Ready, Set, Go! Finding Growth in a Challenging Market
There are a handful of names in our industry that mean in-depth, reliable and actionable data. Three of the names within this exclusive club are David Henkes, Donna Hood Crecca and Technomic, Inc. David and Donna presented some incredibly valuable data in San Diego during the 2016 VIBE Conference. In case you were unable to attend this year’s VIBE, or if you attended but would like to have easy access to this Technomic data, here are the highlights.
First up, some economic information. Jobs are up, unemployment is down, underemployment is down, consumer disposable personal income (DPI) is on the rise, and our economy is experiencing wage growth. Consumer confidence is rising and full-service restaurant sales are experiencing acceleration, with same store sales indicating growth. Both full-service and limited-service restaurant units are returning to positive growth.
However, David and Donna did point out that while drink sales are growing, pace lags the on-premise trend. Adult beverage on-premise sales have increased only 0.2% from 2015 to 2016. As you can see below, total alcohol volume is flat.
Overcoming the industry’s current challenges requires understanding the industry’s new landscape. First, operators must understand dining occasions, such as those below.
Additionally, while it’s important to try to understand Millennials and Gen X, it may be more effective for operators to understand the Loyalists, Explorers and Value Seekers that make up on-premise adult beverage consumer segments.
Operators seeking to increase beverage sales must understand what truly influences drink selection.
But keep in mind that adult beverages remain a priority with diners regardless of cost concerns.
The on-premise paradox is also of utmost importance.
Another change to the landscape is the trend of retailers encroaching on the on-premise occasion. Retailers such as Wegman’s and Whole Foods now have pubs and bars located within their walls, and even Walgreen’s sells wine and spirits in their stores. Chipotle and Starbucks are slowly releasing locations in some markets that serve craft beer and cocktails. Even the airlines are getting more involved with beer and cocktail sales.
So how do operators take action to take volume from flat to up? First, rethink the consumer. Realize that Millennials are changing and that while it’s important to try and understand Gen X, it’s a mistake to ignore the Boomers. Remember to go beyond demographics to understand consumer segments. Second, leverage powerful promotions. Operators must deliver on value, utilize happy hour, use table tents to communicate promotions, and consider offering beer, wine and spirits tastings. Food and promotions, simply put, build customer loyalty. Third, build a story and commit to telling it: be transparent, share origin stories, communicate social responsibility and sourcing practices, label things cleanly, and tell guests what’s fresh and natural. Why a company is doing something has become just as important as what they’re doing. The fact is that many consumers no longer trust big brands. According to an article in Ad Age Magazine, “Quite simply put, big brands are losing one of their most valuable assets: consumer trust. And the fight to regain it will reshape the industry for years to come.” The fourth key to overcoming challenges is looking for new ways to deliver enhanced experiences, such as wines on tap, expanding craft beer selections (particularly to include local products), and offering barrel-aged spirits and cocktails. Finally, either plan to innovate and take risks or set lower expectations for growth. Speaking of growth, Technomic’s formula for growth is located below.
So, get ready by understanding the new consumer and broadening the concept of competition. Get set by leveraging adult beverage’s influence on occasion, evaluating pricing and implementing targeted promotions. And execute, analyze, assess and redirect to go!