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On-trade: A year of change

Published:  21 December, 2016

2016 has had its highlights and, despite challanges along the way, the restaurant sector is in decent shape

Has 2016 been a classic vintage for the on-trade? Probably not, but it's certainly had its highlights - and despite a mid-year referendum vote many were not expecting, the restaurant sector is in decent shape.

Following the 2008 economic slump, the upturn in confidence post-2013 triggered a boom in new restaurant openings, especially in London, many of these in late 2015 and 2016. This has offered plenty of opportunities for suppliers, many of whom see the on-trade as their most important channel for sales and profit.

"Restaurants have remained very buoyant for us," says Andrew Bewes from specialist wine importer Hallgarten Druitt & Novum Wines. "At the moment on-trade is doing very well - it's a sector we understand intimately and we continue to find it incredibly exciting."

Despite new business he says that on the whole 2016 has been "steady" for the restaurant sector and puts Hallgarten's success down to hard work in opening more restaurant accounts than in previous years. 

For fellow importer Boutinot, the sector continues to be extremely important and it has invested this year in its on-trade teams in the north west and London. "There is huge potential here," says head of on-trade for London Kevin Pollard, a view shared by Liberty Wines. "With the premium on-trade in growth, it will continue to be a big focus for us," says Liberty's David Gleave MW.

The company has seen double-digit growth in the on-trade in 2016, which comes primarily from the premium sector. "Our figures suggest more people are drinking better wines - they are keen to spend more as long as they can be convinced of the provenance and quality of what they are buying," adds Gleave.

Quality over quantity

This remark mirrors what's being said by many on the other side of the fence. Chief executive and founder of M Restaurants Martin Williams has noticed a significant change in buying habits among wine drinkers at his two London restaurants. 

"Our wine spend has gone up dramatically over the past two years in quality of wine bought," he says, "but the quantity has probably stayed the same if not reversed slightly."

He puts this down to a shift both upwards and downwards from mid-priced wines and spirits. He gives sparkling wine as an example; many customers are trading down from Champagne to Prosecco, while others are trading up from house Champagne to vintage or grower Champagne. This leaves a gap in the middle. 

"The midmarket, most popular norm -

whether that's Champagne, wine or spirits - has suffered for cheaper, more volume offering at one end and higher quality at the other," he explains.

It's appropriate that Williams should use sparkling wine as his illustration because it's this category that has been one of the trends of 2016. 

"It's been a huge area of growth in the on-trade but in 2016 we have seen an acceleration of this trend with sales broadening to cover quality sparkling wines from Tasmania, England, Franciacorta and even New Zealand," says Gleave.

There has also been a spike in interest for Franciacorta at Boutinot, as well as rosé (year-round) and wines with specific provenance or a leaning towards sustainable winemaking practices. "People are increasingly interested in where their wine comes from and how it's been made," says Pollard.

Cautious openings

Away from specific style trends, M Restaurants has discovered that the most successful sector in hospitality over the past two to three years has been gastropubs in outer-London. "I wanted to tap into that market and decided instead of opening a third big restaurant in central London to open two smaller restaurants that are more local," says Williams, who launched an innovative crowd-funding initiative earlier this year to raise the £1.5 million to fund this expansion. 

"This is where the clever man will put his money - it's such high risk to open a central London restaurant now because there's increased competition and rising rates and rents," he adds.

Another restaurateur who has expansion plans in 2017 is Xavier Rousset MS, who has recently opened French-focused restaurant Cabotte in the City of London and will further his portfolio with a new wine bar and shop in Mayfair in March. He knows how challenging the market is but is confident that with the right formula you can succeed. 

"People go to restaurants primarily for the food so the food offer is very important," he says. "But the customer is getting more and more sophisticated when it comes to cocktails and wine so you need to have a good offering; wide enough and well-priced and interesting enough that people will travel to you."

He relies heavily on his "20 or more" suppliers to support him, not only with great products but with outstanding service. "We judge them on service - that they deliver on time, they deliver what you've asked them to, they don't make mistakes with the delivery or invoice, and if there is an issue you can raise this very quickly. Sometimes you pay a premium for that, but so be it."

Adding value

Bewes knows that business can be won or lost on the tertiary benefits his teams can offer. "We stopped being the type of supplier that simply dropped the wine off at the restaurant door a long time ago, and we now look to build business relationships. We add value through training, market intelligence, and being agile enough to change things if they don't work - so almost becoming an advisor or consultant if you like."

Gleave agrees: "In some ways, our job now starts once we've delivered the wine," he says. "The competitive market place means every part of our service needs continually to be reviewed and improved. It pushes us to be better."

The marketplace has been even tougher following the European Referendum vote in June, with restaurants and suppliers under increasing pressure in the post-Brexit climate. While customer numbers took an immediate dent in late June, these quickly bounced back - but it's the unknown details of Brexit that most concerns the restaurant trade. 

Staffing crisis

"There's been a staff shortage in hospitality for 20 years and that's only going to get worse if working restrictions are placed," says Williams. While Rousset is terrified of staff shortages, too: "It will hit us hard, it's not just a London issue, but is a country-wide issue," he says.

More immediately, Williams predicts that 2017 will see very few new restaurants opening. "I don't think there are many people who think this is the time to open, although it is a good opportunity in terms of being able to negotiate with landlords and suppliers on the fit-out side." 

He's keen not to sound too negative though: "There are more people dining out than ever before, it's the last thing that people want to sacrifice, so if you can provide the quality offering people are after you'll do very well."

Other predictions for 2017 include 'softer margins' at the expensive end of restaurant wine lists and a continued boom for the casual dining sector. "Casual will still be trendy next year - good product, causal environment, friendly service, no formality," says Rousset.

Boutinot predicts a Chardonnay revival, especially among young consumers and a spike in sales of wine in different formats, such as keg wine and single-serve Prosecco, while Liberty says that "provenance will continue to be important to consumers looking for authentic wines."

Plenty to look forward to then.