[Report] The Big Picture: 2018 Trends, Challenges and Opportunities

The Moscow Mule's popularity shows no sign of slowing. Image: Fudio / iStock / Getty Images Plus

The Nightclub & Bar Show is more than an exciting Expo Floor loaded with the hottest new bar and restaurant products. It’s more than incredible parties at some of the top nightclubs in the country. And it’s much more than revered industry experts sharing their knowledge of bartending, mixology, food and beverage trends, and hospitality.

It’s certainly all of that. But amid all the fun and excitement the Nightclub & Bar Show also has valuable data and hard numbers operators need so they can stay ahead of trends, become aware of competitive threats, adapt and improve operations.

Some people don’t find numbers beyond those found on P&Ls interesting. Statistics and analysis may not be “fun” to everyone but without them you don’t have the full picture, and without that you can’t do what an operator is ultimately supposed to do: boost revenue.

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Donna Hood Crecca and Melissa Wilson of Technomic presented data on a wide array of topics relevant to bar, nightclub and restaurant operators at the 2018 Nightclub & Bar Show. For those who couldn’t make it, don’t have direct access to Technomic data, or need a refresher after the show, we present the state of our industry, by the numbers.

Your Role

  • Technomic projects that consumer sales of alcohol will reach $103.9B in 2018.
  • Of those tens of billions of dollars, 75% will come from on-premise drinks sales from bars and casual-dining restaurants.
  • Alcohol sales are growing at a projected rate of 2.3% this year.

Your Growing Competition

As Crecca and Wilson explained, your guests have many choices when considering where they wish to go for a drink. Other bars and restaurants in your market aren’t your only competition. The following segments are becoming increasingly aggressive in terms of growing their alcohol sales:

  • Hotel is the fastest growing segment in alcohol sales.
  • Fast-casual concepts have been serving beverage alcohol. Taco Bell, for example, is opening 300 to 350 locations that will serve spirits, beers and spirits-infused slushies.
  • Stadiums now have craft draught beer in their concessions, and they’re showcasing local beers. This segment is also introducing more fine dining options, and they’re serving alcohol.

You are also facing threats from:

  • Delivery is this industry’s big disruptor.
  • Third-party restaurant food delivery is expanding. The top three providers are:
    • Doordash (17 US cities in 2016, 650 in 2017);
    • Postmates (107 cities in 2016, 230 in 2017);
    • Uber eats (10 US cities in 2016, 45 in 2017).
  • Saucey, Drizly and Thirstie are alcohol delivery services disrupting the industry.
  • Millennials and Gen Z are not the only generations using third-party delivery. Baby Boomers represent 22% of the users.
  • Dinner entrees, appetizers and desserts are the primary food order categories.
  • Technomic has found that 44% of consumers surveyed have agreed with the following statement: "Being able to order alcohol for delivery has reduced my visits to restaurants and bars. 55% of these respondents are aged 21 to 24 years.
  • There are multiple models for alcohol delivery: alcohol-specific services, third-party delivery, and retailers considering delivery. Competition is growing fiercer since Amazon obtained Whole Food.
  • Early adopters of alcohol delivery include BJ's, Buffalo Wild Wings and TGI Friday's. Each is testing in select markets. TGI Friday's, when partnered with Lash, offered consumers bartenders for 2 hours for $50.
  • Pizza Hut began a category-first beer delivery pilot program in partnership with MillerCoors. The brand plans to expand the program to nearly 100 stores across Arizona and California this month. When a consumer purchases select six-packs of Coors Light, Blue Moon or Miller High Life, delivery fees are waived.

Cannabis

  • Legal cannabis is another disruptor. Beyond some consumers eschewing alcohol for cannabis, legalization presents additional challenges.
  • Effective field testing for cannabis influence has not been created. As such, a proposal to lowering the legal BAC limit to 0.5 is on the table.
  • The liability for operators can be illustrated with the following example from Crecca:
    • Should a 120-pound woman come into your bar and consume a single alcohol drink, she would be considered legally over the limit if the legal limit is changed to 0.5.

Your Challenges

  • Alcohol sales are not surging, partially due to traffic softening.
  • Technomic projects total alcohol volume growth will slip -0.2% in 2018.
  • Driving more traffic through the door.
  • Increasing guest spend on drinks and getting them to return to your establishment.
  • Creating a beverage program that connects with your guests and encourages them to engage.
  • Differentiating yourself from your competitors. How can you stand out?
  • Marketing to younger consumers (those aged 21 to 24 years). This demographic finds beverage offerings particularly important, so you need to promote your drink program aggressively to solve traffic issues.
  • To reach Gen Z you must understand what influences their drink decisions:
    • familiarity with brands;
    • unique flavors;
    • price;
    • drinks they can't get or make at home;
    • samples from bartenders and servers;
    • suggestions from people in their party;
    • house specialties.

Wine Challenges

  • 2017 represented the fourth consecutive year that wine growth slowed.
  • Sparkling wine is up (just 0.1%). The category’s growth off-premise may, according to Technomic, translate to growth on-premise.
  • Consumers have shown they favor the following varietals:
  • Red: Merlot, Cabernet Sauvignon and Pinot Noir.
  • White and Blush: Chardonnay, Moscato (younger consumers) and White Zinfandel.
  • Success with wine means offering wine by the glass. Half of consumers say this is important to them.
  • About one-third consumers have indicated that they perceive wine on tap as equal quality and flavor compared to wine poured from a bottle.

Your Opportunities

  • Food sales, according to Technomic projections, are growing at a rate of 3.8% this year. That’s 1.5% more growth than alcohol sales.
  • Drink incidence, defined as an on-premise visit that includes the ordering of an alcohol drink, is beginning to rebound to pre-recession levels.
  • In terms of guest satisfaction and favorable perception of your venue, those who order beverages indicate they are more satisfied with their visit: 64% of wine drinkers, 62% of those who consume spirits, 58% of those who drink beer, and 52% of non-alcohol drinkers rate their experience at an establishment as “excellent.”
  • Consumers are gravitating toward complex, robust and nuanced flavor profiles:
    • Savory and rich whiskeys, tequilas, mezcals, brandies and Cognacs.

Spirits Opportunities

  • The following spirit categories are experiencing growth:
    • A continuing trend, Irish whiskey 9-liter case volume was up 12.4% on-premise as of 2017.
    • Straight American whiskey is up 5.1%.
    • Domestic vodka, led by Tito’s, is up 3.8%.
    • Brandy is up 3.0% while Cognac is up 3.7%.
    • Tequila and mezcal is up 2.5%.
    • Following the premiumization trend, single malt Scotch is up 1.2%.
    • Gin, led by Hendrick’s and New Amsterdam, is up 0.7%.

Cocktail Opportunities

  • Technomic has identified the cocktails seeing growth on-premise:
    • Moscow Mules and variations on the Mule saw growth from 2016 to 2017 of 29.8%. This trend is expected to continue as Technomic researchers have seen no evidence of its popularity waning.
    • Shots and Shooters saw growth of 18.9%. However, Fireball is down—so what’s the next hot shooter brand? Jägermeister has been repositioning itself and may replace Fireball.
    • Perhaps an unexpected revelation to some, White/Black Russians are up 6.7%.
    • The Manhattan is up 4.7%.
    • Other classic cocktails, led by the ever-popular Margarita, are up 3.9%. If this number seems low, say Crecca and Wilson, that’s because this category is massive and has been experiencing growth for several years.
  • When surveyed by Technomic, bartenders identified beer cocktails, wine cocktails, slushies, the Old Fashioned, the Negroni, and all-natural, organic beverages made with fresh herbs and fruit as the trending drinks for 2018.
  • Cannabis cocktails are trending but THC and CBD infusions may not be legal in your state, meaning you must approach these drinks with caution and check regulations to protect your license.

Beer Opportunities

  • Beer has been declining in restaurants and bars. However, craft and imported beer is seeing growth.
  • While craft and imported beers are growing, domestic beer remains an important category: it makes up 53% of beer sales. Younger consumers, contrary to belief, do drink domestic beer.
  • The hyper-local craft beer category has grown by 4% in volume.
  • 44% of consumers value a variety of draft bee and expect rotating taps, seasonal offerings and regional beers.
  • While the focus has been overwhelmingly on craft beer the past several years, imports—driven by Mexican beers—continue to grow. The category rose 6% in the past two years.
  • Technomic has identified the following categories as what's hot and what’s next:
    • coffee-flavored beers;
    • saisons;
    • sour IPAs;
    • barrel-aged beers;
    • sessionable, low-ABV beers (a growing trend among younger consumers);
    • pilsners;
    • lagers;
    • mead;
    • Seasonal beers are always trending, says Crecca. However, she wonders if pumpkin beers might finally wane in popularity this August.

Sources

All data presented by Donna Hood Crecca and Melissa Wilson of Technomic at the 2018 Nightclub & Bar Convention and Trade Show.