Sustainability in the On-Trade and the Thirst for Change

The desire and pressure to move towards greater sustainability touches all aspects of our lives throughout the value chain, from producers and brand owners all the way through to consumers. We all want to try to do “the right thing” in some form, however modest, from recycling to our choices on shelf.

Pubs, bars and restaurants are no different of course. Here, operators are looking for new and innovative ways to reduce their environmental impact and welcome efforts by brand owners and suppliers to help them achieve that goal. To understand how they are doing it and what methods are proving to be most effective, it is worth considering why operators want to be more sustainable.

At Barfly, we have been asked to consider this question during the course of many recent studies. It’s fair to say sustainability is a feature of most briefs these days to some degree or another. The primary reason licensed operators want to do anything is based on money; to either drive up sales or drive down costs and increase margins. This is universally true of all types of outlets and reported by every outlet GM you speak to up and down the land and across borders.

In practice, that means reducing bottle wastage, from beers and mixers in particular. Glass bottles cost money to collect, based on weight typically, and will impact the environmental rating of the outlet which has a direct financial implication. Furthermore, a holistic view of costs will also take in to account staff hours; bottles are awkward, time consuming to deal with and take up a lot of space relative to an individual serve. Reducing reliance on packaged products helps to limit hours and wage bills in a challenging labour market. Add to this the possible effect of some form of DRS (Deposit Return Scheme) being reintroduced, effectively a tax on bottles served, and you have three good reasons for operators to think sustainability first as part of running a tight and profitable ship.

The second reason operators will choose to act more sustainably is social conscience. They want to do it because we all want to do the right thing. In our experience this is always trumped by cost management, demonstrated by few if any operators choosing more costly solutions that are more environmentally virtuous at the expense of the bottom line.

The third reason is driving sales, assuming consumers will choose an outlet based on its environmental credentials. In practice, this is spoken about and a dreamy reaction, but hardly ever witnessed. Consumers are rarely driven by this type of motivation in licensed environments with price, quality of experience and brand relationships being more likely to drive on-trade behaviour. That said, if an outlet can dress a first-rate experience with messaging that lets consumers know they are acting more responsibly, then everyone can win.

So, what does this mean in practice? What changes?

Draught is king. Bottles and glass are being challenged, not just in terms of global supply chain issues, but in terms of their impact on staff and waste costs. So, the battleground for brands is the finite real estate of the front bar top. Beer and cider are increasingly being challenged by spirits, cocktails, seltzers and mixer brands looking to move out of the fridge. Draught delivery is more efficient and barrels have been returned and recycled for centuries.

The second implication, evolving out from draught is king, is for brewers to develop concentrated draught products that can be transported in high density format and diluted close to the point of dispense. This is not without its problems but is a very real future prospect for the brand or brewer that gets it right.

And the third implication is on messaging and pricing. Outlets and brands need to let consumers know what they are doing in this space and be willing to pass on cost savings, or at the very least not expect innovations to be a reason to add a premium price. The cost of increased sustainability is in not doing it, but we have consistently found that consumers, and operators, are unwilling to see it as a source of added value that translates to higher prices. That’s not true of all categories, such as ale for example, where freshness and high turnover of product are virtues, but it is true of carbonated products more generally. Simply, draught tonic has an image problem relative to years of messaging telling us that bottle is best.

So, there’s much to be done in the space. And as usual it’s a blend of carrots (sales uplift and margin improvement) and sticks (price hikes and taxes) that will ultimately drive changes in behaviour across the board. But the future is here and now and draught innovation is where the game will be won.

This article was written by Matt Coles, Strategy Director.