It is common to hear that “wine brands are built in the on-trade”, but are consumers really more exposed to brands in restaurants than they are when browsing for wine in supermarkets or specialist wine shops?
Multiple times I have heard that “wine brands are built in the on-trade”. This is definitely a popular statement in Portugal and I’m sure other markets have a similar theory. But is this really the case?
Brands are built, essentially, inside our brains – they are what we believe they are. Apple or Google are perceived differently by different people, because these are brands that live inside different people’s brains. So, first of all, for a brand to be a brand, we need to be aware of it. Brand awareness is step one in brand building.
Now, what makes us aware of a certain brand? I know this sounds like a quite complicated question. But the answer can be as simple as contact. Consumers need some source of contact with a brand to start being aware of it in first place. And it is the way a person makes contact with a certain brand that will dictate the first steps of their relationship with it.
So, back to the original question: are brands really built in the on-trade?
In Portugal, wine is one of the most popular beverages to consume in the on-trade, including at lunch and during the week. It is an extremely important beverage in Portuguese culture – probably why the Portuguese are the largest per capita wine drinkers in the world according to the IWSR. But when we investigate what regular wine drinkers tell us in our Vinitrac® survey, we see that consumers drink wine at home at around twice the frequency than they do in bars and restaurants. So, at-home occasions happen twice as much as on-trade occasions for the average consumer.
Now, let’s compare the way consumers relate with wine in the off-trade vs. the on-trade:
The off-trade, in general:
- Supermarkets in Portugal tend to have quite a large area of selling space devoted to wine, compared with the total area
- These are often quite nice settings, organised by wine region, with quite a lot of brands exposed that range from entry level to premium and sometimes even ultra-premium
- Even smaller, more local stores, will have a relatively nice wine aisle
- Consumers tend to spend time browsing the many options, examining the bottles, reading descriptions, maybe even using Vivino to know more about the wine
- They tend to shop alone or maybe in small groups, making this more of a personal experience that might take a little longer, checking prices, value propositions and eventually making a decision
- A similar behaviour might happen in other off-trade channels such as specialist wine shops (garrafeiras), the third most used wine-buying channel by Portuguese regular wine drinkers. Here, shop staff might have a higher wine knowledge and will be able to talk about each wine in more detail
The on-trade, in general:
- There is a vast range of restaurant types in Portugal. The sector has been evolving quite significantly over the past decade, fueled by the increasing presence of tourists
- There is a significant proportion of what we call ‘tascas’: typical restaurants with a standard appeal and good food. In the tasca, the wine offer will be similar to what can be found in a supermarket
- There is then a much smaller proportion of what can be called ‘aspirational restaurants’, which will typically be in city centers and will typically target higher income consumers and tourists. Here the wine offer will be more premium
- I believe the average restaurant, where Portuguese regular wine drinkers will go for lunch and dinner, will look more like a traditional ‘tasca’ than an ‘aspirational restaurant’
- In restaurants, many people order a glass of house wine
- Also, in restaurants, consumers don’t have much contact with wine apart from what they will typically see on a wine menu and then, potentially, when the bottle that was chosen is on the table
- Additionally, when in groups, choosing a wine is typically a task allocated to the most senior member at the table, so the remaining consumers will have even less contact with brands
- The chart below shows that the most popular on-trade wine drinking occasion in Portugal is during lunch breaks. This will typically be a ‘convenience’ occasion that needs to be fast, or a working lunch where wine won’t be as relevant as, for instance, for a celebration or a more formal or romantic dinner
That being said, it feels like there is quite a lot of ‘contact’ with brands in the off-trade, and, in the on-trade, maybe not so much. Consumers will have significantly more contact with brands in shops because they will actually see the brands. When consumers purchase wines from a supermarket, they will then bring brands inside their homes and will keep ‘in contact’ with them. When they drink these brands, they will open the bottle themselves, potentially serving friends and family. Very few of these contact points happen in restaurants.
Finally, when we look into average stated spend per bottle off-trade vs on-trade, we see that there is an obvious difference: consumers spend more in restaurants and bars, but we also know that this will include an extra distribution margin (as distribution in the on-trade tends to be more costly than in the off-trade) and a significant on-trade margin which might double (or more) the cost of the same bottle found in a supermarket. So, ultimately, the average wine offer in an average restaurant might even be of inferior base price if we believe this is all true.
If we do believe it, it might be time to change that mindset.