Last orders at the bar

What might Covid-19 mean for the future of the on-trade?

Think back to March 20th, a mere four months ago.  This was the day Boris Johnson announced to the UK that in light of the rapid spread of Covid-19, all 40,000+ of the nations pubs and bars had to shutter. 106 long days later, the crassly monikered ‘Super Saturday’ aka ‘Independence Day’ arrived and the on-trade and countless thirsty punters tentatively emerged from hibernation, into a fundamentally different world. But given context and company play such a fundamental role in how, why and what people drink it’s worth looking at how behaviours have been impacted by lockdown life and reflect on whether the category will ever be the same again.

With the on-trade literally turning off the taps en masse overnight, the off-trade was always going to have to fill the gap. On a macro level this translates into a burgeoning alcohol category, benefitting enormously from the phenomenal upsurge in overall grocery sales over the last quarter. According to recent Kantar1 research, grocery sales hit £10.5bn, up 20% YOY in June, the second biggest month for grocery ever with alcohol up 43%. Once those numbers are interrogated, it’s apparent that beer has been the real category success story, up 66% YOY, fuelled supposedly by the balmy, sunny spring weather.

Another winner appears to be LNA beer, which achieved almost triple digit growth in June, suggesting those lockdown health & wellness resolutions are bearing out. Cider (+56% in June YOY) and RTD’s (+63%) have also been performing well, refreshing sunbathing back garden dwellers who enjoyed a record 626 hours of spring sunshine.

Whilst all of this might sound as rosy as a chilled glass of blush, it would appear that the uptick in the off-trade has not managed to make up for the total loss of the on-trade. Whilst there were an estimated additional 181m off trade alcohol occasions in April & May, the on-trade simultaneously lost circa 230m2, which given the industry was worth roughly £22bn3 in 2019 equates to an on-trade deficit of north of £3.7bn in just two months.

But dig a little deeper and the picture appears more promising, because one of the consumer segments driving the growth of the off-trade has been the nominally disengaged less frequent drinkers (less than once a month), with a 12% YOY increase. Coupled with the growth of LNA, is there then a key opportunity for the category to leverage the uniqueness of the lockdown to retain these consumers in the long term both in the on and off trades?

With pubs and bars now back in business, it will be interesting to see how quickly the on-trade recovers, particularly as the threat of a second wave of the virus remains. Much of the enjoyment and appeal of the pub is the social hustle and bustle, but Covid-secure precautions mean that the atmosphere and overall experience will be fundamentally different from what consumers are used to. It’s likely then that many will continue to exercise caution, suggesting the off-trade will continue to benefit at the on-trades expense, at least in the short term. So what can the industry do to successfully navigate this new normal?

One way might be to adopt a more holistic approach to engaging consumers by focusing on developing a winning direct to consumer model. Another could be to adapt brand communications to reflect the reality that many alcohol occasions will continue to be in-home, which will drive relevance and meaning, as long as they credibly ladder up to brand equity. Carlsberg’s pithy Adopt a Keg campaign is one such example of a brand pivoting and leaning into the current context and doing so in a very ‘on brand’ way.

In any case, it’s apparent that in increasingly complex and uncertain economic & social times, a more considered approach to brand building is required, at least until an elusive vaccine emerges.  One thing that is certain is it will be those brands that adopt a front foot, agile approach to adapting to the reality of a post lockdown, pre vaccine world that will reap the long-term benefits.

Here at TVE we specialise in mastering complexity to help brands unlock growth.  Let’s have a chat to see how we might be able to help you realise your brand’s potential.

1Kantar, FMCG Panel, 4we 14th June 2020

2 Kantar Alcovision Survey, April & May 2020


By: The Value Engineers

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