Takeaways from the Responsible Business Recovery Forum on November 12th suggest that the drinks business, a sector heavily under the Covid cosh, has embraced a state of constructive collaboration that will stand it in good stead going forward.
Operators, distributors, brand owners and manufacturers have all been affected, so what has been happening and what does the future hold? Footprint asked a number of industry leaders for their views. Those in the conversation were:
Hayley Barton, marketing manager insights, Pernod Ricard UK
Julian Hunt, vice president public affairs and communications GB, Coca-Cola European Partners
Tom Fiennes, commercial sustainability director, Britvic
Timiko Cranwell, director of legal and corporate affairs, Budweiser Brewing Group UK&I
Nick Attfield, director of properties, Adnams
William Shearer, brand ambassador, Sipsmith
Ciarán Russell, liquid innovations manager, Sipsmith
Full report with attributed quotes available to members only. To join the Responsible Business Recovery Forum please follow the link at the bottom of the page.
Key takeaways:
- The hospitality industry has been one of the sectors hardest hit by the pandemic and this has had a knock-on effect to suppliers.
- As a result, drinks suppliers have had to pivot to new distribution channels and rethink the ways they build brands and engage consumers.
- At the same time, suppliers and producers have had to look at ways of supporting their customers in the on-trade.
- With the focus on hygiene and safety in pubs, bars and restaurants, sustainability has taken a back seat in the short term. But some drinks suppliers managed to use the lockdown period to make significant improvements to their sustainability practices.
- Changes in consumer behaviour due to the pandemic will have long-term effects on the drinks and hospitality industries, resulting in not so much of a new “new normal” as a “new different”.
Supplier Support
The on-trade remains a key channel for drinks brands, with suppliers still viewing it as the place to build brands and give consumers a great experience with their products.
With this in mind, suppliers were keen to support hospitality in its hour of need, channelling funds into online training, mental health support and financial donations to charities. Others took a more practical approach: offering new credit terms for customers, taking back unused stock and, in the case of the Budweiser Brewing Group UK&I, solving issues around the redemption of tax on beer kegs (the UK government committed to refund the duty on opened kegs that would have gone out of date during lockdown).
“What we had to do with the on-trade was essentially innovate with bartenders who were on furlough…we also worked quite closely with (industry charity) The Drinks Trust and essentially helped out as much as we could, be that incentives, bottle support, stock support and also a lot of educational pieces as well.”
There were also a number of drinks businesses that funded campaigns aimed at encouraging consumers back into venues once they were re-opened and providing PPE and other safely equipment to help them do so safely.
“What is a positive is how the industry has galvanised around some of the key challenges and I’m proud of how we as a business have tried to be there for our hospitality customers.”
Digital drinks
Consumer reaction to being unable to socialise in the usual ways has been polarising. On the one hand there are those that have lost jobs, worry about their health, and for whom loneliness and mental health issues have been challenging. On the other there are those who remained in work and have enjoyed spending time at home with loved ones and discovering new pleasures such as home baking and reconnecting with nature.
There has been a switch in purchasing behaviour in favour of local retailers and people have embraced new ways of buying drinks. Online sales are booming and people have quickly adopted the idea of buying a takeaway drink from local pubs and bars, for example.
This has meant suppliers having to pivot to off-trade sales channels and online sales. Delivery has become vital for suppliers and operators alike, something for which few were set up.
“Suddenly we were very reliant on supermarkets – our poorest margin area, so what could we do to improve things there? We’ve dabbled with web sales but what on earth could we do to try and maximise the opportunities from that because we just didn’t have the infrastructure through our third-party fulfilment to be able to deal with that. Suddenly we had to make a decision to switch things on so that our own depot could fulfil that.”
At the same time, there has been a change in the way we socialise. Outdoor spaces for on-trade businesses are now vital and consumers have also adopted virtual socialising, something that agile drinks suppliers were quick to recognise, offering drinks kits, online masterclasses and virtual distillery and brewery tours.
All of this has accelerated the adoption of new technologies, an area the drinks industry (particularly hospitality) hasn’t always been keen to engage with. The return to opening during the summer further accelerated this with investment in apps, virtual menus and online ordering. It seems the digital revolution has finally hit the drinks trade.
“We’ve been talking about virtual for well over 24 months and for most of that it felt really far-fetched but people have embraced it and it’s all perfectly normal now.”
On-trade gets on top of safety
The extensive safety measures put in place by pubs, bars, restaurants and hotels as the trade was allowed to re-open its doors back in July, coupled with the high level of compliance with government guidance, all helped restore consumer confidence in the sector.
The government’s Eat Out To Help Out (EOTHO) scheme was a huge success, which alongside the safety measures taken by operators, resulted in growing numbers of consumers returning. Research shows levels of confidence increased as the summer turned to autumn.
This means that while lockdown two will have an effect on consumers, many in the industry feel confident that on re-opening this time around people will return quickly to socialising in on-trade venues. Many believe that the recent news of vaccines, and even the election of Joe Biden in the US, will further boost confidence this December and into the New Year.
“I think that the investment the hospitality industry has made in health and sanitisation has really made people feel a lot more comfortable in coming back to venues and so I think this time we’ll see a much quicker return to pubs, bars and restaurants.”
Sustainability survives
It might be felt that in order to satisfy the consumer need for cleanliness and safety in on-trade venues, that sustainable practices have been sacrificed. Indeed, there are high levels of single-use products: coffee cups, disposable plates and cutlery, plastic sachets of condiments and sauces, paper menus and PPE of course.
However, there is a feeling this is a “blip” and that sustainable practices remain a priority for the drinks industry. And, while operators have had to perhaps temporarily press pause on their journey to sustainability, for suppliers the pandemic has provided an opportunity to accelerate their pace.
“Overnight our production team shifted into an environmental team. We were therefore able to look at our site and the changes that needed to be done to meet our own sustainability objectives. For instance we switched all our condenser water to a closed loop system and introduced filters in our effluent to catch large particles and installed activated carbon filters.”
For consumers, the lockdown has increased their desire for the brands they engage with to be sustainable, a fact not lost on politicians. This means that the policy landscape has not shifted – in fact, on the very day of the forum, the Treasury released its draft legislation around the plastics tax.
“There seems to be a connection with Covid, and lockdowns, and changes to our everyday lives that has connected to our understanding of our planet and biodiversity and all the things that come with it. That is crucial because we have definitely seen as a business an acceleration and an escalation of sustainability requirements from our customers and demands from our consumers.”
The new different
One of the clichés to emerge from 2020 has been the idea of the “new normal” but things are changing so frequently that even that has shifted to the “new different” now, as hospitality continues to adapt.
This will mean keeping safety measures in place and being flexible enough to implement changing guidelines and legislation. But it also means accepting that the consumer market has changed.
Time at home has sparked a DIY drive and people are keen to show off their improved living spaces (indoor and out). It has also been a period of learning new skills, including, for many, how to make cocktails that they would previously only experienced in venues made by professional mixologists and bartenders.
Virtual socialising has also been adopted and companies offering shared online events have entered the mainstream. It’s unlikely that these initiatives will disappear once we get a grip of the virus: people are likely to take the best of what online offers (the ability to socialise with those far away, remaining at home but in company, and unique experiences) and combine it with face-to-face socialising.
Commuting into big cities to work long hours may also now be relegated to the past with the rise of “doughnut cities” as seen in the US (cities where activity in the centre has declined as a result of rapid growth of the surrounding suburbs).
All of this means drinks brands and on-trade operators are going to work even harder as we come out of the pandemic to persuade consumers off the sofa and into venues. Meanwhile the shift to e-commerce and digital marketing is likely to grow in importance.
“I’m not sure we all understand or appreciate how much we’ve already changed and what that is going to mean for us in the future. So, if we talk about operations and supply chain and the channels that have been impacted, even if we were all allowed out again tomorrow, we would probably still behave differently and not go out as often as we did. There is a long-term impact here regardless of if there’s a short term solution about to hit us.”
Furlough fears
The on-trade remains important to drinks brand owners and suppliers. However, while there is a recognition that both have done well to adapt to survive this pandemic so far, more flex and change needs to happen if they are to make it through to the other side.
The industry is “dreading” the end of furlough in March, which marks crunch time for the industry. One panellist reported many operators viewing making it to Easter 2021 to be crucial for them to be in with a chance of survival. Beyond that, there needs to be a package of support from the government to help the industry make it through – business rate cuts, VAT drops and assistance with rents.
“We won’t see the impact until the end of furlough and end of the business rates holiday, so to some extend the real impact on the industry is a little bit clouded because of those things.”
On a more positive note, the pandemic has proved that we are social creatures that search for opportunities to connect and harness new technologies to do so. Sales of no- and low-alcoholic drinks (particularly beer) have boomed in lockdown as drinkers become more mindful of their health – a welcome boost to an industry that has been pressured in recent times into taking alcohol units out of the market and to encourage people to drinks less.
As we look to 2021 and beyond, some clear consumer trends are emerging: cocooning at home, online for everything; health and wellbeing, and an apprehension about what the future holds.
Fortunately, this pandemic has proved that the drinks industry is more than able to quench a thirst in all these areas.
