Alcohol in Restaurants. Executive Summary UK April 2011

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Helena Spicer Senior Food Services Analyst Value for money trumps low cost when it comes to consumer spending priorities and this is as true when it comes to diners drinks choices as it is to their

2 Helena Spicer Senior Food Services Analyst Value for money trumps low cost when it comes to consumer spending priorities and this is as true when it comes to diners drinks choices as it is to their grocery shopping habits. Upselling on drinks ranges is often difficult because most diners are habitual drinkers and few consumers classify themselves as wine connoisseurs. Therefore it is up to operators to actively demonstrate points of added value. 1

The Market FIGURE 1: Trends in agreement with lifestyle statements on drinking, 2006-10 Base: adults aged 18+ KPMG s Coffer Peach Business Tracker shows that the eating out market bounced in terms of

3 The Market FIGURE 1: Trends in agreement with lifestyle statements on drinking, Base: adults aged 18+ KPMG s Coffer Peach Business Tracker shows that the eating out market bounced in terms of like-for-like sales at the start of 2011, buoyed mostly by rising food sales rather than drinks sales, but also in terms of operators utilising low property prices to expand their estates. However, it should be noted that these figures were compared against a very poor sales performance in early There has been only a marginal decline in restaurant usage in recent years, with the impact of declining heavy users being lessened by the rising number of light users. However, most operators are cautious going into 2011 with the expectation that it will be another tough year for the industry. Market Factors It is a tough operational environment for the pub and eating out industries; having to contend with issues such as the widening difference between on- and offtrade drinks prices, increasing alcohol duty, tax, VAT and interest rates. Margins are being increasingly squeezed as these pressures are compounded by the fact that consumers are increasingly reluctant to pay more for good-quality wine/beer or splash out on restaurants. Although frequent restaurant users are more likely than average to agree that it s worth paying more for quality drinks, especially wine, it is still generally agreed that operators now need to actively demonstrate the added value to diners. Taken from the TGI survey of around 25,000 adults SOURCE: GB TGI, Kantar Media UK Ltd Q (Oct-Sep)/Min The relaxation of the 1985 Weights and Measures Act (set to come into force in October 2011) should provide the market with further opportunities of growth. The new regulations will allow operators to sell smaller servings of wine that are better suited to sampling strategies, whilst it also permits the sale of the schooner (two thirds of a pint measure of beer and cider). The government s Pub Health Responsibility Deal was launched on 15 March 2011 and includes key pledges such as labelling calories on menus from September 2011 and achieving clear unit labelling on more than 80% of alcohol by At present the code is voluntary, although the British Hospitality Association (BHA) advises operators at least some of the code s key pledges to avoid mandatory legislation being introduced instead. 2

4 Companies, Brand and Innovation Pricing trends Menu psychology has gained in significance with the turbulence of the economy. Strategies include: Neither the rib chains Bodean s nor John Torode s multi-storey bar and restaurant venues, The Luxe, London, display signs on their menus. Venues such as the Canteen chain tend to keep prices rounded eg.00,.50 or.75, whilst Nobu s wine list prices drop some of the decimal places altogether and are displayed as numbers such as 8 or 9.5. Bottles of wine at the Park Lane restaurant also follow this strategy and are listed in pounds only, ie 39. Kopapa Café and Restaurant, Covent Garden, adopts a flexible pricing approach to its drinks menus eg its latest cocktail list offers Martinis and Vodka Martinis using a choice of base spirits at varying price points, eg Martini with Bombay Sapphire at 9.50 ranging up to a Martini with Berkeley Square at Making fine wine more accessible A select number of operators are working to make fine wines more accessible and less intimidating, for example: In February 2011, the 20-strong restaurant group D&D London launched a LOVE WINE selection which involved a comprehensive review of the brand s pricing list and aims to provide fine wines at exceptional value for money. Trinity Restaurant, Clapham, London offers a separate Chefs Cellar list which comprises a small number of fine wines, described as being priced with serious modesty to enable you to enjoy some real gems at great value. The Chefs Cellar wines are purchased in small numbers and are replaced with new varieties when stocks run out. Bring Your Own (BYO) trends Originally the premise of venues at the bottom end of the market which didn t have a drinks licence, the recession prompted the expansion of the Bring Your Own concept into the high end of the market. However, few high-end venues advertise this option and its use is heavily restricted as restaurants of this calibre state that they rely on drinks revenue due to food margins being so tight due to the number and quality of chefs involved in the food production. Health trends Eating out is predominantly seen as a treat which means consumers are less enthusiastic about menu labelling in restaurants than they are about supermarket products, for example. Popular strategies of tapping into healthy eating trends in the restaurant market include promoting a limited range of healthier products in a positive way, eg advertising their added value in health terms rather than what they are low on (think of PizzaExpress s Leggera range or the Londonbased pub group, Drake & Morgan s, selection of Skinny Cocktails). Ethical trends The UK s economic turbulence has dented demand for ethical products in recent years, however, these products continue to be crucial for restaurants looking to establish themselves as lifestyle brands and are used to bolster the health/ethical credentials of the venues overall positioning. For example: The renowned two-strong vegetarian chain Saf bolsters its own ethical and health credentials by stocking what it calls the largest range of organic spirits in Europe including exciting botanical cocktails and a vast range of biodynamic wines and Champagnes. 3

The two-strong pizza chain Franco Manca, which specialises in sour dough pizza bases, bolsters its overall positioning by stocking organic beer and wine which it describes as wines made with little

5 The two-strong pizza chain Franco Manca, which specialises in sour dough pizza bases, bolsters its overall positioning by stocking organic beer and wine which it describes as wines made with little or no sulphur and without the aid of temperate control or selected yeasts. Technology trends They are a number of wine apps available to help educate consumers on wine through smartphone technology (eg Wine Search app and Berry Bros. & Rudd Fine Wine app). Many of these apps also show consumers the price differentials between on- and offtrade prices. Other apps have been designed with the restaurateurs in mind, eg digital wine lists for ipads are designed to help operators keep wine lists up to date more easily and can add to the experience of eating out when used by diners themselves to search through wine lists according to their own preferences, eg by price, country or grape. Advancements in wine preservation systems have also been beneficial for the eating out market, and will be increasingly useful with the forthcoming relaxation of the 1985 Weights and Measures Act. Figure 2: Frequency of drinking alcohol, March 2011 Base: 1,931 internet users aged 18+ I don t drink alcohol 15% I occasionally drink alcohol (less than once a week) 40% I regularly drink alcohol (once a week or more) 45% More than eight in ten adults (85%) drink alcohol, with just 15% stating that they never drink. Changes to drinking habits Figure 3: Changes to drinking habits, March 2011 Base: 1,651 internet users aged 18+ who drink alcohol The Consumer Drinking habits There has been a slow but steady decline in alcohol consumption in the UK, driven by healthy eating trends in part as well as factors such as migration levels, meaning that there is a greater proportion of the population who abstain from alcohol for religious or cultural reasons. Whilst there has been a shift towards in-home drinking, both in- and out-of-home drinking are in decline. I drink less is a net of I drink less for health reasons and I drink less to save money and I drink less due to a change in my lifestyle (eg now have children) 4

Although nearly half of drinkers haven t changed their habits in the last 12 months, the impact of the economic instability is still evident as a quarter of drinkers have cut down on the amount they

6 Although nearly half of drinkers haven t changed their habits in the last 12 months, the impact of the economic instability is still evident as a quarter of drinkers have cut down on the amount they drink to save money. Meanwhile 16% have cut down for health reasons. Drinks ordered in a restaurant Motivations for drinks choice Figure 5: Motivations for drinks choice in restaurants, March 2011 Base: 1,330 internet users aged 18+ who have drunk alcohol at a restaurant in the last 3 months Figure 4: Alcohol drunk in restaurants, March 2011 Base: 1,651 internet users aged 18+ who drink alcohol White wine Lager Red wine Any white spirit (e.g. gin, vodka, white rum) Rose wine Cider Bitter/ale/stout (e.g. Guinness) I haven t been to a restaurant in the last three months Any whisky/whiskey (including Scotch) Cocktails Champagne Other sparkling wine (e.g. Cava) Liqueur (e.g. Tia Maria, Baileys, Cointreau)/ Liqueur coffee I don t tend to drink alcohol in restaurants Other alcoholic drink (e.g. Port, Sherry, dark spirits i.e. dark rum) Brandy/Cognac/Armagnac Mixable (e.g. Malibu, Advocaat, Vermouth) Any low-alcohol/no-alcohol beer/lager or wine Consumers are most likely to order white wine, lager or red wine in restaurants, although Mintel s Consumer Attitudes to Drinking UK, August 2010 shows how, although alcohol consumption is down in the UK, consumers drinking repertoire is actually increasing, with categories such as cider gaining ground % Most diners are habitual drinkers, although just over a quarter say they often try new drinks. Younger diners are the most likely to want to try new drinks, however, they are also the most reliant on advice from menus, waiting staff and family/friends. Value for money is seen as more important than low cost as few people choose the cheapest drinks on a restaurant s drinks menus. 5

Drinks menu enticements Figure 6: Drinks menu enticements, March 2011 Base: 1,330 internet users aged 18+ who have drunk alcohol at a restaurant in the last 3 months points and making it easy for

7 Drinks menu enticements Figure 6: Drinks menu enticements, March 2011 Base: 1,330 internet users aged 18+ who have drunk alcohol at a restaurant in the last 3 months points and making it easy for them to choose. For example, offering wine flights can be used to encourage Pinot Grigio drinkers, for example, to explore a greater variety of wine, whilst schooner measures may be more appropriate when it comes to pairing beer with food matches on menus, as traditional measures may be off-putting for diners due to the larger volume. There is also considerable potential to promote food and drink matching; relatively little has been done so far, yet consumers need help in navigating drinks menus, particularly when it comes to wine and by making suggestions on menus, operators can help guide choice, educate consumers and add to the experience of eating out. Potential menu development strategies which consumers are most interested in include labelling the number of alcohol units in each drink, new/interesting drinks and wines. Operators could also do more when it comes to promoting drinks for certain occasions or mood: The emphasis is on restaurateurs to provide consumers with tangible reasons to eat out, either through service, convenience or authenticity of experience and this attitude needs to be reflected in both the venues drinks and food menus. Calorie counting on drinks menus is more controversial with as many people saying they are not interested in this option as that they are. What we think The eating out market has to balance narrowing margins with the need to engage and excite consumers in order to retain their expenditure. However, the price differentials between the on- and off-trade drinks market arguably make the restaurant operators job even harder when it comes selling drinks at a profit but still appealing to consumers demands for value for money. Operators should address this issue by using alternative serving measures more frequently in order to give consumers more options at different price 6

8 Helena Spicer Senior Food Services Analyst Telephone +44 (0) Helena produces and writes for the Foodservice journal, covering the restaurant and pub markets as well as contract catering. She is primarily responsible for all of the foodservice reports as well as several pub and drink-related titles. Helena joined Mintel in 2005 to produce reports for the Leisure team. She has a BA (Hons) in Politics, specialising in international relations. 7

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