Out for a Drink
Dispatches from “on-premise nation” find a people who
are on the go and looking for a little excitement
it’s a nation in motion. Home may be where the heart is, but
it’s not necessarily the house of beverage consumption opportunities
all day, every day of the week. Away from home is where the land of
on-premise opens its gates of opportunity.
One could say on-premise begins where off-premise
ends, but that may be an unnecessarily confining way to look at life in the
21st Century. Everything from the ballpark to the bookstore constitute the
“on-premise nation”, even as its capitols are clearly the bar
and the restaurant. Of course, what gets stocked, served and consumed in
those places is up for grabs.
In short, on-premise is like the credit card that claimed to
put the you in ubiquity: It’s where you want to be.
On the Town
The kitchen, at least the business end of it, is a
place to which more and more Americans seem to be developing an allergy.
Eating out is in.
Restaurant sales are projected to top $440 billion in
2004, a record, according to the National Restaurant Association.
That’s 4 percent of the U.S. gross domestic product.
According to the NPD Group, which tracks the restaurant trade,
consumers are more likely to wait for a table, or at least their extra value
meal, than they were in early 2003 when cold weather, the economy, and Iraq
were keeping people home, capping “the weakest year in more than a decade.”
Fast-food joints, conduit of so much fountain soda,
picked up their pace in the last quarter of last year, NPD says. Those
hamburger restaurants that form the core of the grab ’n go trade saw
traffic rise 6 percent from the year before.
At McDonald’s, customers who left supersizing
behind long before the Golden Arches did can feel less guilty by ordering a
Go Active! Meal, which is a salad accompanied by a bottle of water.
“How illogical was it to not think about your consumer?” asks
Darrell Jursa, president of the Liquid Intelligence beverage consultancy. “Look
at McDonald’s. Why are they doing so well?”
Among other things, he believes, “it’s the
salads at night with the bottled water,” that are a prime example of
foodservice operators being in tune with what their customers want.
Diet Dr Pepper also goes nicely with a premium salad,
says Bryan Mazur, director of customer marketing for Dr Pepper/Seven Up,
explaining its low-cal CSD flagship is increasing its McDonald’s
penetration thanks to Mickey D’s catching up to its customers’
health and wellness concerns. Diet Dr Pepper is available in less than 10
percent of the Golden Arches nationwide at the moment, but DPSU projects it
will be in between 15 and 20 percent of McDonald’s fountain sets
across the United States by year’s end (by comparison, regular Dr
Pepper McD’s penetration stands at around 45 percent).
The overall restaurant industry was cresting toward
the end of 2003, with NPD pegging November (the last month in
eateries’ seasonal year) as the strongest month of the annum just
Every beverage segment
wants in. Even good-old stolid milk is acting up. The Milk Processor Education Program notes its product
represents only 3 to 5 percent of a restaurant’s beverage sales, well
off the rate it enjoys in the take-home market.
“Without significant action to reverse these trends, milk consumption
will decline as food at home continues to decline,” reports the association.
“Beverages are the No. 1 or No. 2 profit driver
in restaurants,” notes DPSU’s Mazur. That makes the category,
in essence, a significant daypart unto itself. “Most restaurants
don’t manage it as a daypart,” something DPSU is dedicated to
doing with its accounts. Its contemporaries are similarly lending a helping
Eye-poppingly, 23 percent of restaurant traffic does
not purchase a beverage with a meal despite all those entreaties of
“something to drink with that?”, according to DPSU research. A
full 8 percent buys a meal in one place and “makes an effort”
to buy the beverage elsewhere. “There’s an opportunity to close
the gap,” Mazur says.
Major chains are leading the charge in attracting
diners and drinkers — from milk to malternatives — back through
their doors. They’re half the restaurant industry and enjoyed a
4-percent rise in traffic last year compared with 2002. Quick-service
restaurants (think Wendy’s or Subway) and casual-dining chains
(Chili’s, for one) each drove their traffic upward by 5 percent.
“The lines,” Jursa of Liquid Intelligence has noticed, “are
out the door at Chipotle.”
Eating out in 2003 wasn’t just about a night on
the town. NPD notes traffic increases at fast-food restaurants for
breakfast and lunch outpaced those for dinner. Increases were also clocked
for lunch at casual dining and midscale (Denny’s is an example)
Four Legs to Stand On
When viewing the territory that comprises the shifting
plates of on-premise, at least one high-profile beverage marketer chooses to see not one but four broad opportunities to
take consumers’ orders and serve what they want and what they need.
Michael Hammer, Pepsi-Cola North America’s
senior manager for channel strategy, restaurants and entertainment
(including theaters, theme parks, lodging, casinos and foodservice), says
there is a foodshop quartet of thirsty people’s concerns to which his
company is listening closely.
The aging population. “Baby boomers are getting older. They’re
active and have more money to spend. It certainly adjusts the products we offer
and how we offer them.”
The battle of the bulge. “Obesity. Hey, you’ve gotta balance
fun-for-you with good-for-you. So it’s not just full-calorie on fountain.”
A diverse audience. “Latino and African-American demographics
are growing faster than Caucasian. Working with our bottlers, we reevaluate
our offerings at individual locations keeping the ethnic market in mind.”
Variety and convenience. “There’s a higher demand for what used
to be considered out of the norm. In the afternoon, there may be a desire for
a high-calorie boost — or high juice content in the morning. We take every single
occasion and find a product to match it.”
What unites these diverse constituencies is that people “are
living most of their lives away from home-occasions,” Hammer says. “What to
pick up on the way to work? After work? What do you want to consume from restaurants,
theme parks, movies?” Pepsi and its fellow brand owners may not have all the
answers, but Hammer says, “we do a lot of work to help with our customers.”
It’s not just about dousing a hot tamale with
the first cold, wet item within arm’s reach of that fire. “I
may be a loyal Pepsi drinker at home,” Hammer says, assuming the
identity of a consumer, “and I buy it at a good, valuable price,
maybe $1.29 for a 2-liter. But at a restaurant, I may want a Mountain Dew
or a lemonade as a different treat. Maybe a clean, clear, crisp Sierra
Mist.” Increasingly, the customer wants Aquafina and can get it at
Burger King, quite a coup for Pepsi, considering the fountain business
still belongs to Coke.
All of the above, Hammer emphasizes, is what mixing
and matching “occasion and need state” involves. The restaurant
may represent a treat or “an escape from what you have at
home.” Thus enter, for instance, flavored tea that never sees the
inside of some consumers’ refrigerators.
Category management sets the course for foodservice, according
to Foodservice Leadership Drivers, a study by Cannondale Associates. “It is
focused on identifying solutions and programs based on fact-based consumer insights…
the consumer is at the heart of true category management excellence.”
“We act,” Hammer says, “as [customers’] strategic partner in
category management. If we’re doing our jobs right, most customers realize beverage
sales are more and more important. The profitability can be huge.”
Dollars and Dispense
Fountain has a lot going for it, notes Mike Dillon, group director
of QSR marketing at Coca-Cola North America: “freshness, control and profitability.”
A Coke and a smile are perennial favorites, but Coca-Cola tells its foodservice
customers, “we can make you more money than anyone else” as a beverage provider.
“We build your brands.”
Non-carbs aren’t exactly non-profits either. Dillon cites Dasani’s
penetration as “pushing the roof” and Minute Maid Lemonade Light as “taking
off”. That’s the consumer’s idea, not Coke’s.
“It’s never because we push it,” Dillon says of that or any
Coke brand’s on-premise success. “It’s because it gets pulled through.”
Coke calls its foodservice mindset a matter of TURF:
Total Unduplicated Reach and Frequency, meaning brand optimization drilled
down via intense study of demographics, usage patterns and patronage at any
given location of any given outlet — anything to create the
appropriate brand set.
“There’s an interesting relationship between consumption and
preference,” Dillon explains. “The No. 1 driver of preference is consumption
and the No. 1 driver of consumption is preference.”
The lessons of the multiple beverage marketplace haven’t been
lost on its biggest participant. Coca-Cola, like everybody else, needs to take
its cues from people’s desires. If the people would just get around to making
up their minds, everybody could knock off early.
No such luck. Dillon cites data that finds “at 4 p.m., 70 percent
of America has no idea what it’s having for dinner. Time pressure is massive.
It’s driving a lot of consumption away from home and away from the office.”
Driving is the key word, as QSR drive-through becomes ever more
important to food and beverage sales.
Coke’s service to its customers then becomes
anything but drive-by. “Our job becomes providing a total system
solution, our whole bundle.” That
means providing drink vessels that are better for cars, dispensers that
fill those cups at the optimal rate and a service infrastructure that fits
seamlessly with the account.
Opportunity to be Mist
Pepsi, like Coca-Cola, doesn’t lack places to display its on-premise
know-how, ply its trade or pour its heart out. “We’re a company that focuses
a lot on retail distribution and the value of distribution as well,” Hammer
says. “There’s an incredible need to use these channels for activation, sampling
and growing a brand in its channel. If we can activate a brand in movie theaters
while people are enjoying their time out, it does so much to build the enjoyment
of colas.” There’s a genuine joy by association to be had from foodservice,
Sierra Mist, Hammer reports, benefited from near-nationwide
fountain distribution in 2003, three years after its initial introduction. But
these things can take time. Fountain, Coke’s Dillon says, is not a no-brainer
when it comes to launching brand new products. “Post-mix is onsite manufacturing,”
he explains. “There’s a lot of physical activity. It’s a slower build,” than
bottle and can, he says, where volume and distribution can be achieved “extremely
fast — in weeks.”
Keeping Up with that Jones
Jones Soda seems as if it’s a perpetual
freshman, gaining notice from time to time as if it’s the first time
anyone had heard of the Canadian-born, Seattle-based pop that uses pictures
on its labels that are sent in by its consumers. Jones has been at it
almost a decade, its innovative endurance trumping its size.
Just because Jones is small, it doesn’t have to think that way.
Its on-premise strategy reflects a widening of the mind. As chief operating
officer Jennifer Cue explains, “We really wanted to branch out and diversify
from the independent distributor network.” Premium foodservice accounts became
the ideal route to market.
It all made sense for a brand whose roots were in
skate shops and tattoo parlors, outlets to which the bigger guys
hadn’t given much, if any, thought.
Earlier this year, Jones Soda went on sale in 3,900
Starbucks coffee emporiums across the country, following an audition of
sorts that’s been going on in Canada (400 outlets) since 1999. With
North America’s Starbucks conquered, Jones has an impressive trio of
non-traditional — by old standards anyway — account notches
along its on-premise belt. The brand, in carbonated and non-carbonated
form, was already ensconced at Barnes & Noble cafés and at
Panera Bakery Cafés. That’s beans, books and bread in a big
way for a little guy.
“It’s a real high-visibility
account,” Cue says of Starbucks. “We’re more of an
accessory there. But it’s huge recognition for us throughout the
country to have Jones in Starbucks, Panera and Barnes & Noble.”
Sales there represent a significant chunk of Jones volume, but it also, the
company hopes, demonstrates its viability to distributors who might take it
The Lion and water
Fiji Water is about as upscale a bottle of water you
can find, and sells most — about 85 percent — through retail
channels. But the company says the golden three in 20 servings that pour
on-premise are significant beyond their numbers.
“It’s the best sampling program you could ask for,” testifies
Senior Vice President of Sales Ken Kurtz. “The great thing with on-premise is
it’s the highest-potential growth channel.”
Top restaurants and hotels offer it across America,
“and it drives trial,” adds Doug Carlson, president and chief
Word of mouth has its advantages. No so-called
alternative beverage can attest to that the way Red Bull can. Long before
its wings spread on spot television, the Euro concoction that was all about
boost became buzzworthy. Clubbers found a Bull, taken straight or mixed
with vodka, made the night last longer. Its cans have become fixtures
behind many bars… at a nice margin, too.
The fountain could become a font for energy drink
sales, one competitor is thinking. Roaring Lion, letting loose from
Southern California, is offering similar functionality and taste to Red
Bull but in a way that promises to love the nightlife even more. Roaring
Lion has a bag-in-box version to energize more bar and club sales.
Life of the party
The tavern scene wasn’t built on energy drinks
but rather the vigor of a harder drinking crowd. For a drinker, even one
taking the widely prescribed route of moderation, there are two ways to
enjoy and/or take advantage of the emerging health benefits of alcohol. You
can stay home and enjoy a quiet cocktail or you can go out and be sociable.
The latter choice seems to be winning people over.
“Logic says that these are tough times,”
says Jursa of Liquid Intelligence, “but people still want to feel
good. In an uncertain world situation, there is scariness out there, but
the combination of drinks, good conversation and good friends makes you
feel good.” The drink itself, he believes, serves as a conversation
“Furthermore,” adds Euromonitor, Chicago, in its report The
Market for Alcoholic Drinks in the USA, “fashion and trends are first formed
through on-premise consumption. For this reason, manufacturers devote considerable
resources to promoting their brands in bars and restaurants.”
If a drink says a lot about the drinker, as proponents
of the badge value of consumer branding have always espoused, some kinds of
drinks speak a lot louder than others. In 2003, spirits and wines cleared
their throats and spoke up in on-premise situations. By contrast, beer was
On-premise marketing perhaps matters more to alcohol
than non-alcohol because bars are de facto sampling booths. Skyy Spirits,
for example, issues drink recipes to bartenders along with educational
programs to add flair and context. The Skyy Melonade, whose foundation is
the new Skyy Melon flavored vodka, is concocted with pineapple and a splash
of grenadine, served bright pink in a martini glass. It’s done in the
name of increasing the Skyy call at the bar.
Though it may seem like chemistry homework, Skyy Vodka brand
manager Jay Turner finds the story of vodka’s distillation—and Skyy’s purity
level—wins over bartenders who in turn win over their customers. The Skyy salesforce
packs a portable DVD player to educate its accounts on why Skyy is unique in
today’s “cocktail culture.”
Jursa — predicting big things for gin in ’04 — cites Effen Vodka
for coming into accounts and working with bartenders on drink recipes, and praises
Brown-Forman as a company that understands what can be built on-premise by way
of promotions that fit the venue because they have folks in the bars. For Jack
Daniel’s, he says, “they’ve hired the right people to accommodate a lifestyle,
as opposed to intercepting a lifestyle.” It’s a big change, he says, from “‘here’s
a t-shirt, here’s a hat.’”
Instead, it’s “here’s a bottle you can deal with on the dance
floor.” Phil Lynch, vice president and director of corporate communications
for Brown-Forman, says Jack Daniel’s Hard Cola (the flavored malt beverage that
B-F recently took over after ending a licensing agreement with Miller) takes
into account how it will be consumed on-premise — held by the longneck to avoid
spills — specifically when its consumers get their dance on.
And Dr. Atkins doesn’t have to be Captain Buzzkill. In Manhattan,
a club called Trust has begun running Low-Carb Thursday Happy Hour. Michelob
Ultra, Bud Light and Stoli cocktails are the featured attractions.
Even if there’s been a turn away from the corner bar image of
glum workers drowning their sorrow (or, to be optimistic, toasting their good
fortune) with a pitcher of suds, beer-makers are accentuating the positive,
seeing to it that their product is enjoyed in its most glorious form. The crafters
at the Brewers’ Association of America have been running an educational program
in tandem with the Draught Beer Guild to ensure quality draught product flows
“from keg to glass.”
Anheuser-Busch takes quality seriously and continues to take
the issue public. April was Budweiser & Bud Light Freshness Month. Across those
30 days, select wholesalers and accounts offered the brands — longnecks and
draught — that were packaged that very day. The Born On date made the effort
certifiable. In Detroit, Anheuser took the concept to Comerica Park for the
Tigers’ home opener. Were they so inclined, adult fans could be drinking day-fresh
Bud packaged that morning in the A-B brewery in Columbus, Ohio.
About a year ago, industry observers sat up and took notice
of an unadvertised phenomenon. Pabst Blue Ribbon was being revived in bars in
big cities. Jursa’s company went into Pabst-happy accounts to find out what
was going on. The answer, he said, was “it was an anti-brand… genuine.”
By comparison, folks in restaurants tend to feel a
little uneasy when ordering wine, given the lingering intimidation factor.
But wine is getting a boost on-premise with single-glass sales as an
accessible point of entry. The knowledge gap is bridged when the restaurant
waitstaff is trained in the ways and whys of wine. Palm Bay Imports, whose
Cavit Pinot Grigio is the top selling import in the United States, has been
diligent about educating waiters and waitresses at accounts such as the
Olive Garden. It helps drive off-premise trade, the company says.
Come last call, whether we’re talking about beer
or soft drink, water or wine, gin or Jones, it comes back to the end user.
People go out for their own reasons. On-premise operators and beverage
marketers and distributors who ignore those reasons do so at their own
“Understand the consumer before anything,” Jursa urges. “You
can’t just sit in a white room in Tulsa and ask about an ad. Get out there and
listen to the conversations.”