Global economic uncertainty and generational shifts in socialising behaviour cast a long shadow over the outlook for on-trade alcohol.
On-trade settings remain vital to the industry given their pivotal role in consumer outreach, value generation, and brand awareness. But past patterns cannot be relied upon for future success – in mature markets especially. Varied and often competing aspects of demand need to be evaluated and prioritised. What shape could that take? And where will opportunities be found?
Added value vs affordability
A cautious spending approach is now embedded in the consumer mindset as financial concerns persist. Providing value for money is more important than ever, and can be approached from two possible angles – affordable pricing or ensuring consumers feel they are getting more for the price.
A need for careful budgeting and worries about future insecurity could prompt some consumers to seek out relatively low-cost establishments that provide a simple experience while still facilitating all-important social interaction.
But, ultimately, the on-trade cannot compete with retail on price; operators are grappling with their own input cost pressures, which could intensify given the continuing risk of geopolitical disruption.
Strategies that enhance perceived value will therefore be needed. This will involve curating memorable social occasions, hosting unique, immersive experiences, and elevating expertise and customer service. These are the on-trade elements that cannot easily be replicated at home and so are still regarded as spending priorities.
While only a third of global respondents reported feeling comfortable with their current financial situation, 59% deem it important to spend on experiences
Source: Euromonitor Voice of the Consumer: Lifestyles Survey, fielded January-February 2024
Right place, right time
Strategies diverge as venues seek to make the most of the space available – on the one hand are approaches targeting broad appeal through diversification across occasions or beverage categories, and on the other are those aiming to build loyalty with a clear-cut focus on one experiential concept.
Moves to expand appeal include physically dividing the space to create areas with distinct characters or activities, or hosting events that cater to the rising preference for socialising earlier in the day.
Demonstrating in-depth understanding of the core audience’s needs is especially important where the experience revolves around one central concept, which will inherently not interest everyone. That understanding will be reflected not only in major thematic choices and events, but also in smaller details such as the choice of drinks, playlists, and layout.
Efficiency within limits
The choice of drinks is naturally a key decision across settings, and innovative formats can, in some cases, boost efficiency and appeal. On-tap or packaged ready-to-drink beverages, for instance, allow cocktail sales in locations where full bartender service is not feasible – gigs, cinemas, and many smaller cafés and restaurants. They can also speed up service in traditional bars.
Global 2023 on-trade alcoholic drinks volumes stand 10% lower than five years earlier, while on-trade RTDs are up 16% over the same period.
Still, any steps taken to improve efficiency must be balanced against the risk of undermining quality or customer experience. Solutions that feel like cost-cutting measures will not be well received. Decisions on formats, brands and ingredients should align with the overall image of the venue. And of course, the theatre of a cocktail made from scratch in front of the customer is often still a key attraction.
The local context
Acknowledging changing consumer needs is essential for remaining competitive in a difficult environment. But it is just as important to consider the nuances of how those top-level trends (such as moderation or interest in the digital space) translate into specific settings. In their efforts to respond to evolving demand, venues need to ensure they do not erode their own unique character that keeps visitors returning.
With that in mind, many venues are establishing a hyper-local identity through their choice of brands, partner businesses, or ingredients to evoke a sense of place and individuality.
For brand owners, supporting local communities by backing artists, bartenders, and venues brings the added benefit of enhanced cultural relevance, in addition to supporting a vital sales and marketing channel.
Converging challenges mean there are undoubtedly still tough times ahead. Yet, the worries and isolation of modern life are accentuating the importance of fun, out-of-home social spaces. Consumers retain an emotional connection with the on-trade, and that is where the opportunities lie. It is not time to call last orders yet.
Learn more in our report, The Future of On-Trade Alcoholic Drinks.