According to data from the IWSR, the on-premise channel[1] in Australia declined significantly during COVID-19 after being static for a number of years. It showed only a partial recovery in 2021 (see Figure 1), when it was estimated to account for just 11 per cent of total sales, or around 54 million litres.
Figure 1 - On-premise wine sales in Australia
Source: The IWSR
However, the significance of the on-premise as a sales channel for wine producers is much greater than its share of sales. In this Market Bulletin we identify three key reasons for this, based on the CGA by NielsenIQ (CGA) On-Premise User Survey (OPUS), which provides a range of insights into the behaviour of on-premise visitors in Australia and other major alcohol markets.
#1 Younger generations over-index in the on-premise
Among frequent (at least weekly) visitors to the on-premise, according to CGA, 43 per cent are aged 18–34 and just 21 per cent are 55+ years old. By comparison, in the general population, the share of adults in the youngest cohort is 27 per cent and the share aged over 55 is 38 per cent (Figure 2).
Figure 2 - Comparison of general adult population with regular on-premise visitors by age group
This means that the on-premise environment provides an important opportunity to engage with the younger generations, which are showing less interest in the wine category generally. Social media may be the key to doing this, with OPUS finding that 41 per cent of consumers report getting ideas of where to go to eat or drink from their friends’ social media, and 31 per cent often ordering ‘new and exciting drinks’ that they see on social media.
#2 Wine over-indexes in the on-premise
Strictly speaking, this is not quite correct. Wine is the most popular alcoholic beverage in Australia overall, with 45 per cent of adults in Australia drinking wine over the 12 months to June 2022 according to the Roy Morgan Alcohol Consumption report (2022), with beer in second place at 33 per cent. In the CGA OPUS study (September 2022), 43 per cent of on-premise visitors were found to ‘typically’ drink wine – the second-most popular choice after beer (45 per cent) and just ahead of spirits (39 per cent)[3]. This ranking difference can be at least partly explained by the relatively high share of younger people among regular on-premise visitors, whose consumption of wine is lower.
However, looking at the different types of on-premise venues separately, wine (still wine in particular) features strongly across the board (except in nightclubs), whereas beer dominates in pubs and sports bars, but doesn’t feature in the top five beverages in any other type of venue (Figure 3). This broad popularity and versatility of wine gives brand owners a wide and diverse range of opportunities to create wine-based experiences for consumers.
Figure 3 - Top-ranked drink categories by type of on-premise venue
Source: CGA by NielsenIQ
Still wine dominates the food-led occasions in particular, which provides a substantial advantage in terms of contact opportunities, as around 90 per cent of OPUS survey respondents have eaten out at least once in the past month, compared with 44 per cent who have been out for a drink in the past month.
#3 The on-premise is a channel for experimentation, premiumisation and building connections with brands
According to CGA[4], 60 per cent of on-premise consumers globally say that experiences in the on-premise have prompted them to purchase drinks in the off-premise, while 36 per cent claim to try new drinks in the on-premise (compared with 31 per cent who ‘stick to what they know’). The combination of these drivers creates an opportunity for brand owners to introduce their products to consumers in the on-premise environment and create a link to drive further consumption in the off-premise later.
The on-premise would seem to be a suitable environment for trying no- and low-alcohol alternatives, because of the connection between going out and driving. However, only 12 per cent of Australian on-premise consumers reported choosing these options in the latest OPUS survey (September 2022) compared with 13 per cent six months previously. On the positive side, those who did choose them were choosing them more often, with the share of no- and low-alcohol consumers choosing one of these products ‘every time’ or ‘almost every time’ increasing from 33 per cent to 49 per cent (Figure 4).
Figure 4 - Frequency of drinking no or low alcohol alternatives among those on-premise consumers who choose them at least occasionally
Source: CGA by NielsenIQ
#4 (a bonus) The Australian on-premise may be particularly resilient over the next few years compared with other countries
Globally, the on-premise is likely to face headwinds over the next few years. The IWSR forecasts that the channel will recover slowly and in a ‘nuanced’ manner, with rising costs (for consumers and trade), staff shortages and slowing economies limiting growth in the short term, while changes in consumer behaviour such as working and entertaining at home are expected to be long-lasting.
The latest Wine Intelligence Australia Landscape Report (November 2022) reports that the frequency of wine consumption in the on-premise has increased significantly among regular wine drinkers since 2019, with celebratory and formal occasions seeing the biggest increases in consumption frequency. There are reasons for optimism about the on-premise in Australia.
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[1] Restaurants, pubs, clubs, wine bars etc
[2] Bi-annual survey of 4000 adults in Australia who visited the on-premise at least once in the previous 3 months
[3] Respondents could choose multiple options
[4] CGA Reach survey May 2022 reported in presentation Is the Australian On-Premise following global trends or on a different path? October 2022
[5] CGA Reach global survey 2022
[6] CGA Reach global survey 2022