On-Premise Offers Opportunities

As the economy stabilizes, consumers return to the on-premise.  Economists are expecting the U.S. economy to continue its steady growth throughout the year.   A recent Wall Street Journal survey stated the average projection of economists polled believed growth in GDP will be 2.2% for 2015.  Many economists now believe the GDP grew around 3% in the second quarter of 2015 which is higher than the governments initial estimate of 2.3%.  Similarly, growth for the third quarter is expected to be between 2-3%.

The aforementioned growth bodes well for on-premise establishments such as bars and restaurants which have seen improvements in the past two years as the restaurant industry ended 2014 on a positive note with both sales and employment posting solid gains. A recent report from the National Restaurant Association showed that fast-casual concepts could appeal to the key millennial demographic by taking a page from dine-dining establishments by including alcohol sales to their offerings.  In addition to millennials, the NRA states that offering alcohol helps “lure affluent customers, even in a fast casual environment”.

Looking back to 2014, since the economy improved sales to casual and fine dining restaurant chains saw increased traffic.  According to a Next Level Marketing survey of 1,000+ chain consumers, 74% of consumers said they go out as often (51%) or more often (23%) than they did in the past year. More interestingly, as Mike Ginley stated, “if you separate out millennials only, which seem to be the key to the alcoholic beverage industry, the number of those going out more often increases to 30%”.  Lower gas prices translating into more disposable income most likely has aided this return to the on-premise.

Next Level Marketing found that the most important motivators for choosing a drink were: everyday drink prices at a good value, drink specials, a great beer selection, knowledgeable staff and a menu that communicates all drink offerings. Ginley added that “females and older consumers tend to be more price sensitive while male consumers are more concerned about brands”.  Today’s consumer may be the most educated consumer in history especially in regards to beverage alcohol.  Not only are they accustomed to having a bevy of offerings, they are savvy in regards to prices.

In addition, 85% of consumers don’t know what type of drink they’re going to order before they walk in the door and that number jumps to 93% for millennials.  The motivation factors for consumers to pick their first drink include: drink menu, pairs well with the food ordered, drink is listed on food menu, specials, promotions and staff suggestions.  Mike added that food pairing was much further down the ranking compared to prior years which represents a huge opportunity for spirits and beer while wine will need to figure out a way to maintain its stronghold on the occasion. With consumers looking for their beverage alcohol selection to enhance their occasion it’s no surprise that the importance of food pairing has increased lately.

In regards to missed opportunities, 66% of respondents said that they would have been interested in an additional drink.  In addition, 24% say that if the bar provided drinks faster they would have ordered another.  24% of respondents also stated that they would have ordered another beverage if they are offered better quality drinks.  Ginley added “people are not looking for cheaper brands, they’re looking for better brands”.  This notion is believed to have come out of the recession when consumers traded down and realized that quality products were available at lower price points.

Even though the U.S. economy appears to be stabilized and moving in the right direction, in addition to lower gas prices, some U.S. consumers are still precarious about their spending of disposable income due to the instability seen in other global markets.  That being said, we’re still far off from the pre-recession consumer spending levels but since the restaurant industry is making strides perhaps this is simply the new normal.

 

Adam Rogers is Manager of Information Services for BIIG. He can be reached at arogers@specialtyim.com. For more information about Handbooks or other research products, visit www.bevinfostore.com.

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