In the UK, for example, the number of licensed on-premise venues has fallen below 100,000 for the first time since CGA by NIQ has been collecting data, down from nearly 150,000 just 20 years ago. The situation in the UK mirrors those globally, where numbers of licensed outlets in most markets continue to decline.
Faced with spiralling costs, volatile consumer confidence, unreliable supply and, in many cases, stifling tax and debt payments, many operators are taking the heart-wrenching decision to put up the ‘closed’ sign for good. What’s more agonising is that many of these closures are venues that managed to successfully navigate the pandemic before succumbing to the latest round of pressures, spearheaded by energy cost increases of nearly 60% year on year, according to CGA’s latest research.
This research shows that the on-premise continues to struggle when it comes to staff recruitment, retention and training, leading to fears that their overall offer will struggle to attract and retain custom. Despite this, the same research also highlights a not insignificant proportion of optimistic operators who have a great level of , not just in their own venues, but in the channel as a whole, suggesting an ongoing – and drastic – polarisation of the sector between those who are thriving and those who are barely surviving.
For suppliers to the sector, this results in the need for difficult decision-making.
With one in three hospitality outlets in the UK having closed over the past 20 years and the current rate of closures hovering around ten per day, there’s a serious risk in investing and activating in a volatile sector and in venues that may have limited time left. As brutal as this sounds, there is little reward in producing point-of-sale material for pubs, bars and restaurants that are at serious risk of no longer being a point of sale.
There is, therefore, a clear need for rational and informed decision-making and where, how and when to invest in on-premise outlets. As somebody who is employed by the world’s largest market research company, I believe that data and insights can provide this clarity (but I would say that).
Looking more closely at the closure data, however, there are commonalities around what is closing, which provides clues as to why. This can then lead to informed choices around where to invest – as well as which underperforming outlets to support to turn overperforming ones – and, critically, where not to.
The first clue comes from the types of outlets that are closing. As consumer behaviours shift and visitation patterns change, bars (-2.2% year on year) have been less negatively impacted than nightclubs (-7.4%), while hotels (-2.2%) have also managed to navigate the last year with less difficulty than others in the sector.
Evidently, a clear channel strategy is required, informing how to activate, with which brands and with which particular outlets. Even though the likes of nightclubs and traditional independent restaurants have been worse hit than others, there remain winners with whom there is opportunity.
It’s also worth identifying the locations where particular types of closures and openings occur, as pockets of vibrancy and hotspots within both city centre and suburban locations continue to appear.
Monitoring population trends and new housing developments can be a sure-fire way to ensure that your brands play where demand is highest. This can also be a way to identify underperforming venues and provide support to help to turn their fortunes around.
When we ask operators what they’re looking for from suppliers, the usual answers crop up with depressing regularity: cash incentives, better deals per case, lower transaction costs, etc. However, when we ask about their challenges, there is evidence that suppliers could go beyond financial support to boost trading, providing mutual benefits for supplier and operator alike.
Operators tell us that they’re struggling to understand rapidly-shifting consumer demands, that their pricing strategies are, at best, guesswork and that when it comes to their ranges, little thought is being applied. Given this context, there is opportunity for clever suppliers to invest smartly in outlets to help them elevate their offerings and take advantage of a market with fewer competitors and become the survivor who thrives.
As well as investing in those operators who are performing at the higher end of the channel, there are also opportunities to partner with those operators who are most in need of support. It is here that long-term and more secure relationships will develop.
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