Growing adult beverage sales is a challenging task in an environment where strong growth in patron traffic is lacking.
Understanding the trends and market forces influencing traffic—from new competition for occasions to changing consumer behaviors—and the role of adult beverages in driving traffic and repeat visits is crucial to increasing sales.
Technomic’s duo of David Henkes and Donna Hood Crecca will share current insights into the state of the drinks business on-premise and the outlook and opportunities in light of these evolving dynamics. We spoke with Henkes as VIBE Conference 2020 neared.
VIBE: Explain how traffic has changed the game for operators lately.
Dave Henkes: When you look into growth trends, the traffic situation isn’t getting worse but it certainly is not getting any better. When we look at our forecasts and also we look back, we see that as an industry, we’re in a fairly prolonged period of stagnation. We’re oversaturated with restaurants, and consumers are increasingly polarized in terms of what they are looking for. On the one end, a phenomenal, experientially-rewarding way to spend their discretionary entertainment dollars. And on the other, toward a more convenience-driven experience.
We've talked about this in the past at VIBE but it's worth saying again: there are not a lot of operators who do either one of those things very well, either providing a phenomenal experience—something you can't get at home—or providing that convenience option. When you look at things like third-party delivery, that's certainly where a lot of restaurants are managing the convenience-driven consumer. But the overall excitement is lacking and beverage plays a big role in that.
VIBE: Many chain operators, when you look at their beverage menus, seem to be offering drinks that seem interchangeable, maybe with little tweaks but nothing so special.
Henkes: That's the challenge with beverage. We recently did some research, and found that even though many multi-concept operators run numerous concepts within their company—perhaps with one or two locations—to consumers, for all intents and purposes, they are independent restaurants. At those operations, the focus tends to be much more on the bar, and these are beverage-forward concepts. Our research indicates they are generating much higher sales of beverage alcohol and are perceived as having the uniqueness that consumers are looking for.
We're not identifying something really brand new; it's hard for a 300- or 500-unit chain to provide a unique experience because that's not the value proposition of a chain. And value is certainly an issue. A lot of the Margaritas you see are priced at $10, $11, $12 range and at that point you’re getting into an area where consumers question that if it's not especially different, why would they pay that much for the drink?
VIBE: Any obvious fixes available to chains?
Henkes: Just having a renewed focus on beverage and cocktails. And figuring out what actually is an experience and what that means to a consumer. In many cases it means things that they can’t do at home or get elsewhere easily. Putting a little more thought into the beverage program and not just putting what everybody else has on the menu. I know a lot of these operations have cut back on resources and investment, and a lot of time beverage doesn't get as much focus as the center of the plate does, since people are coming typically for the food, with drinks a great satisfaction enhancer but not necessarily a driver for the occasion. We don't recommend moving focus away from the food but the beverage is the differentiator in a lot of ways.
VIBE: Got an example?
Henkes: When Applebee’s rolled out their dollar drinks program, it had a material impact on traffic and they started to view beverage not so much as a profitability driver but as a way to get people in the door. Of course, once you get them in the seats, anything can happen in terms of building check average and spending, and that’s what increased traffic is all about.