Encouraging On-premise Insights for 2014

FILED APRIL 1, 2014

Dear Client:

The on-premise channel has been a pretty gloomy topic to cover in the last year. Although we don't expect the channel to make a full recovery in 2014, Next Level Marketing did find some encouraging signs in a survey they conducted in February of 1,000 national chain consumers. Below are a few of the key findings from the survey as presented by Next Level partner Mike Ginley at the VIBE conference.

TRAFFIC TRENDS:When deciding which venue to go to, consumers said great food, great service, affordable prices, convenience and great drinks were the most important factors this year. Mike noted, that affordable prices was the second most important factor last year, but it has fallen to No. 3 in 2014 as consumers loosen their grip on their wallets. As such:

--79% of consumers are going out as often or more often than last year.
--21% are going out less often.
--Millennials are the group most likely to be going out more often this year.

SPENDING TRENDS: In light of the delicate consumer confidence situation, it's just positive to hear that consumers are not decreasing their spending on-premise as they have in years passed. Consider this:

--75% of consumers are spending the same or more than they did last year.
--26% of consumers say they're spending less than last year.
--40% of millennials are spending more than last year.
--The over 50 age bracket is the least likely to be going out more often.

TYPES OF DRINKS ORDERED: Next Level found that most consumers value quality and great drinks, not quantity, which explains the current trends in premiumization. "The answer to selling more drinks is not to price it low and think you'll make it up in volume," said Mike. With this information in mind:

--77% of consumers are ordering the same quality and quantity of drinks.
--Only 4% are ordering more, less expensive drinks.
--19% are ordering fewer, but better quality drinks, and trend driven by millennials.

As for which type of cocktails are most popular right now, Next Level found that margaritas, restaurant originals, martinis, mojitos and classic cocktails round out the top five list of most ordered cocktails. However, sangria, beer cocktails, bloody marys, classic cocktails and bellinis/mimosas are growing the fastest in popularity.

--32% of all consumers try a new drink every week.
--35% of consumers age 35-49 try a new drink every week.
--41% of millennials try a new drink every week.

MARIJUANA IMPACT: "I'm encouraged to say it does not appear [marijuana] will have a dramatically negative impact on the business." In fact, if marijuana were legalized in every state:

7--8% of consumers say they will go out the same amount and order the same amount.
--More importantly, 54% do no think marijuana is a safe alternative to alcohol. Though we would argue that number isn't nearly high enough.
--Females in general are less likely to think marijuana is safer, but millennials are much more likely to think it's safer.

KEY TAKEAWAY: That's a lot of data to take in, but what it all boils down to is that millennial consumers are still driving many of the positive growth trends on-premise and there's a reason the industry is focusing on them; they are more likely to be going out more often, they're spending more than last year, they're buying better quality drinks, and they're trying new drinks while they're older counterparts are largely set in their preferences and habits.

GROCER DONATIONS FOR PRIVATIZATION PASS $1 MILLION

The money for privatization in Oregon is starting to roll in. We've previously reported that Fred Meyer grocery chain donated $500,000 to the effort to privatize Oregon. That number has jumped to more than $1 million as the grocery chain added another $500,000 to the fund in recent days. Furthermore, Safeway has donated $656,500, and let's not forget the Distilled Spirits Council has also donated $200,000.

Interestingly, Oregonians for Competition representative Pat McCormick says, "We expect it will be a broader coalition than you might have seen in Washington. "

The money will be used to pay for the signature gathering effort, reports The Oregonian. Recall, that process won't begin until the Oregonians for Competition are satisfied with the ballot title.

There is no official opposition campaign yet, but you'll recall the Presidents' Forum of the Distilled Spirits Industry recently told WSD they are adamantly against the change (see WSD 03-04-2014) and are reconsidering the no-lobbying policy in this market.

WSD BRIEFS:

YOU'LL RECALL, SAFEWAY INC. RECENTLY ANNOUNCED it would be acquired by private equity firm Cerberus Capital Management, the parent company of Albertsons. The announcement was followed by a "go-shop" period in which Safeway could receive competing proposals, and despite rumors that Kroger was interested, the period has ended without any proposals, reports Bloomberg.

DEUTSCH FAMILY WINE & SPIRITS has brought on Dan Goldfield as consulting winemaker for its The Calling wine brand. You might recognize Dan's name as he has partnered with the Dutton Ranch vineyard for nearly 20 years. In fact, The Calling sources chardonnay and pinot noir almost entirely from Dutton Ranch. The Calling's current portfolio consists of a Dutton Ranch Russian River Valley Chardonnay, Dutton Ranch Jewell Vineyard Chardonnay, Dutton Ranch Russian River Valley Pinot Noir, Russian River Valley Fox Den Vineyard Pinot Noir, Alexander Valley Rio Lago Vineyard Cabernet Sauvignon, and an Alexander Valley Bordeaux style blend named 'Our Tribute.'

PERNOD RICARD JOINS SPEAKER LINE-UP. We are happy to announce that Stephen O'Neill, svp, strategy and transformation, Pernod Ricard USA, will present at the Wine & Spirits Daily Summit taking place on June 5, 2014 at the Four Seasons in Denver, Colorado. Seats are filling up fast, so reserve your spot by registering online or by filling out this form and sending to kim@beernet.com. You can find more information about the event and hotel arrangements on our website.

Until tomorrow, Emily

"Leadership is a two-way street, loyalty up and loyalty down. Respect for one's superiors; care for one's crew."
- Grace Hopper

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ANNOUNCING THE WINE & SPIRITS DAILY SUMMIT

We are happy to announce that our Wine & Spirits Daily Summit is taking place in Denver, Co at the Four Seasons Hotel on June 5, 2014. Come join executives across the industry, in addition to Wall Street analysts, advertising executives, consultants and more.

So far our speakers include Kevin George, svp, global cmo for Beam Inc.; David King , president and coo of Anchor Distilling Company; Mike Lakusta, ceo, EthniFacts speaking on multicultural consumer trends; Danny Brager , svp, Nielsen; John Beaudette, ceo, MHW Ltd.; Donna Hood Crecca, senior director, Technomic; a craft distiller panel with Sam Seiller, evp & managing director for Angel's Envy, and Melkon Khosrovian, co-founder of Greenbar Distillery; and an on-premise retailer panel with Mac Gregory, director of food and beverage, North American division for Starwood Hotels & Resorts Worldwide.

Our tentative schedule is now available.

Register online here: https://winespiritsdaily.com/register.php?id=7. You may also sign up over the phone by calling Kim Nelson at 210.805.8006. To sign-up via fax, please fill out this form>> and then fax it to 888.256.6550 or email it to kim@beernet.com.

To learn more about the Summit, please visit our website by clicking this link: http://www.winespiritsdaily.com/summit.php

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