A state of the nation pub address from CGA

Fionnuala Carolan spoke to Sian Brennan, CGA by NIQ’s client director, Ireland about the trends that are happening in the Irish drinks industry. Brennan shared some insights into the evolving role of the on-trade and has looked at the effect of the cost of living crisis on how people are choosing to spend their money

Good value is important to consumers but most Irish people have no plans to go out less, says CGA research. While nearly nine in 10 (87%) consumers have felt an increase in the cost of living over the last year, almost a fifth (18%) plan to increase their visits to the on-trade over the next 12 months.
Money pressures have sharpened consumers’ focus on brands they trust, to offer them full value for money. Ireland’s consumers remain eager to eat and drink out despite rising costs but they are demanding full value for their spending. These are among a wide range of insights from CGA by NIQ’s latest Consumer Insights Report, which reveals Irish consumers’ habits and priorities.

Reduction in visits to the on-trade

According to this research, 87% of consumers have seen an increase in the cost of living crisis over the last year and naturally it is impacting how consumers are engaging with the trade and because of this people are having to make some difficult choices when it comes to their expenses. This includes 45% of people going out less frequently because costs are so high but Brennan reminds us that the pub is an important part of our culture and the way in which we socialise as a society.
“I think it is important to remember that the on-trade is much more than a place to have a drink, it is very much part of our social fabric and entrenched within those special moments in our lives and so whilst there has been a reduction in visits, we aren’t prepared to give them up completely and we still have 51% of consumers visiting the trade weekly and 88% visiting the trade monthly but it’s now more important than ever that we are maximising spend in each visit.”
In the current climate, operators are grappling with significant cost pressures including rising utility bills, increased staff costs, and the overall surge in the price of goods. “These challenges mirror those faced by consumers in their daily lives,” says Brennan.
“For many operators, cash reserves are dwindling, forcing them to make tough financial decisions. To manage these escalating costs, many operators have had no choice but to pass some of these increases onto consumers. This shared burden highlights the interconnected nature of the crisis, affecting every link in the chain from suppliers to publicans, and ultimately, to the consumers themselves.”
However, most consumers accept that rising costs have forced venues to raise menu prices, and are prepared to spend more on their food and drink as a result. They are also clear that value doesn’t always mean cheap – just worth whatever they spend.
“Our consumer research is a timely reminder that the cost of living crisis is far from over in the Republic and Northern Ireland. Rising prices are changing people’s habits in some significant ways, with big implications for category and brand choices,” says Brennan. “Suppliers need to keep a very close eye on what these trends mean for spending patterns, and deliver consistently good value for money to keep people coming out to eat and drink. Investment in understanding consumers’ behaviour is more important than ever if businesses are to protect market share and seize opportunities.”

Connection over consumption

An interesting take away from the research is that lunch and brunch visits are starting to overtake late-night visits but evening remains the time of day to see the greatest number of visits. “Key reasons for a switch to earlier dayparts is avoiding nighttime crowds or loud environments, it being less crowded and consumers feeling safer although for some consumers, finances are also a driver of earlier visits,” explains Brennan.
Does this mean that a larger percentage of the share of revenue is due to food sales as opposed to drink sales, I wondered. Do you think pubs can survive without a food offering anymore, we asked.
“Despite a higher proportion of consumers visiting food-led channels,visits to wet-led venues such as pubs are more frequent, attracting a bigger on-premise spender. So pubs can absolutely survive without a food offering and we are seeing hundreds of examples of thriving pubs without food, never mind just surviving. What they all have in common though is that they do not only provide drinks, they provide hospitality experiences, around those drinks. For some venues, that will be the all-singing, all-dancing (literally) experiences that centres around entertainment, but for many exemplary pub operators, a great hospitality experience is simply nailing the basics of great staff that make customers feel like valued guests, a safe and inclusive venue and fostering a sense of community. If a drink-led venue gets all of the above right, as well as serving brilliant drinks, then it can absolutely thrive without food.”

Could another reason that people are choosing earlier day-parts be that the population is aging or is this an indication of the changing way young people drink – as in more in moderation than the previous generation? “There is definitely a shift in lifestyle that is contributing to earlier day parts, with moderation and an aging population playing a part, but the fundamental way in which consumers are interacting with pubs, bars and restaurants is changing – we are moving from a channel in which the main need state is consumption to a channel in which consumers are looking for connection. As such, the lower tempo (and traditionally earlier) occasions such as catching up with friends, socialising with family and spending quality time with loved ones are winning against the more consumption-led big nights out and pub crawls – although do not write these off completely, as they still do take place, just less frequently. There is also a sense that earlier day parts offer better value for money, especially through promotional activity and through wider experiences that are happening earlier on in the day.”

Spend less earlier in the day

Consumers feel like by socialising earlier in the day, they are likely to spend less. How so do operators maximise spend during this time?
“Operators are working hard to keep consumers in venues from the earlier day parts into early and late evening through engaging consumers with entertainment and moving from lower to higher tempo to ensure that consumer spend is retained. There are many great examples of how operators are driving spend per head through delivering fantastic food and drink and utilising the venue to drive dwell time increases.”
What can publicans do to encourage night-time custom again? Is there a case to run “reverse happy hours” to offer better value for money in later day parts, when operators are losing trade, rather than the standard 4pm-6pm? Brennan says they have seen some great examples globally of operators developing innovative happy hours and pricing to encourage later night visits.

Draught beer

There was an increase in draught beer consumption after lockdowns. The research would suggest that beer remains the driver of total wet sales. Beer has been well positioned to benefit from the macro trends impacting the trade. Brennan acknowledges that lockdowns drove a massive demand for the draught serve that is extremely difficult to replicate at home but that is not the only reason that beer sales are on the up. “We then came out of the Covid pandemic into the cost of living crisis which has put greater emphasis on value for money and with beer generally being cheaper and served in larger quantities, than your spirits and mixer, we have seen some consumers switching to beer which is driving further growth of the category.
With the popularity of beer, it would suggest that other categories are losing out and as suspected it seems to be spirits that are having the most challenging time at present due again to the cost of living crisis and many sporting occasions. So how do you encourage spirit sales in this climate?
“The key thing is ensuring we are driving spirits relevance to the new ways consumers are engaging with the trade,” says Brennan. “Outlets must emphasise the value for money through high-quality serve execution, engaging activations and effective in-outlet messaging.
“Aligning serve strategies to fit emerging trends, and incorporating longer serves to appeal to earlier day parts which as we’ve discussed have increased in importance, will support spirits in regaining their appeal.
“Similarly we know the gin drinker over-indexes for watching rugby when in trade and there is no reason why the sporting occasions have to be solely for beer – it’s about unlocking new opportunities for spirit categories,” says Brennan.

Low/No alcohol

Notably, sales of non-alcoholic beer grew last year by 18% and production surged by 50% in response to rising consumer demand. We wondered if publicans should put more emphasis on hot/soft/lo/no alcohol drinks in the future? Is this a worry for alcohol sales?
According to Brennan, it is well known that moderation is a growing trend within the on-trade which is demonstrated by the amount of innovation we have seen within this space.
“It is a trend that is more prominent amongst older consumers and females with the younger demographic less likely to reduce consumption,” she says. “But whilst we know there is a proportion of consumers moderating their alcohol consumption, we still have over half of consumers maintaining or increasing consumption. So, whilst healthy options are a growing expectation and must be a consideration in ranging, there is still very much a demand for alcoholic options as well.”

From on-trade to off-trade

When consumers try new drinks in the on-trade, does this mean that off-trade sales of the product follow or not necessarily so?
“Yes, very much so,” says Brennan. “66% of consumers are likely to repurchase a drink for at home consumption after trialling it in the on-trade. The on-trade remains the land of trial and is the number one location where consumers try new drinks, making it an essential place for consumer recruitment and ultimately driving off-trade sales.”
Generally younger consumers try new products due to exposure by influencers and celebrity culture. Brennan agrees that they have seen an increase in celebrity endorsements, largely driven by the younger Gen Z consumers who are particularly attuned to what is cool and trendy. “29% of consumers are likely or very likely to be influenced to purchase a product or type of drink by celebrity endorsement or ownership so the right partnership can help drive sales.”
However, it’s not just about celebrity influence, It’s also crucial that the products and brands align with consumers’ personal morals and, she values. Half of consumers are likely to boycott a brand if it doesn’t align with their values, highlighting the importance of authenticity and ethical alignment in marketing strategies, which is a key piece of information for brands especially marketing towards the younger generation.
This research has offered a really thorough look at the state of the pub and drinks trade at present and there is a lot to digest here. Hopefully the information can be utilised to enhance your business and make sure your business is working to its strengths