I have racked up my fair share of years telling the story of the On Premise. Delving into what shapes the sector, how it is performing and who is driving it, I am well into my second decade of professionally analysing this weird and wonderful On Premise channel.
It’s fair to say that it hasn’t exactly been smooth sailing; there have been cost-of-living crises, global health pandemics, restrictions on hospitality, mass closures of venues and seemingly ongoing policy battles with governments only to result in the sector being shafted at any 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 hospitality is on its knees, that the innate urge to socialise has dissipated and that swathes of the global population have given up on eating and drinking out.
Yes, there are headwinds that the industry is facing, and yes, economic pressures are yet to fully ease, but surely, if there is any sector that could and should have a feelgood factor about it, it is the sector that is designed to make people feel good.
My hypothesis on why there is so much pessimism around at the moment is that we have been invaded by a spreading infection of fun-sponges and mood-hoovers. There is nothing quite as contagious as negativity and, for larger manufacturers in particular, it feels as though a doom-cycle of gripes, laments and moans have firmly established themselves within boardrooms as tough-to-swallow results are framed in the context of a dying sector. The media too are all too eager to gleefully post clickbait articles around the travails of hospitality and the latest sensationalised statistic about one demographic group or other ‘turning away from alcohol’, regardless of how dubious or surface-level those statistics may be.
Of course, in turn, that allows other big suppliers to frame their results in the same way, taking the heat off mis-firing CEOs and failing strategies and placing the burden at the feet of the sector and the consumer, rather than the companies themselves.
I am not alone in that view. I was recently speaking with a Global Insight Director in a spirits manufacturer, who shared my perspective of an all-too gloomy outlook from those who should really be championing the sector, rather than knocking it down at every opportunity.
As they put it, ‘there are exciting areas of growth in the On Trade, but the industry seems to have accepted defeat. Our consumers want quality experiences, and quality drinks – and we can either invest in them, or accept a self-fulfilling prophecy of category decline’.
There is, then, a real, genuine threat from this macabre outlook. With this melancholy environment comes an aversion to risk-taking, a lack of investment and a self-perpetuating staleness which genuinely damages the prospects of what should be a vibrant and joyful sector.
However, there is a section of the market where this trend is reversed, where an 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 venomous negativity released by some of their larger, more established, competitors.
At CGA by NIQ, we have partnered with the UK-based Kindred Spirits community, a group of one hundred or so small and medium sized beverage producers, led by Jack Orr-Eweing of the Duppy Rum Company, and set up in order to take collective learnings on how to win in both retail and hospitality sectors, taking on what is often seen as a monopoly from 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. It isn’t 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.
Yes, these manufactures, with limited budgets are outperforming the market. As a collective, they are growing sales in what is, at best, a flat market. Indeed, 72% of our sample saw growth in 2024, with 48% reporting significant (10%-20%) or hyper (20%+) increases in sales.
Of course, it 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 are presented.
The focus of these smaller manufacturers also mirrors positive shoots that are in evidence across the sector as a whole. These nimble trendsetters and fast-followers are positioned firmly within the forefront of what is positive about the sector at the moment. They over-index in agave spirits, capitalising on the increased consumer intrigue and exploration in tequila and mezcal, while also prioritising signature cocktail serves that benefit operators, through high margin or easy delivery – in many cases – utilising pre-batch or RTD offerings. As you would expect, there is also a skew towards non-alc alternatives, while there are very few who do not run some kind of experiential activation, to link their products to consumers who are living their best lives.
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 suppliers could only dream of.
What’s more they resonate. Even if large suppliers are risk-averse, consumers are not, especially in On Premise environments and especially if encouraged by bartenders to trial new products. Our 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 its time for some of the larger-scale suppliers to take inspiration from the innovators.
To learn more about CGA’s REACH survey, Bartender Insights and other sources of insights for suppliers and operators across global markets to support your global strategies, contact Charlie Mitchell here.
Originally published in Global Drinks Intel Magazine
