This article was initially published in the October issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
Just as Europe has come to terms with the post-pandemic environment, the cost of living crisis is set to throw consumer behaviour into disarray once again. CGA’s Graeme Loudon examines how brands and suppliers can navigate the next storm.
As COVID-19-related fears begin to wane and the ‘new normal’ establishes itself across Europe, consumers are returning to bars, pubs and restaurants with new behaviours to those exhibited before the pandemic. However, with a looming cost of living crisis, this behaviour is expected to change again. To fully capture the opportunities arising from this shift over the coming 12 months, brand owners need to understand how these trends have shaped consumer engagement and brand selection within the on-premise.
With insights from 12 of Europe’s most valuable on-premise markets, CGA’s ‘REACH’ study has uncovered new trends, threats and opportunities that brands are set to face over the coming months. Here, we review key insights from the study that can help brands and suppliers maximise the upcoming opportunities and navigate the challenges posed by today’s on-premise visitor.
Market overview
The pandemic caused the number of on-premise outlets to shrink overall, but also to change in its very nature. In Great Britain (England, Wales and Scotland), about 9,200 venues were lost in the past 12 months, while a staggering 10,455 disappeared in France.
Food outlets were often most protected during the enforced closures of 2020 and 2021 and, as a result, many drinks-focused venues permanently shuttered, creating the more food-focused landscape today. However, when examining how consumers are interacting with the sector, food-led visits are yet to fully recover to pre-pandemic levels, whereas outlets with more of a beverage-led focus have seen more promising footfall levels.
The reason why food-led visits haven’t fully recovered yet is likely two-fold: undoubtedly this occasion over-indexed with a consumer demographic that has been slow to return post-pandemic, although this could also be an early warning sign for the likely impact of the cost of living crisis, as consumers tend to prioritise drinking occasions as an affordable treat during tough economic times.
Despite the challenges posed by the pandemic and in the face of a cost of living crisis, CGA’s REACH study suggests that Europe’s hospitality is still a thriving sector. Three in four European consumers visit on-premise outlets more than last year, with nearly two-thirds doing so on a weekly basis. Meanwhile, only one in six consumers plan to decrease their on-premise spending habits over the next 12 months.
Almost half of European on-premise visitors want to make up for the lost time and their determination to experience the on-premise is springing back, with 78% feeling confident about going to bars, restaurants or clubs and nearly half planning to visit venues more often than they did in 2021.
The cost of living crisis is beginning to have an impact on consumer mindsets — one-third of European on-premise users say they’ve been “severely impacted” by it, a percentage that exceeds 40% in Sweden, Italy and Poland. A further 54% claim they have been impacted at least to “some extent”. The crisis is set to have repercussions in both the off- and on-premise and brand owners must adapt their strategy to reflect how their core and target consumer will be impacted in key markets.
How can suppliers negate the impact of the cost of living crisis?
What will be key for brands is understanding exactly who their core customer is and how they plan to navigate the cost of living crisis. While some may go out less frequently in order to treat themselves to premium options when they visit the on-premise, others will prioritise cheaper options during their visits, which can impact their brand and category choices within the channel.
This changing consumer behaviour still provides opportunities for brands to play at either end of the pricing ladder: Owners need to be clear on which role their brand plays on different consumption occasions and in different outlet types.
When it comes to entry-level propositions, brand owners must appreciate consumers’ evolving understanding of the good-value space. According to CGA’s research, the modern consumer expects quality standards at all price points and isn’t willing to trade down on quality when spending less.
Increasingly, value doesn’t mean cheap, but rather a product worth the price and still made with high-quality ingredients — 31% of consumers want high quality (+3 percentage points versus 2021) while 34% also want good value (+13pp versus 2021). Service offered and overall experience received both play key roles in defining what consumers understand as good value, too. Such a shift at the value end is set to intensify expectations at the premium price points.
With 59% of European on-premise consumers likely to trade up for a better-quality drink, the premium space still offers significant opportunities for drinks brands. In the French market, for instance, the growth of higher-end vodka confirms the continued desire for premium drinking experiences. Ultimately, premium brands need to communicate their values effectively, which for the most part is around quality. Highlighting sustainability credentials can be another way to leverage higher-end credentials.
Attracting new consumers while keeping loyal ones engaged
Europe’s on-premise remains an area of exploration, with more consumers looking to try new and different drinks (38%) than those who always choose the same categories and brands (30%). Whether brands are looking to appeal to new or existing consumers, it’s never been more important that they keep their image fresh and continue to bring innovation to the category to drive awareness and trial.
Typically, younger consumers over-index when it comes to experimentation, so engaging with this segment is crucial to establishing and growing a loyal customer base. Strong Social Media strategies are key — for about one-third of those aged 18 to 34, posting about a new experience, drink or meal is crucial for the event to feel ‘complete’. Not posting on Social Media is like the experience never actually happened. For categories such as beer and wine, the challenge will be elevating this drinking occasion to compete with more experience-led serves such as cocktails.
This consumer segment is not only looking for Social Media-worthy content; the brands they consume need to reflect their desire for interesting, healthy and ‘trustworthy’ drinks. These factors are critical to developing marketing strategies that attract and build trust with these younger consumers — while recognising the rising trend towards the importance of sustainability and ethics.
It’s clear that experimentation in the European on-premise leads to a halo effect in the off-premise too, as 75% of drinkers tend to repurchase a drink for the at-home occasion if they tried and liked it in a bar, restaurant or club. Ensuring the serve is delivered in a memorable, Instagrammable way is one of the key levers brand owners can pull to cement this link.
The increasing importance of the occasion
Lower-tempo occasions have been quickest to return post-pandemic as consumers integrate the on-premise into everyday life, with day-to-day, wind-down and planned visits increasing. That’s not to say there aren’t opportunities for categories that traditionally operate in high-tempo occasions — for spirits, a category popular during the late-night occasion, brands are winning share by driving consumption occasions earlier in the day.
The late-night occasion is still crucial to drinks brands, with late-night visits attracting spend, trial and trade-up as younger consumers seek exciting experiences. Consumers are more likely to engage with activations in high-tempo outlets including nightclubs, late-night bars, festivals and bars. Activations can be key in driving purchasing behaviours by focusing on these experiential channels, with 47% of European consumers more likely to purchase products as a result of activations they’ve engaged with.
As the research shows, the next 12 months continue to offer vast opportunities for brand owners across several European markets. Yet these chances differ widely by region, demographic and consumer segment. Because of these variables, an insight-based approach is needed to tailor brand messages to specific audiences, and ensure that revenues are maximised by location, occasion and volume opportunity at each bracket of the price ladder.
To learn more about CGA’s capabilities across the on-premise, visit www.cgastrategy.com.
This article was initially published in the October issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
