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Hospitality ramps up range rationalisation in response to growing costs

Published:  12 November, 2024

Nearly a quarter of hospitality operators have changed the routes-to-market of their drinks ranges and more business are seeking to reduce their delivery partners than increase them, leaving drinks brands at risk of being de-listed, new research has revealed.

Findings from CGA’s latest Business Leaders’ Survey have revealed the growing financial strain among hospitality leaders which are being heavily impacted by wage, food, rent and energy cost rises in 2024. Cost challenges now result in the need for operators to review all parts of their cost base, including drinks. This in turn has led to range reviews as businesses seek greater value from their distributors and brand partners. Two in five (41%) leaders of hospitality groups now report that they were reducing and rationalising their supply base, while another quarter (26%) were considering doing so.

“Operators can’t afford to hold stock that isn’t delivering sales, and they know their range needs to meet the demands of their guests,” Rachel Weller, commercial leader, GB & Ireland said.

“Add in the intense competition for space, and it’s essential for drinks suppliers to create strong sales stories that show why their brands deserve to be at the bar. It’s particularly important to strike the right balance of quality and value, to emphasise credentials on reliability and sustainability, and to target the categories where ranges are rising rather than falling. To beat rationalisation, the top priority of all is to listen to what venues want and deliver the committed support they need.”

As a result of these pressures, operators are now closely reviewing the performance of categories, looking to optimise by stripping out poor performing categories and making space for growth ones. The long alcoholic drinks (LAD) category is seeing the greatest churn, with 11% of businesses already changing their primary supplier. A proportion of businesses are planning to reduce their ranges of draught standard lager (16%) and packaged (10%) or draft (8%) cider. Gin ranges are being cut by even more (22%), while a wave of celebrity-led new entrants has added to competition in this spirit.

According to the survey, 72% of operators say that drinks suppliers can help them with more competitive pricing, along with staff training and support. Assistance with sustainable and environmentally friendly initiatives and offering more reliable and timely deliveries should be part of packages too.

Meanwhile, CGA’s On Premise User Survey reinforces the importance of meeting consumer needs and protecting the quality of their visits. When drinking out, consumers state that value for money means that a drink is ‘good quality’ (42%) and is ‘worth its cost’ (38%), particularly in the beer category, while factors like innovation, excitement and visual appeal are more significant in cocktails.

In terms of growth categories, operators are now planning to increase their range of no & low alcohol beer and cider (42%) as they look to meet the needs of consumers, while balancing range risk and reward.

Spirits (39%), including Tequila (18%), is another growth opportunity.




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