Channel Strategies: Patrons trade off to drink out
April 15, 2009
The decline in disposable personal income this year has led consumers to make budget cuts, and the on-premise industry is one area feeling the belt tightening. In 2009, overall on-premise food and beverage sales in fine dining, casual dining, bars, nightclubs, lodging, casinos, concessions and other recreation will decline 5.4 percent, predicts Technomic Inc., Chicago. Alcohol sales will fare better in those channels and see only a 1.6 decline, Technomic says.
“The number of people coming into bars and restaurants is down, so that’s having a big impact on what’s going on within the business,” says David Henkes, Technomic’s vice president and on premise practice leader. “Our sense is just because sales have been declining so much, the percent of sales that come from alcohol within chain restaurants and within the casual dining community in general is going up a little bit.”
Part of the reason alcohol is not forecasted to decline as much is that the bar and nightclub segment, compared to everything else, is relatively healthy, Henkes says.
“People are still going to the corner pub or sports bar,” he says. “Buffalo Wild Wings, even though it’s a national chain, it’s kind of emblematic of that sports bar, and it continues to post pretty good sales numbers quarter to quarter. We see alcohol staying strong in that bar and nightclub segment, which has the effect of not quite as deep of a decline in alcohol sales next year as the overall food and beverage growth.”
This year, Technomic also expects beers sales in the total on-premise channel to dip 1.2 percent, spirit sales to decline 2 percent and the wine segment to perform the worst, with a 4.2 percent drop in sales growth. The foodservice research firm makes these predictions based on the assumption of inflation and price increases of 2.5 to 3 percent.
Shifting sales trends
Restaurants in particular are suffering most from the burden of decreased traffic, and have been doing everything they can to drive traffic, Henkes says. Coupons, discounts, happy hours and bundling combo meals, such as two for $9.99, are all methods restaurateurs are using. Restaurant operators are leading more with food promotions vs. beverage promotions because, on average, 85 percent of casual dining’s sales are still from food, Henkes says.
Restaurants also are putting a greater emphasis on the food side of their bar business, such as offering smaller portion food items on the bar menu, Henkes says. Restaurant operators are realizing that while they aren’t getting as many people into the dining room for a full sit-down experience, they are seeing more traffic in their bars compared to their dining rooms.
“The shift has been toward the bar and away from the dining room,” he says. “That also benefits the restaurateur because obviously the bar, and beverage alcohol in general, is a lot more profitable to them than the food side. So alcohol has become incrementally more important to restaurants, especially because as traffic is slowing, really their focus has to be on supporting and maintaining some kind of bottom line profitability to the extent that they can.”
A correlating trend is that when consumers do decide to go out, they are deciding between purchasing food or drinks.
“Rather than going out for maybe a full meal, there are more drinking-only occasions going on, and we see that in the shift in overall on-premise occasions has moved more toward the drinking establishments,” Henkes says. “…If you had a pie chart of all drinking occasions away from home, because that restaurant occasion is shrinking, you have the bar, nightclub or drinking establishment share of the pie getting bigger.”
Compromising to go out
An overall theme with the current economy is that consumers are making sacrifices in order to control spending. “I think that people are still going out, but people are making compromises,” says Chris Haack, a senior market analyst for Mintel International, Chicago.
Restaurants are aware of these compromises, and will continue to offer deals, he says. “They are communicating to the consumer that they understand these are difficult times and that they are willing to make compromises, just as the consumer has to make compromises,” Haack explains.
One way people are compromising when they go out is trading down on the drinks they purchase. For example, at retail, consumers might continue to buy their specialty or premium-priced beverages, but would trade down at an on-premise location because of the cost of a meal or higher prices, Haack says.
“At the lower end of the market, you are going to see more recession resilience,” he says. “Cheaper beers, wines and well drinks are not going to take as big of a hit as distilled spirits.”
Technomic also has seen in its consumer tracking a large shift toward domestic light beer.
“A couple of months ago if you asked me, I would say that people are still drinking what they have been drinking, they just have been drinking less of it,” Henkes says. “It does appear now that as the economy continues to worsen that there is some shift in behavior.”
Predominately a shift has occurred from cocktails toward beer, Henkes says. Wine’s share of on-premise business has not been hurt by wine drinkers switching to another alcohol, but by the decreased traffic in fine dining and even casual dining.
“Those are the two segments within on-premise that are hurting the most, and unfortunately that’s where wine’s prevalence is the greatest,” Henkes says. “The segment that we still see doing OK and holding their own are bars, taverns, sports bars, neighborhood [bars], that type of thing, and those tend to be more beer oriented, and to some degree, cocktail or spirit oriented.”
The volume of drink sales on-premise are coming from domestic light beers and imported beers, he says. The types of beverages that are performing well right now are established brands.
“In an economy like this, consumers are getting what they know, so the brands that are the popular brands, that are the mega brands, that have a large base of consumer support are the ones that are going to be the best positioned in bringing out something new,” Henkes says. “Obviously, it’s a lot riskier to do that now than it was a year ago.” BI
The drink menu is an important part of the dining out experience, and a survey of more than 1,600 professional chefs from the National Restaurant Association (NRA), Washington, D.C., revealed which drink trends would be the hottest on restaurant menus in 2009.
In October 2008, NRA asked American Culinary Federation member chefs to rate 208 food/beverage items, preparation methods and culinary themes as a “hot trend,” “yesterday’s news,” or “perennial favorite” on restaurant menus in 2009. The chefs ranked micro-distilled/artisan liquor, culinary cocktails and organic wine in the top 20 culinary trends for the year. Also high on the list of trends were food-alcohol pairings, craft beer, specialty beer, organic cocktails, muddled cocktails, and wine or beer flights.
“According to our chef survey, mixologists will be taking on leading roles in the coming year, and much like chefs in the kitchen, showcase their creativity behind the bar,” said Dawn Sweeney, president and chief executive officer of NRA. “In addition, chefs will continue to highlight various types of alcohol in their recipes and to complement their culinary creations through pairings and samplers.”
The chefs also were asked what the hottest beverage alcohol trends in restaurants will be this year. Thirty-three percent said mixologists and signature cocktails will be the No. 1 trend. Twenty-six percent believe functional cocktails, such as cocktails created with superfruits or vegetables, will be the most popular. Another 23 percent said food-alcohol pairings will lead the alcohol scene in 2009. BI