Why bigger is not necessarily better to win in the on-premise – Comment

I have racked up my fair share of years telling the story of the on-premise. Delving into what shapes the channel, how it’s performing and who’s driving it, I am well into my second decade of professionally analysing this weird and wonderful area of the drinks industry.

It’s certainly fair to say that it hasn’t exactly been smooth sailing; there have been cost-of-living crises, global health pandemics, restrictions and mass closures of venues, and seemingly endless policy battles with governments that often result in the hospitality sector being dealt a raw hand at what feels like every opportunity.

So why then, in a period of relative stability, is it so gloomy currently?

Reading through industry commentary, one could be forgiven for thinking that the on-premise channel is on its knees, that the consumer’s innate urge to socialise has dissipated and that swathes of the global population have given up on eating and drinking out. 

Yes, the industry is facing headwinds, and yes, economic pressures are yet to ease fully, but surely, if any sector that could and should have a feel-good factor about it, it is the sector that’s designed to make people feel good.

My hypothesis on why there’s so much pessimism around at the moment, for what it’s worth, is that we’ve been invaded by a spreading infection of fun-sponges and ‘mood-hoovers’.

There’s nothing quite as contagious as negativity and, for the larger brand owners in particular, it feels as though a doom cycle of gripes and moans has been firmly established within boardrooms as tough-to-swallow results are framed in the context of a dying sales channel.

In turn, of course, that allows other big suppliers to frame their results in the same way, taking the heat off misfiring CEOs and failing strategies, for example, and placing the blame at the feet of the sector and the consumer, rather than the companies themselves.

With this melancholy environment comes an aversion to taking risks, a lack of investment and a self-perpetuating staleness that genuinely damages the prospects of what should be a vibrant and joyful channel.

However, a section of the market does exist where this trend is reversed, where infectious positivity is spurring on winning brands, driving revenue growth and giving consumers good times and reason for cheer.

Yes, the independents and the challenger beverage alcohol brands of this world continue to provide the antidote to the seemingly contagious negativity released by some of their larger, more established, competitors.

CGA by NIQ has recently partnered with the UK-based Kindred Spirits community. Led by Jack Orr-Ewing of the Duppy Rum Co, this is a group of around 100 small- and medium-sized beverage producers set up to take collective learnings on how to win in both the on- and off-premise sectors and taking on what is often seen as a monopoly of larger manufacturers.

Running quarterly surveys with members, we’ve witnessed a collective can-do attitude, an enthusiastic sense of collective pride and, refreshingly, a bit more fun and light-heartedness.

This is more than just the naïve optimism of start-up businesses. Nor is it just hype either, or the need to talk up business prospects in order to convince investors and raise capital – it’s genuine optimism, which, in turn, is fuelling growth. These companies, with limited budgets, are outperforming the market and growing their collective sales.

Indeed, 72% of CGA by NIQ’s sample saw growth last year, with 48% reporting significant (10% to 20%) or hyper (20%-plus) increases in sales.

Of course, this is from smaller bases, but the numbers are not insignificant when combined – forming a collective equivalent to many companies whose dreary financial statements match the tone in which they’re presented.

Despite limited budgets and against established competition, these challenger brands are finding innovative ways to win, often using their closeness to the trade to spot and take advantage of opportunities in a nimble fashion that bigger brand owners could only dream of. 

What’s more, they resonate. Even if large companies are risk-averse, consumers are not, especially in on-premise environments and especially if encouraged by bartenders to trial new products.

CGA by NIQ’s latest global study of bartenders finds that the number one influencer for bartenders when choosing which spirits brands to use is the availability of unique/interesting and smaller brands, while 69% of bar managers (those often making stocking decisions, let’s not forget) say that they prefer less well-known brands that allow customers to explore new options than familiar ones.

The context matters, but so do the vibes. Maybe it’s time for some of the larger-scale suppliers to take inspiration from the innovators.