Beverage Trend Paper

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Beverage Trends: The Strategic Mindset

“I don't set trends. I just find out what they are and exploit them” - Dick Clark

Significance of Content

Learners should strive to identify emerging trends in the marketplace through gaining an understanding of the numerous external forces that impact their business.

In their efforts to recognize Mainstream (broad-based) and cutting-edge, niche (localized trends) markets, learners recognize how they can proactively sculpt a competitive advantage through harnessing a company’s core capabilities.

These efforts help companies to capture market opportunities, spur innovation, and allow for better problem solving and decision-making.

Learning Objectives Upon completion of reading this chapter, the learner will be able to:

Recognize the significance of trends as a part of a successful strategic approach

Define the distinction between trends versus fads

Reiterate at least 3 beverage trends presented in class that connect with the students personal experience

Significance of Content

Learners strive to identify emerging trends in the marketplace through gaining an understanding of the numerous external forces that impact their business. In their efforts to recognize broad-based and localized trends, learners recognize how they can proactively sculpt a competitive advantage through harnessing a company’s core capabilities. These efforts help companies to capture market opportunities, spur innovation, and allow for better problem solving and decision-making.

The Origins

Consumption of alcohol began unintentionally around 10,000 years ago (approximately 8000 bce)

Originated from the storage of overripe and decaying fruits, honey and grains

Intentional production of beer and wine to the first civilization that arose around 8,000 years ago (approximately 6000 bce)

Mesopotamia and Egypt (largely corresponding to modern day Iraq)

The origin of distilled spirits is far more recent, and is traced to Middle East or China at about 700 CE

Ultimately, the creation of an apparatus known as a still was used to extract and concentrate the alcohol

Significant Beverages

Alcoholic based beverages (also referred to as “drinks”) are relatively distinguishable from one another, as they each look, smell, and taste quite different

Wine

Beer

Spirits and Liqueurs

Sake

Cider

Coffee

Tea

Heightened Opportunities

Elevated role of the beverage person (bartender, brewer, sommelier, barista) in the Hospitality Industry

Now many customers are at least as interested in the beverage professional as they had been the chef

The chef has always been the centerpiece—the one who comes out and speaks with the customers about the dish at the table, now the beverage person is as interesting.

What cooking network had done for the chef, the movie Somm is doing for Sommeliers

Necessary Foundation

Associate/Bachelors Degree

Certifications

Sanitation

BASSET

Wine/Beer

Experience

Positions

Owner/Operator

General Manager

Beverage/Wine Director

Beverage Buyer

Sommelier

Brand Ambassador

Distributor/Importer

The Food & BEVERAGE Manager

Restaurants: Food drives revenue

Modern perspective…Beverages can drive profit!

Greater profit margin on beverages

Can off-set the increasing costs found elsewhere

Traditionally, wine has been the driver of alcoholic beverages in full-service restaurants. But…

Using food as a loss leader as a strategy to…

Given the state of the economy over the past decade, many hospitality establishments were experiencing decreased profit margins.

Effective businesses are continually searching for opportunities to differentiate themselves and remain competitive.

Beverages have been a source of differentiation

Food as a loss-leader in order to get people to buy drinks

McCormick and Schmicks starting at $3.00…but must have 2 drink minimum. According to USA Today, McCormick and Schmicks offers the 1 happy hour in America

Back in 2014, McDonalds Corporation had procured and then promoted higher quality coffee as a differentiator which simultaneously allowed them benefit from the higher margins (difference between cost of the coffee and their selling price) offsetting their need to increase food prices due to increasing costs.

Non alcoholic beverages as a loss leader to buy food and entertainment

Happy hour or even “happy days” Bar Toma offers ½ priced wine night on Wednesdays from 430-6 and 9-10.

Competitive Advantage?

Trends . . .

General direction or tendency in which something is developing; in vogue; having a long-lasting change and impact in the marketplace.

Fads. . .

When consumers are having some interest in a phenomenon (new product, concept, service, etc.) with exaggerated enthusiasm for a brief period of time.

Paying attention and/or being ahead of the curve can work to illuminate a distinction and a competitive advantage—ultimately leading to profitability

Trends and fads are often used incorrectly—as interchangeable terms.

Being able to identify fads and trends in their early stages allows an operation to more fully devote its resources and address the changing needs of the marketplace.

Trend Examples: Wine kegs, screwcaps, Bourbon barrel aged beers, ½ bottles of wine, cider, sake

Fad Examples: Cronut, Malort, Miller Clear Beer, Pepsi Clear, Buttered coffee, Pizza beer, Pruno (Prison) wine made from fermented ketchup, sugar, fruit and bread (apparently tastes like rotted garbage, squirrel beer (Brew Dog with a 55% ABV stuffed in dead animals

Remember this: classics never make a comeback. They wait for that perfect moment to take the spotlight from overdone, tired trends. Read more at http://www.brainyquote.com/quotes/quotes/t/tabathacof657349.html#FgSw5PfwRfG7SfAC.99

Trends as a Part of Strategy

Appropriate strategies are the ones selected that enables a particular company to achieve superior performance and provide their company with a competitive advantage

Managers play pivotal roles in leading the strategy-making process.

There are many people and businesses that are “late” to trends, and mistakenly adopt a trend after it’s no longer in fashion. They exist in music. They exist in mutual funds. They exist in clothes and in cars.

Recognizing growing trends as it relates to the application of beverages within a given business is an imperative effort on behalf of the business.

These efforts help companies to capture market opportunities, spur innovation, and allow for better problem solving and decision making.

Types of Trends

Efforts to recognize broad-based and localized trends and how they can proactively sculpt a competitive advantage through harnessing a company’s core capabilities

Broad-based Trends - Influencing a larger percentage of people in the wider market place

Localized Trends - Influencing and capturing smaller niche markets within a localized area

Recognizing growing trends as it relates to the application of beverages within a given business is an important effort on behalf of the management team.

These efforts help companies to capture market opportunities, spur innovation, and allow for better problem solving and decision-making.

Origination of Trends

Many trends will be something that has been presented as a:

Renewal - the updating of something that is worn out or run-down

Reinvention - the process through which something is changed so much that it appears to be entirely new

Adaptation - a change or the process of change by which something becomes better suited to its environment

Influences of Trends

Social/cultural

Political / Legal

Economic

Environmental

Technological

Demographic /

Labor Market

Social / Cultural - Signifying the combination or interaction of social and cultural values within society or specific to a geographical area or demographic

Political / Legal – Relating to politics or government control through federal or local laws and policies

Economical - Pertaining to the production, distribution, and use of income, wealth, and commodities

Environmental - Relating to the natural world and the impact of human activity on its condition

Technological - The application of newer tools, techniques, and processes used for better efficiency and/or effectiveness

Demographic and Labor Market – The developments in population as they relate to changes in age, gender, marital status, educational levels, employment status, race, and so on

Influences of Trends

Trends are often founded and influenced in one or several of these seven external forces

Social-Cultural - Gluten-free, natural, healthful options (yet what is up with the proliferation of donut shops??)

Political / Legal – The distribution system – 3-tier, minimum wage, happy hour laws, tied house laws

Economical – Economies of scale – wine kegs

Environmental – Can lead into social/cultural

Technological - Smartphone apps, tablet computers (i.e. iPads for menus and wine lists), social media, mobile/wireless/pay-at-the-table payment options.

Demographic and Labor Market – direct implications through producers and consumers / labor supply, productivity, and demand

Beverage Trends

Overall consumption of alcoholic beverage has increased, though with a slight decrease of restaurant/bar (on-premise) consumption

Although a consistent trend is reflected of people buying more premium beverages:

Drinking less—but drinking better

Beverage Forecast

Alcoholic beverages

1 Craft/artisan spirits

2 Locally produced beer/ wine/spirits

3 House-brewed beer

4 Non-traditional liquors

5 Craft beer

Cocktails/cocktail ingredients

1 Onsite barrel-aged drinks

2 Culinary cocktails

3 Regional signature cocktails

4 Food-beer pairings

5 Edible cocktails

Non-alcoholic beverages

1 House-made/artisan

soft drinks

2 Gourmet lemonade

3 Specialty iced tea

4 Mocktails

5 Coconut water

The National Restaurant Association surveyed professional chefs, members of the American Culinary Federation, on which food, cuisines, beverages and culinary themes will be hot trends on restaurant menus in the year ahead.

The What’s Hot in 2016 survey was conducted in the fall of 2015 among nearly 1,600 chefs.

Wine Trends

Wine purchases off-premise through non-traditional retail and on-line sources

Wine-on-draft

Red and white blends (non Bordeaux style)

Greater awareness of sustainable and natural

Rosé wine – Across the world

Vermouths

China!?

Central Coast California

Wine credentials/certification

Old World, yet second-tier wine countries:

Greece, Portugal, Austria

Eastern European wines

Bulgaria, Hungary, Romania

Wine – More than 10,000 wineries in all 50 states in the U.S.

As the world of wine broadens and American wine drinking culture becomes more firmly established in the socio-economic mainstream, wine sales seem likely to become even more concentrated in the vectors where everyday consumer purchases are made.

Beer Trends

Beer and Wine Hybrids

Lower alcohol (session) beer styles

Barrel Aged Beers

Sour Beers

Regional Craft Breweries Expanding

Collaboration Brewing

Beer credentials/certification

Domestic (mass produced) beer sales has declined for the past 2 years, but American craft brewers captured 7.8 percent of the U.S. beer market last year, up from a 6.5 percent market share in 2012 - The Brewers Association.

http://www.mensjournal.com/expert-advice/sour-beer-brewing-s-next-frontier-20130906

http://www.bevindustry.com/articles/87228-domestic-beer-case-sales-decline

Spirit / Cocktail Trends

Increase of molecular mixology

Classic Cocktails

Culinary cocktails - Seasonality

Exotic ingredients

Homemade syrups, bitters

In-house barrel aged spirits/cocktails

In-house infusions

Japanese Whiskeys

Flavored Whiskeys

Bitters

Mixologists are “championing simplicity, using three or four ingredients, so that base spirits are allowed to shine, and moving away from the seven- to eight-ingredient cocktails.”

Coffee/Tea

Coffee & Tea

Fair and direct trade coffee and tea

Single origin and estate

Coffee

Local specialty coffee roasters

Micro roasting

Draft coffee and draft lattes

Coffee kegs with use of nitro

Barrel-aged coffee

Cascara

Tea

Craft tea – Carbonated tea, bubble Tea

Flavored ice teas

Tea cocktails

http://www.qsrmagazine.com/marc-halperin/coffee-tea-are-hot-trends?microsite=156400

http://www.qsrmagazine.com/outside-insights/farm-cup?microsite=156400

http://www.qsrmagazine.com/menu-innovations/reading-tea-leaves?microsite=156400

The breakout year for nitro coffee. Nitro coffee is created by adding nitrogen to cold brew coffee, resulting in a drink with a naturally creamy mouthfeel.

Coffee connoisseurs may already be familiar with nitro coffee as the beverage has been in the market for the past few years at some third wave coffee shops and as a RTD beverage.

However, nitro has finally hit the mainstream thanks to Starbucks, which rolled out nitro coffee in select stores nationwide.

Cut the waste with cascara

According to Mintel 2017 Foodservice Trend Reduce, Reuse, Upcycle, consumers are increasingly concerned with food waste and chefs are finding new ways to repurpose ingredients to reduce overall waste.

One beverage that fits into this trend is the coffee/tea hybrid cascara, a slightly tart/bitter caffeinated beverage created by the discarded skin of coffee cherries.

While still a relatively niche beverage, use of cascara is on the rise.

Blue Bottle Coffee mixes cascara with butter to create a Cascara Butter Toast. Even Starbucks is focusing on cascara, as the company announced it would launch a cascara latte in 2017 at its bi-annual investor conference

Other Beverage Categories

Sake

Cider

Mead

Sake is no longer confined to the shelves of sushi bars and Japanese restaurant, but is now earning an ever present fixture on beverage menus around the country

Consumers, most notably millennials (and those under 35 years) are gravitating towards sake. Overall consumers are becoming more educated about this Japanese beverage and embracing all sorts of upscale products.

As the sake category grows in the United States, many consumers are opting for sake-based cocktails.

Cider is one of the fastest growing beverage categories

Good supplement for those with gluten sensitivities or celiac disease

Mead has been reawakened and is moving beyond medieval fairs and Halloween