The Role of On Premise

In almost every case we have read thus far we have mentioned on premise (i.e. restaurants, bars, etc. - any location that sells alcohol that is to be consumed at the same venue) but few have focused on the role of this channel. For sure, we're noted that the endorsement of high-end sommeliers can increase brand equity, but does the average bar have the ability to impact how wine is packaged and sold?

I would argue yes - although it will be slowly and over time. Partially, this is because the role of the bar (in particular) is changing. I spent the summer talking to bar owners across NYC, Mexico City, Brazil, and China. Overwhelmingly, they pointed to social media platforms like Facebook and dating websites as their main source of competition. They noted that while 10 years ago "the local" was the only + best way to meet new people, find friends, etc., today social media is the primary source of connection. The bar is no longer a central, every day node in the average social circle.

Consequently, bars are under immense pressure to sell more at higher prices - but consumers don't want that. Simultaneously, consumers seem to want more choice. Increasingly, on premise is looking to cutting costs - by decreasing footage devoted to inventory or scrutinizing pour cost. Bars are caught in a catch 22 of needing to offer ever more product selection while having less and less flexibility to have capital tied up in inventory that may or may not move.

Therefore, many are turing to tech solutions (technology's impact in bars could be a WHOLE other post). For some, this means having wines, liquors, beers, etc. on tap, with taps that shut off at exactly the right pour. This is one critical means of cutting costs (I talked to one bar owner who said that he loses at least 1.5 glasses/bottle to waste - given that bars tend to recoup the cost of the bottle with the first glass I didn't feel that badly, but the point stands). Another is a movement towards more efficient modes of storage than bottles - e.g. pouches. Either way, as more and more millennials move up the ranks to become bar owners, I would be astonished if technology + mobile did not become increasingly incorporated into the bar.

Eventually, I cannot imagine that this trend will have impact further up the supply chain; however, if I had to hazard a guess, it will hit the low end wines first (i.e. wines targeted at the non-discerning customer or those who don't care as much about the "experience"). Whether or not these trends have any real traction, however, will depend on bars themselves determining their new role within society.