Home consumption vs the on-trade: have pandemic behaviours become entrenched?

Beverage alcohol consumers are showing a clear preference for home consumption versus visiting the on-trade, with signs that behaviours learned during the Covid-19 pandemic have become entrenched.

However, there is a strong regional contrast between markets in Europe and North America – where on-trade withdrawal is being used as an economising measure in the cost of living crisis – and many countries in Asia, where attitudes are more positive, and the on-trade is recovering more strongly.

On-premise share yet to meet 2019 levels

Although many bars and restaurants around the world bounced back in 2022 following the lockdown-induced lows of 2021, most markets have yet to see their on-premise share of overall alcohol consumption reach pre-pandemic levels, according to IWSR data.

Charting the on-premise share of total beverage alcohol (TBA) in leading markets around the world, only Mexico exceeded the levels of 2019 in 2022, with countries including China, India, Brazil and the UK still falling well short.

Globally, the on-premise accounted for 35% of TBA volumes in 2019; this figure plummeted to 23% in 2020, before a partial recovery to 28% in 2021 and 29% in 2022.

However, there is a strong contrast between Western and Asian countries when it comes to consumer attitudes to the on-premise, according to IWSR’s ongoing consumer tracking into 15 of the world’s leading markets (Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, South Africa, Spain, Taiwan, UK, US). As Asian countries have emerged from prolonged pandemic restrictions, consumers are eager to return to socialising in bars and restaurants.

Polarising trends across regions

“The trend around going out is polarised across key markets, with consumers in most regions recalling net withdrawal from the on-trade,” says Richard Halstead, COO Consumer Insights, IWSR. “Asia is the only region showing net positive sentiment towards going out.

“Home-premise consumption is being used as an economising tool in many markets to allow consumers to maintain relationships with premium brands. But this is not the case in Asia, where the on-premise revival remains in full swing.”

According to IWSR consumer research conducted in April 2023, on average, around 60% of consumers in North America, parts of Europe, South Africa, and Australia say they are going out less. Meanwhile in China and India, around 50% say they are going out more.

Asked for their preferred drinking venue, consumers in all regions expressed a net preference for at-home; again, this was strongest in Australia/South Africa, and weakest in Asia.

In terms of recalled consumption, 58% of consumers across the key markets said they last consumed alcohol at home, with 37% referencing the on-premise.

Again, there is a strong contrast between a market like Japan – where self-reported at-home consumption stands at 82% – and India, where almost two-thirds of drinkers choose the on-premise. However, IWSR analysts caution that its ongoing tracking over the coming months will reveal firm trends in this area.

Attitudes to the on-premise versus at-home are driven by a number of factors, such as the macroeconomic climate and cultural attitudes towards socialising.

The impact of increased cost of living

In some markets, reduced disposable income has prompted consumers to go out less, or to enjoy their favourite brands at home and choose more cost-effective options in the on-premise.

In the US, for example, 59% of consumers said they were going out less – and IWSR believes that negative perceptions of the on-premise here have been exacerbated by pandemic behaviours, when consumers became more aware of the increased costs associated with going out for a drink.

Many bars and restaurants are also being squeezed by rising costs and supply chain pressures, leading them to raise prices or cut investment in staff. On-trade pricing in the US has risen at nearly double the rate of retail.

And this phenomenon is not confined to the US, warns Halstead. “High costs – of energy, staff, food and drink – are making life very hard for the on-premise in many countries now. There are expected to be further closures in 2023 as a result.”

This is already true in Brazil, for example, where beverage alcohol prices have gone up in the on-trade at nearly double the rate of the off-trade, and consumers are reacting by shifting consumption to the home. 53% of drinkers say they are going out less.

Cultural attitudes towards socialising

There is also a strong regional contrast in terms of the connection between alcohol and socialising. In Europe and North America, about 60% of consumers do not view alcohol as an important part of their social lives; but in Asia, that figure drops to around one-third.

“Asian markets and China in particular attribute a lot of importance to alcohol being a part of social life,” says Sarah Campbell, APAC Research Director, IWSR. “Drinkers in China, India and Taiwan are most inclined to come back and socialise in the on-premise.”

Although the on-premise is recovering strongly in China in the second half of 2023, this resurgence is being hampered by concerns about the decelerating growth of the country’s economy, with the stock market and real estate prices both exhibiting fragility, and unemployment levels rising among young adults.

Chinese consumers remain among the most financially optimistic in the world, but these economic worries are prompting them to be more careful with their money, meaning they are visiting expensive on-trade venues less frequently – and spending less money when they do.

LDA Gen Z show a higher willingness to go out but are under financial strain

In many markets, the willingness to go out is stronger amongst LDA Gen Z, however, the overall consumer mood across most markets, especially those outside of Asia, is still pessimistic towards the on-trade. However, the LDA Gen Z cohort is the age segment that is also most likely to say that they are under financial pressure – a sentiment that is already evident in markets such as Spain and Taiwan. LDA Gen Z also have higher moderation/abstention rates than older age groups, both for economic and health reasons. These factors will inevitably impact their spend level in the on-trade and their frequency rates.

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