Plan for Modest Beverage Growth Ahead
Growth is hard to find lately on-premise, and a recent study released by research firm Technomic confirms what many have already been saying.
The report indicates that growth expectations for beverage alcohol sales at the country’s bars and restaurants should remain modest through the end of 2016. This comes from research conducted for Technomic's Adult Beverage Planning Program, a membership-based program delivering suppliers with research on key topics and trends related to the adult beverage on-premise industry.
While the overall restaurant industry has been experiencing good momentum, slower traffic at major casual dining chains and an evolving consumer dynamic are resulting in a "new normal" in which consumer drink purchase patterns have changed. For 2016, the firm says overall consumer spending on beverage alcohol away-from-home will grow at a modest 2.3%, with similar expectations for 2017. In fact, the growth seems to be all based on price increases or trading up by consumers; total alcohol volume in bars and restaurants is expected to be flat in 2016 compared to 2015, says the report.
"It's true that the operating environment is better for many restaurants and bars, but consumer occasions that include an alcohol beverage at these establishments are not growing," says David Henkes, senior principal at Technomic and head of the firm's beverage practice. "We see a number of underlying factors, including a different consumer mindset, with many consumers drinking less, but higher quality when in a bar or restaurant. There's also growth in takeout and delivery − both areas that negatively impact the beverage occasion − as well as increased competition from new channels in both retail and foodservice for the alcohol occasion."
Beer continues to underperform on-premise, with expected consumer spending growth stalled at two percent. "Craft and imports are trending positively, but domestic beer, which still accounts for over half of on-premise beer volume, remains challenged," says Henkes. On the other hand, consumer spending on spirits is pegged to grow nearly 3% by year’s end, the fastest expansion of all categories due to the popularity of whiskey, craft cocktails, and the ongoing premiumization trend. Spending on wine is forecasted to grow at 2% as well.
Among operation categories, lodging (4.5%) and fine dining (4.2%) are expected to have the largest spending acceleration, while casual dining tracks the whole range of establishments at a growth rate of 2.3 percent. Bars and nightclubs are expected to fare the poorest by the time all the figures are counted, up only 1.7 percent.
Henkes cautions that restaurant and bar operators must ensure that the value proposition of their beverage program is aligned with their consumers' expectations. "We continue to stress to our clients the importance of a strong adult beverage program – it drives customer satisfaction, and is obviously a source of incremental profitability" he notes. "But with consumers still cautious on spending, it's important to stress the quality and creativity of a beverage program."