Some prescriptions for success amid the toughest of trading years
The sentiment is predominantly negative in the UK on-trade at the moment. Clearly, much of the near-term focus is on Brexit, and at time of writing we remain at the mercy of the slings and arrows of outrageous politicians (seeking, in some cases, their own fortunes). One can be gripped and/or frustrated by this ongoing saga, though to do so might not be so wise, as more fundamental and long-run changes are taking place in the UK on-trade, which may have more profound long-run effects on their own business, and the network of wine businesses that supply them.
For my money, there are three key trends that 2019 on-trade business plans need to acknowledge and respond to:
- Property-related cost increases need to be accounted for: This is already spelling trouble for restaurant owners who are seeing increases in rent, taxes and premiums operators must pay to secure well-positioned sites. However, there are coping strategies: increasing selling space and utilisation rates (crudely, the number of covers per sitting), ruthless focus on reducing overheads, and ensuring every element of the food and drink offer delivers sustainable margins, especially wine.
- The apps are running the show: Two irreversible trends have taken hold in global on-trade– the prevalence and importance of customers reviews as well as meal delivery platforms that may be driving people away from the on-trade. Nowadays, it’s consumer-driven reviews and social media platforms that influence the decision of where to drink and dine – that is if they choose to go out at all over having their meals (including drink) delivered right to their door. Maintaining excitement and reasons to book (or re-book) to tempt people away from their sofas is a key business priority.
- Cocktails and gin are taking over: Restaurants and bars are increasingly building their agenda and differentiating claims on a vibrant drink offers that are crowding out wine messaging. Often but not always, operators are targeting younger consumers, and the platforms they frequent, to decide where to spend their on-trade time and money.
Despite these hurdles, and the looming storm clouds of Brexit, I am actually quite optimistic for the prospects for wine in the UK on-trade in 2019. One truism we need to acknowledge right away: going out to bars and restaurants and choosing to drink wine will remain one of the great British pastimes in all settings, whatever the political landscape. It may well turn out that the ratcheting tensions in the Brexit debate may prompt more people to want to gather and celebrate together – if nothing else, to take their mind off things.
The evidence so far, post-Referendum, is that overall wine consumption is continuing to fall (along with alcohol consumption generally), driven in part by duty increases and health and lifestyle factors, but that consumption in the on-premise has in fact held up. Consumption tracking data recorded by Wine Intelligence and recently published in the UK Landscapes Report 2018 shows that the biggest fall in consumption was in the casual, non-food, at-home wine occasion: in 2018, 32% of UK consumers said they drank wine at this occasion at least once a week, down from 39% in 2015. By contrast, over the same period, the frequency of on-trade wine occasions was stable.
Why is wine prevailing in the UK on-trade, despite currency headwinds? Principally, it remains a very compelling social drink, with a broad range of price points to suit different wallets and occasions, with (generally) flexible serve sizes. In my view, for wine to remain central to the on-trade alcohol offer, amid some of the most challenging trading conditions in a generation, it needs to do four things well in 2019:
- Make the entry-level offer more compelling. Many millions of consumers will continue to frequent on-trade venues and ask for a glass of white wine or Sauvignon. These transactions generate valuable margin, often helping shore up the financial viability of many on-trade operations. Yes, the supply-side struggles to generate sustainable margins on entry-level wine. On the other hand, they have made huge advances in reducing their cost base by delivering good-quality, lower-cost wines in bulk. I would like to see more innovation here – perhaps more than one house wine style? Or a mini “house” list, rotated regularly, where all the wines are the same price?
- Reassert wine’s position as the drinks category with the best stories. It remains the high-ground drink in terms of provenance, traceability, sustainability. It has the most interesting people and places where the product is made which evoke a very human connection. Stories, images and soundbites are today’s currency in our connected mobile world, and increasingly the most relevant and effective form of advertising to generate footfall, consumption, spend and thus profit for all.
- Promote imagery that makes consumers stop and think. Instagram continues to grow, especially among younger age groups. Food dishes are increasingly photogenic – cocktails and cocktail mixing certainly are. So, we must think about how wine can convey messages with imagery from on-trade settings. Perhaps more social media-friendly labels? More originality in serves and glassware? More evocative imagery of where the product comes from, and who makes it?
- Embrace English wine. While part of the appeal of wine and nearly all wine sourcing will continue to be from ‘foreign countries’, wine can now be a UK product. Certainly not at entry-level pricing, but it is increasingly featured and promoted on on-trade wine lists. Fuller’s has headed this movement by introducing English wine as its sparkling pour, and many more are likely to follow. At a time when the overwhelming focus is on rising costs of imported goods and services, surely English wine resonates?
None of these ideas are easy or instant, but all potentially do-able. More brainstorming, talking and determined research will, no doubt, generate more inspirational and uplifting initiatives, despite what Brexit throws at the industry. But one thing is for certain: this category is most definitely worth this endeavour.
Author: Brian Howard