While the amount of bars and restaurants in operation has recovered to pre-pandemic levels, beer’s on-premise business has yet to bounce back, with keg volume expected to be 2.5 million barrels below where it should be by the end of 2023, according to the Brewers Association.
Changes in consumer and retailer habits may have permanently changed and old strategies for building brands through draft won’t necessarily work moving forward, according to Mellow Mushroom associate director of beverage operations Kynyetta Lester, Karl Strauss co-founder and CEO Chris Cramer, and industry consultant Jason Murphy, who shared the stage during the Brewbound Live business conference earlier this month in Marina del Rey, California.
“You can draw concentric circles around your brewery and as you go further away from your home market, the harder it is to gain acceptance and conversion,” Cramer said.
“We had a luxury for decades of being able to introduce consumers to brands by giving them a splash of draft beer – when have you ever been offered a splash of spirits in a bar?” he continued. “We all relied on that, we focused on it. And I think now we have to look at some of the paths that the liquor companies and others have used to be able to gain consumers and fans, because not as much draft sampling has happened.”
That decline in sampling can be credited to a number of factors, including fewer tap handles, an increase in competition from other categories, and a lack of emphasis on educating consumers on beer offerings at bars and restaurants. Because of the changes, some of the brands that have found the most success in the on-premise are those who focus on accounts closer to home, according to Lester.
“For Mellow Mushroom as a whole, we really have our operators focus on local,” Lester said. “We have a very small mandated handle list. From there, we want our operators to work with their local breweries and kind of see what’s out there, what are their local audiences asking for, and fill in those gaps there.
“And I’ll say that the suppliers that have reached out and have worked with our stores locally have done really, really well,” she continued.
Recovery isn’t only in the hands of beer suppliers, according to Murphy, who emphasized the need for retailers to promote bev-alc more.
“Usually when I see on-premise retail ads, it’s food-focus first and beer is just kind of a bystander in the background,” Murphy said. “I think if the industry is really going to take a look at what’s happening to bev-alc sales, you need to take a step back and look at how you’re marketing beverage. Maybe it’s time to start placing more of an emphasis on beer in the marketing for retail as well.”
Consumers may also be feeling the weight of bev-alc in the on-premise. The Consumer Price Index (CPI) for beer (+5.2% year-over-year), wine (+5.6%) and spirits (+6.2%) all continue to outpace overall inflation (+2.7%) on a seasonally unadjusted basis through November data. And the potential impact is that consumers will prioritize food over bev-alc when visiting bars and restaurants, according to Murphy.
“Price is something that’s concerned me for a while,” Murphy said. “I saw a semi-viral TikTok the other day of someone who was talking about pressures on the beer category, and of the responses in that TikTok, probably 40% of them were related to on-premise price being too high. It’s, ‘Why am I going to pay $7-$8 for a pint, when I can get a $12 12-pack of Busch Light?’ It’s a real conversation that people are having.”
Insiders can watch the full panel discussion above, including comments on venue sales and style and innovation trends.