Soaring number of café bars driving spirits growth in UK

The rise of café bars in the UK is driving growth of premium spirits sales in the on-trade, thanks to their “chameleon offering”.

The First Drinks 2013 Market Report focuses on the key trends affecting the UK’s on- and off-trade

Café bars accounted for 53% of the total on-trade openings in the UK last year, bringing the total up to 6,000 outlets.

According to research compiled by First Drinks, William Grant’s UK distributor, for its third annual Market Report 2013, the café bar’s ability to offer a range of products, from coffee to cocktails, makes the format accessible to a number of consumers who are swapping late night visits for “low tempo” occasions.

“Since 2008, over 12,000 outlets have left the on-trade market,” said Phil Tate, chief operating officer for CGA Strategy which contributed to the report. “We’ve also seen an unprecedented influx of quality outlets that are attuned to customers’ needs and which understand how important it is both to maintain the highest retail standards and to be flexible in the way they operate: offering different experiences at different times of day to maximise their consumer appeal.”

The format is prime for driving premium spirit sales, which grew 29% in value to £475m in the on-trade in 2012/13.  Outside of café bars, the wider on-trade is spotting the potential for premium spirit ranges with more sophisticated brands, seasonal drinks and cocktails becoming integral to menus.

The report also highlighted the need for bars and restaurants to consistently offer perfect serves in terms of presentation, flavour, glassware, and theatre. First Drinks found that over half of consumers would not return to an outlet if the serve was not up to standard.

“Few consumers visit the on-trade because it’s the cheapest place to buy alcohol,” continued Tate. “They come for the experience, and for many, that experience needs to be a little bit special to justify both their time and the associated cost.”

Off-trade

In the off-trade, the 2013 Market Report highlighted a new focus for supermarkets and convenience stores to offer a quality shopping experience, after the recent spate of price matching has diluted consumer loyalty.

The continuation of the alcohol duty escalator over the past few years has resulted in a rapid rise in spirits pricing. In response, brands have addressed the issue of affordability by offering a wider range of bottle sizes to deliver a range of price points. First Drinks discovered that one in four spirit sales in convenience stores are 350ml formats, and are driving market growth. Those consumers buying smaller bottle sizes are proving themselves loyal to the format, with 72% of 350ml shoppers only buying that size.

First Drinks added that the convenience channel is predicted to grow by £10bn over the next five years, as predicted in last year’s report.

At the other end of the market, an influx of foreign wealth is driving sales for prestige spirits, with specialist retailers profiting the most. An increase in high net worth individuals are helping to drive growth at the super- and ultra-premium end of the market, particularly with aged whiskies and Cognacs.

Many are international visitors who work or live in the UK, with the majority from the Middle East, China, Hong Kong, Russia and the US. London department store Harrods receives visitors from 130 different countries every month, with over half of their international shoppers from China or the Middle East.