Slow Death of Bars, Rise of Restaurants is Bad for Beer
Source: Beer Business Daily
MAY 31, 2017
Neighborhood bars are dropping like flies, and restaurants are popping up like mushrooms. Since 2004, the former has declined by 12,766 units, while the latter has increased by 60,906, according to stats shared by Nielsen CGA in the Brewers Association’s latest Power Hour.
This dynamic is bad news for the entire beer category, because there’s about a 20% swing between people picking beer at a “drinking” venue versus an “eating” one, per recent surveys conducted by Nielsen CGA: 70% of consumers who recently visited a neighborhood bar drank beer, and only 52% of restaurant goers chose beer.
BARS SELL ABOUT 91% MORE BEER THAN RESTAURANTS. That shouldn’t come as any surprise, considering the average drinking venue sells 91% more beer than the average restaurant. In fact, the average beer velocity for the drinking channel stands at 827 pints a week, while the eating channel’s velocity accounts for 434 pints a week.
BAD NEWS FOR DOMESTICS. As we said, this slowdown of bars and rise of restaurants is bad news for all of beer, and “understanding this dynamic and how to play in this dynamic has never been more important,” said Scott Elliott, senior vice president at Nielsen CGA. It’s particularly important for beer’s largest segment, domestic premiums.
When domestic premiums lose a drinking outlet, and gain a distribution point in an eating outlet, they “typically lose over 60% of their volume,” Scott said. How did he come up with those figures? Nielsen CGA data pins domestic premiums’ velocity in a bar at 461 pints per week. The segment’s velocity in a restaurant is less than half of that (165). That’s a -62% change. Yikes.
IMPORTS SLIGHTLY LESS AFFECTED. “Imported beer is less affected, but still loses nearly 30% of its volume in this dynamic,” Scott said. Imports do about 135 pints per week in drinking channels, and 97 pints per week in eating channels, representing a 28% decline.
CRAFT IS LEAST AFFECTED. This changing dynamic isn’t as bad for craft, as the segment actually sells more in the average eating outlet than domestic premium or imports at 179 pints per week, but compare that to its velocity it in the drinking channel (211 pints a week), and it’s still a 15% decline in volume.
What’s scary about this structural shift in the on-premise is that it looks to be the new norm. “You may see a slowdown of growth in eating outlets,” Scott said, “but there’s no indicator that there’s going to be an increase in the drinking channels.”
A “THIRD CHANNEL” EXISTS AND MILLENNIALS ARE THE DRIVING FORCE BEHIND IT
It’s hard to peg beer consumption into two channels nowadays. The on and off premise still make up the majority of beer sales, yes, but there’s plenty of beer drinking going down at places like “taprooms, music festivals and sporting events.”
We’ve yet to get a neat set of data detailing consumption in this “third channel,” as Nielsen calls it. But we do have an idea of who and what is driving it.
A recent survey from Nielsen CGA shows Millennials are making more purchases in the “third channel,” particularly with high-end products.
All respondents said 13% of their import purchases happened in the “third channel.” If you extract Millennials’ import purchasing habits alone, that number jumps to 23%. Millennials also said they made 23% of their craft purchases in the “third channel” as well, a nice jump from total respondents’ habits at 17%.