Wine Losing On-Premise Sales

Alcoholic drinks are at the forefront of several trends, which offer both immense opportunities and daunting challenges to today’s leadership cohort. Consumer behaviours in this space are arguably on a more rapid evolutionary trajectory because alcohol is subject to regulatory changes, as well as changes in technology, retailing and consumer culture. Within alcohol, wine must compete – and to an extent emulate – developments in adjacent categories such as craft beer, spirits and hard cider.

The millennial drinkers are increasingly enchanted with cocktails and craft beer.

That trend was the focus of remarks by Sandy Block, MW and vice president in charge of the beverage program at Legal Seafoods, a 36-location restaurant group in the eastern United States.

Block was speaking at a seminar hosted by wine closure supplier Diam and its U.S. partner, G3 Enterprises.
Block’s view stems from significant changes in the behavior and expectations of customers in the on-premise channel. “Customers don’t just want to eat and drink; they want to be entertained,” he said. “And cocktails and draft beer are more entertaining to them than wine.”
Block said that Legal Seafoods, a family-owned collection of distinctive restaurants, noted the difference after 2008. “Everything changed. We realized that we were in a different business than we thought we were in. Restaurants were no longer temples of gastronomy. They were for entertainment. We weren’t just in the business of feeding people. We were feeding their souls.”
He said they realized that they needed to put on a show and embrace more social interactions between staff and customers. Some of the changes included open kitchens, custom-made cocktails and lively bars with “attractive, muscled bartenders with tattoos shaking cocktails like maracas and blenders whirling.”
It all makes for an act that’s hard for wine to compete with. “Everyone knows how to buy and pour wine, but only a few people can make crafted cocktails. You expect them only in restaurants.”

A huge market
Block noted that Americans now eat almost half their meals outside of their homes. “It’s declined a bit since the height of 51% in 2007 to 45% last year, but is rising again.”
He said that multi-unit restaurants total 45% of the market, but capture 73% of sales, while individually owned restaurants have 55% of numbers but 27% of sales.
Wine sold in restaurants accounted for 19% of volume sold, but 44% of retail value last year, according to the Beverage Information Group. That’s down from 51% of value and 23% of volume in 2007 before the recession.

What’s cool?
Block pointed out that France once owned the market for fine wine, but lost that leadership position by growing complacent. The same is happening to wine in general, especially in on-premise sales. “We see early warning signs for wine in the restaurant business. We may say, ‘wine is best with food,’ but that isn’t what our customers are telling us.”
Block further observed that many people want to drink the “right” thing. “Restaurants and bars are public displays. Patrons want to be perceived drinking something hip.”
He noted, too, that in the mental checklist of ordering, taste may come first, but the risk (buying a bottle of wine the consumer doesn’t like) and what is says about the customer are also important. And cocktails (and beer) are also much more profitable than wine. “They’re coming after us [wine].”

What’s hot, what’s not?
Block also shared numbers on popularity of varieties of wine at Legal Seafoods restaurants:
Sauvignon Blanc is up 33%. “It’s going through the roof.” Of course, it’s good with seafood, but Block also says Sauvignon Blanc is distinctive and blandness is out, hurting Chardonnay, which is down 6%, and Pinot Grigio, down 22%.
Merlot is down 44% and Syrah/Shiraz 55% but Malbec is up 59%, Pinot Noir up 31% and Cabernet 22%.
He also said that bubbles were way up, 42%. “That’s the entertainment factor again.”
Block admonished that though the industry – producers and restaurants – hate half bottles, they are very popular with customers. He also said that wine on tap has received an indifferent response, a situation at odds with trends reported by some suppliers and wineries.

How to attract millennial?
Finally, Block offered some advice for wineries trying to attract millennial customers. “You need to better communicate that wine is authentic. It comes from the earth, is natural and has human connections. You need to convey what’s behind the drink to the wait staff. Wineries need to tell their stories. Don’t talk about technology.”
And he added that servers love to meet with winemakers who they see as the human connection to wine. Alcohol producers are also using alternative sources of energy to run their distilleries, reducing waste from their plants and eliminating plastic packaging. By reducing their environmental impact they can leverage their sustainability efforts as a brand differentiator in advertising campaigns.


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