Nielsen Insight: Impact of the on-trade closure

One of the most common questions we’re being asked by our clients is: what are the immediate and longer-term impacts of the on-trade closure on the off-trade?

We’ve been working with our partners at CGA to take a closer look and these are the four biggest issues we think brands and retailers should consider.

OVERALL DECLINE ACROSS THE TOTAL TRADE

Though the off-trade has seen significant increases, the total alcohol trade has declined by around 25% since the UK went into lockdown. Beer and cider – the two most popular on-trade drinks – have been much more impacted than spirits and wine. By the end of the year we expect all sectors to see decline at a total trade level.

VOLUME HAS SHIFTED TO THE OFF-TRADE – AND IT WILL STAY WHILE PUBS ARE CLOSED

The off-trade has absorbed around 40% of the alcohol volume lost from the on-trade, and we expect this to continue. In a recent Nielsen Homescan survey, 70% of UK shoppers who have reduced their spend outside of the home say they haven’t reduced their overall consumption of alcohol. So, it’s reasonable to plan that this volume moving through the off-trade will be sustained as long as the on-trade is closed.

BEER IS DRIVING OFF-TRADE GROWTH

Since the beginning of lockdown, an additional 196 million litres of alcohol was sold in the off-trade – and beer accounted for 65% of that. Cider is a distant second, contributing to 16% of the additional volume sales. Part of this growth is down to shoppers trading up to premium beer products during lockdown as they attempt to recreate the pub experience at home. Because beer is typically so reliant on on-trade sales, manufacturers and suppliers will be working extra hard to increase or expand their supply chain and produce larger pack formats to drive more value in the off-trade over the coming year to offset some of those losses.

NOT ALL SUPPLIERS WILL BENEFIT EQUALLY

The volume shift from on to off-trade has major implications for suppliers. Those that rely predominantly on the on-trade have been severely hit, and with no clarity yet on when and to what extent pubs and bars will reopen, alternative routes to market are critical. Some of these suppliers are already looking to mitigate losses from the on-trade by capitalising on the increased demand in the off-trade. 

In the longer term this could disrupt shelf availability and pricing for traditionally stocked brands.

Suppliers that are purely off-trade based have seen and will continue to see substantial benefits as long as the on-trade remains closed. And they are working hard to maximise their relationships with retailers to ensure their products are front and centre now and when the on-trade reopens.

One thing’s for sure, agile suppliers in both the on and off-trade should be seeking additional routes to market that enable them to reach their shoppers directly, whether through online stores or direct-to-consumer offers.

The impact of the on-trade closure has been felt deeply across this category, with some benefiting hugely from increased demand in the off-trade and others left struggling.

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