Drink choices polarise as the market reboots

The pandemic and lockdown have profound implications for out-of-home drinking and the premiumisation trend in particular. CGA’s Mark Newton explains how consumer behaviour is changing—and how retailers and suppliers can capitalise.

The pandemic and lockdown have profound implications for out-of-home drinking and the premiumisation trend in particular. CGA’s Mark Newton explains how consumer behaviour is changing—and how retailers and suppliers can capitalise.

CGA’s Mark Newton

Premiumisation has been a hugely significant trend in drinking-out for several years now, but how has it been impacted by the COVID-19 pandemic and lockdown? The latest edition of CGA’s BrandTrack survey reveals some subtle but significant shifts in behaviour that all operators and suppliers will need to follow in the months ahead.

The quarterly survey of 5,000 British adults shows that while many consumers continue to trade up to premium and super-premium drinks, others have traded down—providing fresh opportunities for value and mainstream segments of the market. While the majority of consumers have stuck to their usual favourites, nearly one in five has shifted to either end of the price scale, with 11% buying cheaper drinks than usual and 8% treating themselves to more expensive premium brands.

This increasingly polarised behaviour is driven by money. BrandTrack shows that a third (34%) of consumers have seen their household income fall since lockdown, and fears of a deep recession and job losses have prompted many people to tighten their spending. But it’s important to remember that lockdown has had a very positive effect on some consumers. Those who have continued working, but saved on travel and other costs because they stayed at home, have more money in their pockets now.

The polarising effect of lockdown is echoed in CGA’s groundbreaking research into the impact of the pandemic in China. Here, the domestic beer category saw a distinct swing from premium to value brands during and after lockdown, but in vodka the proportion of people choosing only premium brands jumped by nine percentage points when the market reopened.

As the out-of-home drinking market relaunches here, it is vital to understand the different appeals of premium, mainstream and value drinks. The new wave of premium consumers identified by BrandTrack indicate that they are likely to take the habit with them when they return to drink in the on-trade, which presents pubs, bars and restaurants with a great opportunity to capture their spend. But as people seek savings, brands further down the pricing ladder could be poised for a revival too. That may leave some drinks in the middle of the pricing ladder a little exposed.

Polarisation is likely to emerge in different ways in different categories. In spirits and soft drinks, the demarcation between super-premium, premium and value brands is already pretty clear. Equally, the craft beer and cider movement has provided an obvious trajectory path for drinkers from mainstream to premium choices. It’s a slightly different story in wine, where well-known brands tend to be at the budget end of the market, and trading up requires an increased knowledge of varietals and countries. Education and premium on-trade only branding could both help to push drinkers up the price range here.

CGA’s ‘Reclaiming your Consumers in the Out-of-Home’ report uses the latest BrandTrack data to provide more clues about people’s decision-making. For example, it shows that 29% of consumers think ‘value for money drinks’ are now more appealing than before lockdown—but 23% think the same about ‘high quality drinks’. This perfectly illustrates the value-and-premium paradigm, and the potential danger zone for mid-market brands that sit between the two.

The report also indicates a growing desire for British and regional drinks brands. Consumers’ interest in local, sustainable and ethical issues has deepened during lockdown, when so many people have been spending time and money close to home. Brands that can prove their green credentials and their community roots could reclaim drinkers’ hearts and minds quickest.

It shouldn’t be forgotten that value isn’t only connected to price. While the level of disposable income is pivotal, a high-price drink can also be a good-value one if the quality exceeds expectations. As drinking out becomes a less spontaneous and more organised activity in the months ahead, these premium drinks can help consumers to maximise their experience.

Retailers and suppliers alike will need to act smartly to satisfy changing needs in the coming months. Those that can successfully position their brands across a polarised environment are well placed to thrive in what will inevitably be a smaller and ultra-competitive market. The marketing of products and serves will have to be tailored to key demographics—affluent and older white collar males for premium beers, for example—and retailers and suppliers will need to work closely together on innovative POS, serves and more. Price promotions alone may no longer be enough to drive volume, and the trick will be to find the sweet spot of quality, cost and experience.

It is already clear that the on-trade and consumer behaviour have both changed dramatically. But as we wait for the new normal to settle, striking the right balance of value and premium will be crucial in getting people back through the doors and securing new loyalties.

To ensure your strategy meets the needs of the post-lockdown consumer and to uncover opportunities for your business, email mark.newton@cga.co.uk.

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