Raising The Bar: Developments in On-Trade Alcoholic Drinks: February 2020

RAISING THE BAR: DEVELOPMENTS IN ON-TRADE
ALCOHOLIC DRINKS
February 2020
DEVELOPMENTS IN ON-TRADE ALCOHOLIC DRINKS
Scope
Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
On-trade companies’ opinions, reader
87.6 billion litres discretion is advised.
Global alcoholic drinks On-trade contributes over a

254.3 billion litres third of global alcoholic drinks
volumes, yet it is often
(2018) overlooked. Trends are
Off-trade converging to create a
166.7 billion litres challenging environment in
mature markets; however,
innovation is rife and there are
opportunities to be found – for
example brewpubs, exploring
ingredients and an emphasis on
experiences. At the same time,
evolving consumer behaviour
and technology mean that the
notion of a binary split between
on- and off-trade is becoming
increasingly less relevant.
© Euromonitor International ALCOHOLIC DRINKS: RAISING THE BAR - DEVELOPMENTS IN ON-TRADE ALCOHOLIC PASSPORT 2
DRINKS
Off-trade leads growth as consumption occasions shift to the home
▪ For the majority of the 2013-2018 review years, alcoholic drinks volumes stagnated or were in decline. The
slight return to growth towards the end of this period was primarily due (in broad terms) to a resurgence in
Eastern Europe and ongoing strength in Asia Pacific. The premiumisation trend continues to shape the
industry, with the emphasis on quality rather than quantity.
▪ Off-trade has marginally outperformed on-trade globally since 2015, although both followed a similar
trajectory. Many markets are experiencing a shift towards at-home consumption, as economic pressures
promote restraint in discretionary spending. Of the main alcoholic drinks categories, it is in beer that the on-
trade plays the most significant role, contributing 37% of total volumes in 2018.
▪ While these statistics provide an overview, they mask an underlying picture where the distinctions are less
rigid. Evolving consumer behaviour and technology means there is no longer a binary split between on- and
off-trade.
Global On-Trade vs Off-Trade Share in Key Global Alcoholic Drinks: Off-Trade vs

Alcoholic Drinks Categories, 2018 On-Trade Y-o-Y % Growth 2013-2018
2
Beer Wine Spirits
1
% y-o-y growth
0
-1
-2
On-Trade Off-Trade On-Trade Off-Trade On-Trade Off-Trade 2013 2014 2015 2016 2017 2018
Off-Trade Volume On-Trade Volume
DRINKS
Significant on-trade share in many key growth markets
▪ At a global level, the off-trade dominates alcoholic drinks, but the balance between on-trade and off-trade
varies greatly between countries. The on-trade has a crucial role to play, and traditional bar or pub customs
can be found across much of the world – from izakayas in Japan to cantinas in Mexico.
▪ The highest regional off-trade share is found in Eastern Europe, where it accounts for 84% of alcoholic
drinks sales. In countries such as Ukraine, Russia and Lithuania, this figure is over 90%. In Russia, many
wine and spirits producers view the on-trade as an advertising opportunity, rather than as a key channel for
sales.
▪ However, in the Middle East On-Trade % Share of Alcoholic Drinks Volumes, 2018
and Africa, the off-trade
contribution is far lower, at just
59%. In fact, in Cameroon,
Ethiopia and Kenya, over 80%
of sales of alcoholic drinks are
on-trade. This is particularly
relevant for beer, which has an
on-trade consumption figure of % On-Trade
close to 90% in the three Share
aforementioned markets. 80+
▪ Vietnam, which is expected to 60-79.9
see the third-highest rise in 40-59.9
absolute alcoholic drinks 20-39.9
volumes over 2018-2023, has a 0-19.9
Global figure = 34%
70% on-trade share. Not researched
DRINKS
Converging trends bring challenges for bars and pubs
▪ Drink-focused on-trade venues are now operating in a highly Leading Consumer Foodservice
challenging environment. As well as consumption occasions Types Globally: % CAGR for
shifting into the home, consumers are reducing their overall Number of Outlets 2013-2018
intake of alcoholic drinks. This is partly due to the prioritisation of
quality over quantity, which is exemplified by the rise of craft. Full-Service
There is also a rise in health awareness and growing support for Restaurants
temporary “dry” movements.
▪ However, the publicity surrounding such trends perhaps
Street Stalls/
overstates the case; people are still drinking alcohol. What is Kiosks
evident is the growing need for the on-trade to offer something
extra to drive its appeal.
▪ When socialising, people are increasingly placing an emphasis Limited-Service
on the occasion and experiences rather than sticking rigidly to Restaurants
certain drinks categories. This is allowing non-alcoholic drinks

players to seek involvement in occasions that were traditionally
the domain of alcoholic drinks. Starbucks Reserve Roasteries, Cafés
which can be found in major global cities, are positioned as
premium destination venues which are as suitable for an evening
out as a morning meeting. Bars/Pubs
▪ This same trend brings opportunities for bars and pubs to also
broaden their appeal. Breakfast and brunch offers are
-1 0 1 2 3 4 5
increasingly common, as is a focus on tea and coffee. This
makes particular sense for bars with high levels of passing trade. % CAGR
DRINKS
Brewpubs and taprooms are key engagement channels
▪ Brewpubs and taprooms are breweries that sell their beers for consumption on site (the US Brewers
Association differentiates the two by the extent of the focus on food). They are key channels for
microbrewers across the world – for sales as well as consumer interaction. The local community aspect is
central to the “craft” movement, and on-site sales can help brands to highlight their credentials in this area.
They allow brewers to capitalise on the interest in experiential drinking occasions – educating consumers
and providing recommendations while highlighting the genuine “craftsmanship” that goes into their
products.
▪ In the more established craft markets, such as the US, innovation through new products and different styles
will help to maintain consumer interest and drive loyalty. Brewpubs and taprooms provide an ideal channel
for experimentation and gaining early feedback on new products. The increasing number of US
microbrewer closures highlights the need for such an approach to ensure developments align with
consumer tastes.
▪ In countries where the craft trend is still emerging, the on-trade has a key role to play in introducing
consumers to new beer styles.
US: Craft Beer Volume Growth and Microbrewery*
Openings and Closures 2013-2018
1,200 20
% y-o-y growth
800
Number
10
400
0 0
2013 2014 2015 2016 2017 2018
Total openings Total closures Volume growth
Source: Data from the Brewers Association
Note: * Opening and closure figures include microbrewers and brewpubs
DRINKS
Cask ale battle to remain relevant in draught beer in the UK
▪ In draught beer, kegs and casks are the two main storage formats. Keg beer is common across the world,
while cask beer (or real ale) is only significant in a few countries – primarily the UK. Cask beer has gained a
(limited) international following, with the Cask Days festival in Toronto celebrating its 15th anniversary in
2019.
▪ According to the UK’s Campaign for Real Ale (CAMRA), “real ale is a ‘living’ product, which is typically
produced and stored in a cask container”. The campaign was started in the 1970s to “describe traditional
draught cask beers, distinguishing them from the processed and highly carbonated beers”.
▪ There has been some disagreement about the meaning and relevance of the “real ale” and more modern
“craft beer” concepts in recent years. However, there are many similarities between the two – both share an
emphasis on tradition, quality and craftsmanship – and they are not inherently mutually exclusive.
▪ The 2018 Cask Report, by Cask-Marque, states that cask beer is declining faster than overall on-trade beer
volumes in the UK. There are a number of reasons why cask beer is struggling. Key factors include poor
quality of serve, a lack of staff training in pubs and a perception that cask beer is an old-fashioned choice.
▪ In June 2019, BrewDog started selling cask beer in its bars,
beginning with a cask version of its flagship Punk IPA. It has
modernised the production process to produce what it describes
as “cask with a twist”, in an effort to reduce the inconsistency of
serve.
▪ The involvement of trendy craft brewers will raise interest
among younger consumers, which is crucial to the future of cask
beer. Having their own bars or taprooms also means craft
brewers can maintain greater control over the quality of serve. BrewDog Cask Font
Microbrewers may well have a vital role to play in the next era of
UK cask ale. Source: BrewDog
DRINKS
New horizons to be explored in draught
Bringing cocktails to crowds
• Traditionally, a degree of ceremony when serving is a key feature of the cocktail experience. However, the desire
for convenience and speed is becoming more important in some cases – premixed draught cocktails are on the
rise. The clear benefit of this format is that it allows cocktails to be served in high footfall locations in which it would
otherwise not be feasible – at events and festivals, for example. Wine on tap has also been gradually gaining
popularity.
Key players see potential
• In 2019, Bacardi released a Grey Goose branded sub-zero cocktail tap system that enables drinks to be poured in
seconds. To retain an element of theatre, the system has a transparent front panel so consumers can see the
internal workings. In the same year, Diageo acquired Tipplesworth, a company that specialises in premixed
cocktails and offers Espresso Martini and Passion Fruit Martini cocktails on tap in a number of UK venues.
Hard seltzers: Time to focus on the on-trade?
• Hard seltzer – the alcoholic sparkling water that has taken the US by storm – has so far been
predominantly sold pre-packaged, mainly in cans. Cans have the advantage of practicality and
convenience; benefits that are particularly relevant for the off-trade outdoor summer occasions often
associated with the category.
• However, the rise of hard seltzer is not an off-trade-only phenomenon. On-trade, portability is less
important, and value for money is a higher priority. In summer 2019, Boston Beer-owned Truly announced
the launch of Truly on Tap across the US. This unflavoured hard seltzer is designed to be served with a
slice of lemon or lime, similar to a vodka soda. A number of microbreweries already offer hard seltzers on
draught in their taprooms – North Carolina’s NoDa Brewing, Minnesota’s Lift Bridge Brewing and
Connecticut's Two Roads Brewing, for example. In contrast to Truly on Tap, these are mainly flavoured
hard seltzers. Other producers will surely follow suit now it has become apparent the category is here to
stay.
DRINKS
Appearances are important
▪ The on-trade has been a fundamental driver behind some of

the most headline-grabbing recent alcoholic drinks trends,
such as the rise of Aperol, and alcohol-free spirits (pioneered
by Seedlip).
▪ The Instagram factor was a crucial element of Aperol’s
success – the bright colour and summer associations of the
spritz led to attractive photos, seemingly designed for sharing.
Brand marketing worked to emphasise its visual appeal. The
presentation of cocktails and surroundings help on-trade
venues to create points of differentiation; “Instagrammable”
bars are being sought out in cities across the world. Source: Campari UK
▪ At the other end of the scale to elaborate, eye-catching
creations is the movement towards minimalist cocktails –
straightforward in both ingredients and serve. Although
challenging to perfect, the pared-back approach can fit well
with the consumer desire for simplicity.
▪ It is on-trade specifically where people are keen to avoid
appearing conspicuous if they choose not to drink alcohol.
Non-alcoholic spirits such as Seedlip capitalise on this desire.
These drinks are perceived as adding a complexity and
sophistication to non-alcoholic cocktails that is missing in
many alcohol-free options – something which allows bars to
charge comparable prices to standard alcoholic versions.
DRINKS
Increasing need for innovation on high-energy occasions
▪ The rise of mindful drinking is affecting high-energy occasions. Jägermeister Brand: Absolute
Younger drinkers today are faced with a different environment Volume Change in Top Markets
to previous generations. Social media means that the events of 2013-2018
a night out are now quickly shared among peers and potential 4,000
employers – moderation is often viewed as the wise choice. 2,000
▪ The fact that consumers are drinking less has been a factor 0
‘000 litres
contributing to a wave of nightclub closures across Europe.
-2,000
Alcoholic drinks producers are also having to rethink their
strategies as the drinking culture evolves from shots to sipping. -4,000
▪ In the modern era, Jägermeister has become virtually -6,000
synonymous with shots. The brand has been struggling in its -8,000
World USA Germany UK
top markets, and has begun to innovate to adapt to shifting
consumer behaviour. In 2017, Mast-Jägermeister released its
first brand extension, super-premium Manifest, across Europe.
▪ Further variants have followed this turning point. For example,
a new packaging format, Jägermeister COOLPACK, was
launched in the US in 2019. The PET bottle is designed for
convenience in out-of-home off-trade occasions. 2019 also
saw the release of the Scharf (with a hot ginger flavour) and
Cold Brew Coffee extensions in various markets. The flavour-
driven nature of these new offers is significant; consumers are
keen to explore new tastes, even for high-energy occasions. It Jägermeister Jägermeister Cold
is no longer possible to rely on the continuation of previous COOLPACK Brew Coffee
behaviour.
Source: Mast-Jägermeister SE
DRINKS
AI, AR and apps: the expanding role of technology
▪ The alcoholic drinks world has arguably been slower to embrace developments in technology than other
consumer industries. Nevertheless, innovation is gradually driving change.
▪ Bars with self-serve beer taps can now be found in cities across the world. The taps are either located on
the tables or on a “beer wall”. Apart from the obvious benefits of reducing queues at the bar and saving
staff time, the interactive aspect helps to attract and engage consumers. Augmented reality cocktail menus,
such as those found at London’s City Social and The Alchemist UK bar and restaurant chain, also use a
sense of theatre and experience to add an extra element to an evening out.
▪ Digital ordering through tablets or apps is becoming fairly common. The aim is to streamline service and
reduce staff interaction, as well as the associated costs and waiting times. A more controversial approach
to improving service is the use of facial recognition to record the order that consumers arrived at a bar, and
inform staff who should be served first.
▪ Looking further forward, artificial intelligence in mixology and robotic
bartenders potentially herald a futuristic age of drinking. Robots will
speed up service and could help to alleviate employee shortages in
markets with ageing populations, such as Japan.
▪ However, the social element has always been central to alcoholic drinks
in the on-trade. In most markets, removing all human interaction from
the process in the name of efficiency may simply serve to alienate
consumers once the novelty has worn off. Indeed, one UK bar chain,
Samuel Smith’s, has “banned” mobile phones in an attempt to
6 Tap Beer Wall
encourage conversation. While this would be too extreme a step for
most bars, the primary purpose of the on-trade – socialising – should not
be sacrificed for the sake of digital progress. Source: Drink Command
DRINKS
On-trade comes home?
▪ Many markets are witnessing a shift towards at-home consumption. Consumers are looking to reduce their
expenditure, and moving socialising occasions into the home is one way of achieving this. Drink delivery
apps such as Drizly in the US and Bevy in the UK are making at-home entertaining easier than ever. Many
of these services offer delivery within an hour, meaning the danger of running out of alcohol is no longer a
worry.
▪ An increasing range of accessible and technologically-advanced home-brewing and mixology devices is
radicalising at-home drinking, clouding the lines between on- and off-trade. Convenience is a key attraction
of these devices, which look to replicate some of the success of the capsule format in coffee. While they
lack the theatre and artistry of traditional cocktail mixing or home-brewing, they provide a time-saving option
that allows easy experimentation and opens up new entertaining opportunities.
▪ There are various options on the market (or soon to be released), but capsule- or pod-based cocktail
systems are proving particularly popular. Many of these feature all-in-one ingredient packs, which just
require the addition of ice or water, while some feature capsules that exclude the base spirit, allowing
greater customisation.
LG HomeBrew Bartesian Bevy

Source: LG Source: Bartesian, Corp Source: Bevy Limited
DRINKS
Opportunities to stand out
▪ A distinct concept is one ▪ Mixology featuring tea, ▪ Boosted by micro-
Curation
Ingredients
Concepts
way for on-trade venues to beer, kombucha and lesser- producers, the number of
stand out. Alcohol-free bars known spirits, such as baijiu high-quality spirits and
are on the rise, aided by the in most markets, meets a beers on offer is
growing range of non- desire for new tastes. considerable. Range is
alcoholic options that allow ▪ While using tea to provide useful in broadening appeal.
high-quality, varied offers. added complexity in However, an excess of
▪ A zero-waste positioning is cocktails is nothing new, the choice can be perceived as
becoming more attractive as wide variety that is now intimidating or confusing if
ecological concerns climb available allows for easy no guidance is given.
the consumer agenda. As experimentation. ▪ With the off-trade stepping
well as being the ▪ A major trend in soft drinks, into its occasions, the on-
responsible course, there functionality claims are trade has to focus on its
are also cost savings. more complex when alcohol strengths. A well-curated
▪ Utilising the relatively low- is involved. Nevertheless, offer is key – whether
risk pop-up format can help functional ingredients, such through a limited cocktail
test whether or not an idea as probiotics and CBD, are menu, personalisation or
works in a certain location. on the rise where permitted. highly knowledgeable staff.
DRINKS
Future trajectory
There is no doubt that the on-

The outlook for the on-trade Unfolding macroeconomic
trade has a continuing part to
appears set to remain events are likely to lead to
play in alcoholic drinks;
decidedly troubled. The even greater financial
however, brands will need to
competition will intensify pressures across regions,
rethink the nature of this role.
further, with different adding to existing concerns.
Where the on-trade was once
categories vying for the same The on-trade is an obvious
the focal point of new spirits
limited number of occasions, target for consumers looking
launches, retail will potentially
as the global shift towards at- to reduce discretionary
need to take centre stage in
home socialising continues. spending.
coming years.
DRINKS
FOR FURTHER INSIGHT PLEASE CONTACT
Anna Ward
Consultant
anna.ward@euromonitor.com
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DRINKS

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RAISING THE BAR: DEVELOPMENTS IN ON-TRADE

Global alcoholic drinks On-trade contributes over a

Off-trade leads growth as consumption occasions shift to the home

Global On-Trade vs Off-Trade Share in Key Global Alcoholic Drinks: Off-Trade vs

Significant on-trade share in many key growth markets

Converging trends bring challenges for bars and pubs

certain drinks categories. This is allowing non-alcoholic drinks

Brewpubs and taprooms are key engagement channels

Cask ale battle to remain relevant in draught beer in the UK

New horizons to be explored in draught

Bringing cocktails to crowds

Appearances are important

▪ The on-trade has been a fundamental driver behind some of

Increasing need for innovation on high-energy occasions

▪ In the modern era, Jägermeister has become virtually -6,000

AI, AR and apps: the expanding role of technology

On-trade comes home?

LG HomeBrew Bartesian Bevy

Opportunities to stand out

▪ A distinct concept is one ▪ Mixology featuring tea, ▪ Boosted by micro-

There is no doubt that the on-

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