The hospitality sector is huge! In 2018/19 the sector’s turnover was £130bn as measured by the ONS. As identified in the 2019 Future Shock Report: “Hospitality’s turnover has reached £130bn a year- making it bigger than the pharma, automotive and aeronautics industries put together. It’s Compound Annual Growth Rate (CAGR) of around 5.5% is better than any other industry over the last 8 years and nearly double of that of the economy as a whole”. Now those figures are pretty spectacular!
The spending habits of customers has been slowly but surely changing regarding the consumption of alcohol. For various reasons, people are selecting a Low or No alcohol option. In 2017, the proportion of adults who said that they did not drink alcohol at all, claiming to be teetotal, was 20.4%. This equates to approximately 10.4 million people in the population of Great Britain. According to the CGA Future Shock Report, the average person eats out once per week. That is a lot of people eating out but craving a Low or No option.
The big question is ‘whether this market is being fully catered for’? Let’s just take a minute to think through what is happening. There is a shit load of people eating out at least once a week and either drinking water with a ‘zero margin’, or a sugary drink that simply does not enhance the food they are eating nor the customer experience! Simply think through the economics of selling one drink to the tap water drinker or upselling to the ‘coke’ drinker. Simply think through the improved customer experience and ‘instagramability’ of a well matched quality non-alcoholic drink that is specifically paired to a meal: “61% of premium soft drinks consumers state that the quality of drinks on offer is an important factor when eating out. As lifestyle changes continue to drive premiumisation trends, it is crucial that brands and retailers optimise their drink offerings to meet the needs of their guests.” (CGA Benchmark, Oct 2018)
So why are companies failing to take advantage of this increasing market? There are undoubtedly several reasons for this:
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1. The restaurant/bar owners are resistant to offer the No-Lo alcohol drinks ‘space in the fridge’. Granted, there has been an explosion in the quantity and quality of drinks in the last 5 years with new and exciting products being released daily. It really is a difficult task for owners and managers to decide upon what they stock in their limited cool space. All too often, the decision is made to stock the ‘perceived’ higher margin alcoholic drinks. Therefore, in many cases, the actual No-Lo product list is not available to the customer.
2. The lack of research from the total restaurant team into what non-alcoholic drink actually pairs a certain dish. It is easy for the waiter/waitress to suggest the traditional wine offering for a specific meal. In fact, in most food places, there is a distinct lack of research and the common formulae of wine-to-food is followed. It is understandable this is the case with the intense time pressures within the sector. So it is with little surprise that establishments are failing to discover the best No-Lo drink that will enhance the food being served.
3. Even in the restaurants and pubs that have the ‘knowledge’ of what No-Lo pairs well with a certain dish, there is a major need to train the people who are taking the orders. The development of Lo-No alcohol drinks has been dramatic and the science has gone way beyond lemonade or soda! Without product knowledge, it is inevitable a server will fail to be able to sell to an unknowing customer. As a result, the customer is left reading a menu with a variety of options that they might not be familiar with. Lack of knowledge about the drinks leaves the customer ordering a glass of zero margin tap water.
The question is whether the potential income is sufficient to justify the outlay of:
- expanding the percentage of fridge space for Lo-No alcohol drinks
- overall research into what drinks pair with the dishes being offered
- the perennial discussion around the training of people in a highly transient industry
However, as discussed earlier, the market for Lo-No alcohol drinks is not only massive, but is growing at a faster rate than any other element of the market and is particular growing for the Millennials. As stated by Kamilla Laura Sitwell: “We are talking about an entire generation of people who don’t want to drink alcohol but will spend £5 on a special iced coffee, even more, if it comes in all colours of the rainbow. Yet, restaurants are struggling to sell them a £2 soft drink to enhance their £15 meal.”
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What are owners and managers doing with the promotion of the Lo-No drink offering? This is essential with products relatively unknown by the customer. Words are wonderful; images are essential! We live in the ‘instagramable’ era where pictures sell. People actually want and, indeed hunt, experiences they can share that ever so slightly improves their ‘social media value. Basically, they long to be sold a drink they can photograph and bang on their social media so why not discover or develop the drinks that not only enhance the meal, but looks great with it? But more importantly, drinks that restaurants and bars can actually sell at a premium.
There are a multitude of ways to market the No-Lo drinks from the simple table tent cards, glossy table pamphlets to the t-shirt promoting server. But come on, it is essential for all the participants at the table to understand what is on offer and ‘how it will seriously enhance the overall experience’ of the meal. That goes for both the customer and the server themselves.
The training of hospitality staff is one of the most hotly discussed topics within the sector. Far too many owners and managers fail to deliver the training needs of their employees for various reasons. This includes the transience nature of the workforce but, arguably, the lack of investment in the people is a key reason people move on. According to CGA Future Shock Report, “the UK hospitality industry has an annual staff retention rate of just 70%”. But when it comes to the ability of the server to up-sell, it is essential the people receive the necessary training from both a ‘customer service’ perspective and even more so on the actual products. How else can a server tempt a consumer to purchase a premium non-alcoholic drink rather than a glass of tap water?
So ‘the times they are a changing’. And it will provide great opportunities for the organisations who can not only see the potential but more importantly, act in order to exploit the changes. The number of people dining out in the UK who have chosen to drink a No-Lo alcohol option is increasing year on year. To fail to identify and then market to this growing number of people will be the difference between success and failure within the hospitality sector going forward.
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