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February 2012Prepared by:
On‐Premise Trends and Outlook:Identifying Opportunities for Growth
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Good Afternoon!
• We appreciate the opportunity to speak to you
• Our objective today – provide a review of current trends within on‐premise
• Will discuss:
Consumer issues
Trends in key user segments
Product trends
Outlook and opportunities
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Technomic is…• Founded in 1966,
Technomic is a fact‐based consulting and research firm focused entirely on food and beverage.
• Our mission: To be the first call you make for insights and intelligence in the on‐premise channel.
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Our Thesis Today:• Operators talking more and more about value
• Consumer demand for value is paramount
• Need to focus away from cost and focus on experiential factors that impact consumer value perceptions
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Driving Revenues: Value Beyond Price
Price
DiscountsLoyalty marketingMeal dealsSpecials
Food and BeveragePreparationTasteUniquenessVarietyNew products
Hospitality
AccuracyAttentivenessServer knowledgeSpeed of service
Ambiance
ComfortableContemporaryFriendlyClean, sanitary environmentQuality image
Focus for many
Food + Hospitality + AmbiancePrice
Value =
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Beverage Plays A Role With The Changing Needs of the Operator
Operator Demand/Need Role of Beverages
Rising costs/margin pressure• Beverages provide incremental
positive margins
Need to provide value• Price continues to be important, but
experiential value gaining traction
Flat revenues• Having a strong beverage program
can generate incremental dollars
Expanding dayparts• As operators add new dayparts,
beverage selection needs to keep pace
Changing consumer preferences• Beverages increasingly innovative /
versatile
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Key Trends That Are Impacting Your Customers’ Business1. High end consumers doing just fine
2. Showmanship driving high end beverage sales
3. High end dining not all about “special occasions”
4. Prevalence of house wine trending down slightly in high end
5. Technology changing the game
6. Casualization of high end continues
7. New occasions, dayparts moving the needle
8. High end clubs continue to outperform
9. Overall spirits, wine growth will outperform in high end restaurants, hotels, clubs
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1. A Tale of Three Economies: High End Consumers Doing Well
Source: Institute for Supply Chain Management, December 2010
Doing quite wellRich & Super Rich
• Stable income and income growth• Wealth effects (income, stocks, savings)• Strong credit access
Some job stability with problematic balance sheets Middle Class
• Improved stability but stagnant wages• Mortgage wealth and student loans problematic• Spotty credit: student loans and credit delinquencies rising
Higher income consumers are doing well and are spending again in the on‐premise channelLuxury brands seeing a revitalization
91 to 5 Scale: 5 = agree completely; 1 = disagree completely.
58%
53%
47%
48%
60%
21 ‐ 29
30 ‐ 39
40 ‐ 49
50 ‐ 59
60 ‐ 64
Age Income
62%
56%
54%
41%
37%
<$25K
$25K ‐ 49K
$50K ‐ 74.9K
$75K ‐ 99K
$100K +
Higher Income Have Not Cut Back As Much As Lower Income
“I have cut back ordering drinks in bars and restaurants due to the economic situation”
(Top Two Box)
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70%
60%
51%
48%
49%
21 ‐ 29
30 ‐ 39
40 ‐ 49
50 ‐ 59
60 ‐ 64
Age Income
54%
60%
58%
60%
49%
<25K
$25K‐49K
$50K‐74.9K
$75K‐99K
$100K +
Price Is Less of A Factor For High Income Consumers“Price is more important for Away‐From‐Home consumption/selection”
(% Agreeing)
1 to 5 Scale: 5 = agree completely; 1 = disagree completely.
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High End Consumers Willing to Pay More For Brands
Income
57%
64%
74%
76%
73%
<25K
$25K‐49K
$50K‐74.9K
$75K‐99K
$100K +
“I am willing to pay more for a brand I know at a restaurant or club”(Top Two Box)
Give higher end consumers the brands they want, and they’ll be willing to pay more
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2. Showmanship Driving High End Beverage Sales
• Customer is literally taken to the kitchen
• Preparation skill setis brought front and center
Increasing credit being given
• Customization and interaction possible
Various alcoholic beverages are prepared and served tableside as skilled staff move
throughout the dining room
Dallas, TX
The “art” of drinking making becoming an artisan skillIngredients and brands are coming front and center
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Flights Take Flight
• Safe Experimentation
• Sense of adventure adds to dining value perception
• Knowledgeable servers
• Enticing price points
Offering nearly 100 different whiskeys, the concept is known for making several varieties
available through flights
Providing a low risk avenue for consumers to experiment with your products can yield dividends
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High End Establishments Looking to “Tell The Story” of Their Menu
• Back story allure
• Appealing to Millennials
• Baby Boomer approachability
• Showcase Mixologist and bartender skill set
• Both traditional and contemporary interpretations
Dallas, TX
Manhattan“Our signature twist on this classic. Woodford
Reserve Bourbon, maple syrup, sweet vermouth, Angostura Bitters, and a cherry”
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3. Fine Dining Occasions Are Not All “Special Occasions”
• Mix of various types of consumers visiting high end restaurants
Understanding (and marketing to) specific occasions will pay dividends for a portfolio of product like Moet has.
Informal/ spontaneous get‐together
6%
Informal meal with family only
17%
Planned other special occasion 17%
Planned get‐together/meal with friends
17%
“Clubbing”/ letting loose
1%
Special/ romantic occasion27%
Business meal5%
Vacation meal7%
By myself3%
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4. Prevalence of House Wine Is Slowly Trending Down
• Always been lower in fine dining • Move away from low cost positioning• Some restaurants still developing proprietary labels
Venue
Percent of Occasions that Included a House Wine
4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11
All Casual Dining 46% 49% 45% 46% 52% 47% 46% 49% 42%
Fine Dining 30 30 31 28 22 32 19 23 25
Bars/Nightclubs 41 39 45 46 53 50 47 39 44
Hotels 41 56 35 40 49 47 44 43 40High end consumers looking to engage with premium wines Opportunity to promote the “value” of high end wines
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5. Technology Changing The Game:iPad Wine Lists
• Simplifies an otherwise intimidating decision
• Provides descriptions, flavors and comments
• Creates informed wine buying decisions
• Inventory control for operator efficiency
“In the first month of use we saw wine sales jump
over 10%”Richard Lewis, Owner ‐ Bones Restaurant
Places greater control in the patron’s handsLess reliance on limited server knowledge
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6. “Casualization in Hotels”: Fine Dining Out; Casual In
• Hotels looking to find a middle ground between upscale and casual
Todd English’s Food Hall inside New York City’s
Plaza Hotel
Postrio at the Grand Canal Shoppes
The Dining Room at Woodlands Inn in Summerville, SC
Hotels moving away from off‐putting formal dining, but demand is still great for high‐end premium experiences
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7. New Occasions Moving the Needle
• All operators seeking new areas of revenue
• Areas of emphasis include:
Happy hours
Late night events
• Move to shore up profitable areas of business
• New menu items, drink specials
Opportunity to talk to high end establishments about revenue building opportunitiesAlign product portfolio with these new occasions
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The Happy Hour Is Also A Big Focus For Higher End Hotels
• Catering and breakfast have driven much of the F&B revenue
• Historically, little excitement around late afternoon and dinner
Rather than focus on dinner, hotels putting effort against happy hoursAs in other on‐premise channels, opportunity to upsell the consumer with high end brands
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Hotels Vying For Locals As Well As Travelers• Resurgence of hotel‐based bars, especially in major markets
Empire Hotel’s Rooftop Lounge hotspot in New York City
Cityscape Bar at Holiday Inn Chicago Mart Plaza
Asellina/Gansevoort Park Avenue Hotel in New York City
Need to develop offerings that appeal not only to the traveler but to local consumers.
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8. High End Clubs Continue to Do Well
• The top 100 bars/clubs account for $90B in revenue, up 9% from 2010
• Continued strong revenue at the top
• Major upscale clubs dominate the list
High end clubs focus on bottle service, luxury brandsChampagne continues to be a mainstay
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Key Learnings from Technomic’s Top 100 Study
• No “one path” to success –concepts vary dramatically
• Spirits‐based drinks still primary, wine on the upswing
Average Beverage Sales by Category
Wine14%
Beer31%
Spirits57%
24Note: Midpoint of estimated range
9. Overall Spirits Growth is Strong in High End Restaurants, Hotels
Nominal Growth (Consumer Spending)
On‐Premise SegmentOverall F&B Growth 2012
Overall Alcohol
Growth 2012
Beer Growth 2012
Wine Growth 2012
Spirits Growth 2012
Fine dining 3.0% 3.5% 5.0% 3.0% 4.0%
Casual dining 3.0 3.2 3.5 4.0 2.5
Bars/nightclubs 2.0 1.7 1.5 2.0 2.0
Lodging 4.5 5.4 5.5 6.0 4.5
Casinos 1.5 1.8 2.5 1.0 1.7
Concessions ‐0.5 ‐0.2 0.0 ‐0.5 ‐1.0
Other recreation 0.0 1.1 1.5 0.0 0.0
Overall On‐Premise 3.0% 2.4% 2.2% 3.5% 2.3%
Assumes inflation/price increases of 2‐3% +
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Brown Spirits are Back in Vogue After Several Years Out of Favor
• Small batch, higher end brown spirits on trend
• “Artisan” positioning is key
• Success of cognac in positioning to mixologists
• High end single malts doing well
• Flavors MHUSA portfolio is aligned with broader trendsMixologists can be key to driving new products, volume
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“Better For Me” Positioning A Strong Focus
• Skinny drinks big menu driver
• High end operators jumping on trend
“Better for me” appeals to females, moves the needle in terms of drink ordersOpportunity to move beyond the margarita
Skinny
Oct‐Dec 2011 Jul‐Dec 2010
# of Menu Items % Change
# of Chains Offering
# of Menu Items
# of Chains Offering
All 76 533% 42 12 11
Source: MenuMonitor, Technomic
Wrap Up
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Situation Analysis ‐ SpiritsOutlook
• Premium brands will still drive category, but on a more selective basis
• Brown spirits re‐emerge
• Artisan positioning key
• Bars and nightclubs still provide highest opportunities
• Hotels, high end restaurants expected to outperform
Implications• Brand relevancy more
important than ever
• Price premium for high end brands must be positioned based upon added value
• More creative ways of marketing and targeting the consumer are necessary
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Situation Analysis ‐WineOutlook
• Continued growth of wine by the glass programs
• Fine dining bounceback helping category sales
• Growth taking place in secondary varietals
MalbecMoscatoTorrontesBonarda
• Flights remain strong method of sales
Implications• Need to expand “wine acceptable” occasions; make more accessible
• Emerging varietals offer opportunity for experimentation
• Target the occasional wine drinker for incremental volume
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Situation Analysis – Champagne/SparklingOutlook
• Younger consumers have a taste for sweeter wines
Rose can fit the bill
• More sparkling wine found in cocktails, punch drinks
• Strong competition from wine varietals such as prosecco
Implications• Developing drinks (and drinking occasions) outside of existing will be critical
• “Value” position and perception necessary to overcome price objections
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Conclusions: Talk to Your Customers About the Winning Value Proposition
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Focus on Dollars, Not Percentages, When Discussing Costs
• Operators tend to view pour costs as guidelines for profitability
• “You don’t take percentages to the bank”
• Need to show ROI and value to operator of bringing in higher‐priced, higher‐value products
Thanks for your time today!
ContactDavid HenkesVice President and On‐Premise Practice Leader
(312) 506‐[email protected]/davidhenkes
ContactJennifer PassmoreBusiness Development Manager(312) 506‐[email protected]