise indicators could be a whole lot better. This, according to the soon to be released On-Premise Intelligence Report, jointly developed by Technomic and Beverage Marketing Corporation.

Finding growth in drink sales continues to be a challenge for operators and brand marketers alike, says the report. Slowed consumer traffic at on-premise locations and stagnancy in occasions involving adult beverages translates to flat total alcohol volume in restaurants and bars in 2017, although dollar sales are expected to end the year up, driven primarily by increased drink prices and continued growth of premium spirits, wine and beer products at the bar.

While volume growth is elusive, drinks remain an important aspect of going out for consumers, according to Donna Hood Crecca, associate principal at Technomic.

“Consumers prioritize adult beverages, with one-third overall and half of those 21-34 confirming that the drink offering influences their where-to-go decision,” says Crecca. “Today, consumers have more choices, as venues ranging from sports stadiums to winery and brewery tasting rooms are in the consideration set. The more competitive on-premise marketplace raises the bar for traditional locations like restaurants seeking to win the drink occasion. Improving and differentiating the drink experience is key to success.”

Crecca says traditional restaurants and bars now must compete with sports stadiums that have chef-driven restaurant concepts with on-trend adult beverage offerings, as well as winery and craft brewery tasting rooms and even fast-casual restaurants like PizzaRev and Smashburger menuing drinks.

“Since consumer occasions on-premise involving adult beverages aren’t growing, this means there are more venues competing for ‘share of throat.’ Differentiation is key to winning occasions.”

With traffic slowing, share of occasions involving a call for alcohol is stagnant. In addition, one-third of casual-dining operators report that their guests are ordering fewer drinks per occasion.

“So, consumer behaviors have changed – this is something we’ve noted post-recession. It’s an interesting environment right now, as the economic fundamentals are essentially positive – unemployment is low, wages are growing, gas prices remain low, confidence is high – yet traffic and sales at restaurants are not growing at a rapid rate. Adult beverage sales are actually lagging overall food and beverage sales in the on-premise channel. It appears consumers remain conservative in their approach to on-premise spending. All of this contributes to flat adult beverage volume, and only moderate dollar growth,” Crecca says.

One bright spot is the growth of higher-priced offerings, the report finds. Crecca credits a shift towards adult beverages with more robust, rich and complex flavor profiles, such as whiskey and Cognac, and many craft beers, which tend to carry higher price points.

“Also, consumers view adult beverages as an affordable indulgence. While they’re looking to watch their spending, many are also seeking low-cost luxury, and a high-quality drink often fits the bill,” says Crecca.

For bars and restaurants wanting to turn the tide, Crecca says the priority must be differentiation and enhancing the drink experience.

“Whether being known for a curated selection of tequilas served by a highly knowledgeable staff or wines from a particular region, operator concepts need to be ‘known’ for something on the drinks front. And that differentiated offer must be showcased in marketing and messaging, as the type of adult beverage program remains a decision driver for many consumers in the where-to-go decision, especially younger consumers.”

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