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Premium soft drinks set to drive on-trade sales higher

Published:  05 May, 2022

Premium soft drinks and cocktails are in more demand than ever after consumers traded up for expensive beverages at home during lockdowns.

The trend has spilt over into licensed venues, where high-quality serves continue to be in demand.

According to Britvic’s 2022 Soft Drinks Review, the higher margins on premium soft drinks and cocktails, which operators can charge more for, will help licensed venues claw back some of the £100.2bn of sales lost during the pandemic.

It is expected more consumers will visit on-trade venues in 2022, with 36% saying they missed going out over the lockdowns, according to the latest CGA data.

Consumer sentiment towards premium has changed so much that 58% of those asked at a CGA consumer panel in March 2021 said they would be willing to trade up to a premium soft drink if paired with a dish.

The same survey also found that customers are calling for mixed drinks, such as gin and tonics, and cocktails to be of the highest quality possible, with over half of those asked saying they were willing to buy more premium cocktails.

As a result, soft drinks and mixers could play a more significant role in the cocktail space through no and low alcohol alternatives, as 35% of consumers agreed they would upgrade their soft drink to a premium non-alcoholic alternative.

According to the report, mixed drinks and cocktails are also set to continue their pre-pandemic growth, with sales already on the rise and distribution tracking up by 5.3% in the third quarter of 2021.

Like-for-like cocktail sales in licensed venues rose from 6% to 9.9%, equating to £1 in every £10 of licensed sales between April 2021 and October 2021, further cementing the segment’s continued growth.

“Premium has long been a lucrative and growing drinks trend, as data in this year’s Britvic Soft Drinks Review shows,” said Katy Watts, Head of Channel Development (Foodservice & Licensed) at Britvic.

“However, it is clear the pandemic has sped up this trend as consumers sought to treat themselves during lockdowns, gaining a taste for the best-quality drinks they can afford, which they now want in outlet.

“On the whole, the pandemic did not affect consumers’ desire for premium drinks, with many opting for premium food and drink options to enjoy at home when they couldn’t go out. However, the desire for quality is here to stay, as 15% of consumers predict they will exclusively visit premium venues, showing upsells can help recoup lost revenue from the pandemic.”

This bodes well for pub and bar businesses, as 23% of consumers said high-quality drinks in licensed venues would appeal more to them than before Covid. A further 32% said their decisions to purchase a drink would be led by quality, while 21% agreed the drink's value would mostly influence them.

The ongoing cost-of-living crisis that is set to bite into disposable income may affect a customer's willingness to spend more on a drink. Many people built up additional savings during the lockdowns, but others struggled. This means the value of a drink could lead a customer’s decision to purchase

However, value isn’t always necessarily about price, but what the product offers the customer for the money they pay for it, which is poignant as 70% of Brits agreed experience is now more important to them than possessions, according to a Mintel report in May 2021.

“As this year’s Soft Drinks Review shows, customers of all types of income are looking to have memorable experiences in the on-trade, having missed out on so much during the pandemic,” continued Watts. “It is important that outlets provide a premium experience, not only in price but also through how drinks are presented. Extra profits can be earned by elevating a drink’s appearance, such as garnishes or nice glassware. It can also be done by making something customisable, such as a house soda offering with a variety of flavoured syrups to add to the soda.”

While consumers are looking to treat and enjoy themselves, the pandemic also sped up the health and wellness trend, as more guests make a conscious effort to look after their minds and bodies. This has led to low-calorie cola taking the largest share of cola sales for the first time in October 2021.

The importance of healthy or healthier options will continue to grow for customers, as 58% say they would like to see more healthy soft drink options in venues. A further three-quarters of consumers say it is important to have healthier options on menus when eating and drinking out, rising to 84% of 18-34-year-olds. This will only become more prominent with mandatory calorie labelling on menus, now in many outlets, as well as upcoming HFFS labelling.

However, eating and drinking out is the top spending priority for consumers in the coming year which, as well as being encouraging for outlets, highlights how important the licensed sector is to consumers. Regular pub and bar visitors were the quickest to return to venues when restrictions lifted, with 34% visiting weekly and 31% going monthly.

“A strong cohort of regular customers were ready to support the sector with plans to increase their time spent in venues in 2022,” continued Watts “However, just two in five pub and bar occasions are drink only, which means operators must work harder to increase wet revenue through the likes of premium options, as well as diversify their offering in order to bolster add-on sales.”