What can the US On Premise Learn from
China's Recovery through COVID-19?

BY  ROBYN ELLIOT-MURPHY – VIZUALIZATION & CONTENT EXECUTIVE

As regional and national laws surrounding COVID-19 protection are adjusted, the US On Premise market is facing daily challenges. The volatile state of the industry has left the wider market with questions about their future and what the next best steps are. To provide a comprehension of what the market is facing, Nielsen CGA have conducted new research with consumers in China – one of the earliest markets to reopen. Insight from China can provide a clearer understanding of the impact that the pandemic has had on consumer behaviors, and from there, we can draw out the trends that are likely to proliferate into other markets on recovery. 

2,000 On Premise consumers from Shanghai, Wuhan, Beijing and Chengdu in China were surveyed on their behaviors in bars and restaurants approximately 4-6 weeks after they reopened and what they anticipate of their future habits. The full report allows us to uncover key lessons to apply during the reopening of various US markets. From cities across China, almost half of respondents (48%) had visited the On Premise since restrictions were lifted, and the majority had visited multiple times. Consumers who were previously considered most active and valuable (in terms of their spend) have returned the quickest, however there is still convincing to do for those with less frequent On Premise habits. Specific events or occasions could be key for this group. 

Our US research shows this is likely to be similar for the states: those who were more frequent visitors are itching to return sooner than those who tend to visit less frequently. Of those who have returned, 41% said service has been better than visits prior to COVID-19, and 45% said it was the same. This suggests an appreciation and recognition for the extra efforts of reopened bars and restaurants, and for the staff that are working to provide good service in difficult circumstances. Positive experiences like this can encourage new consumers to return after associating a positive experience with an outlet, and suggests that those who have gone out will continue to do so.

Looking to China, overall spend for On Premise visits has initially reduced. The financial impact of COVID-19 has meant that household income has been reduced for over half of consumers, resulting in less disposable income and a re-prioritization of spend. Meanwhile, the priority for operators and suppliers in China is to drive consumers back into the On Premise. Based on consumer observations, there has been an increase across many major offer types – drink promotions especially (i.e. happy hour, 2 for 1 etc.). This is helping to convince consumers to return, however we are seeing a polarization in drink brands stocked due to these financial concerns. 27% of consumers said they are only drinking value brands since lockdown restrictions were eased and some outlets are opting to stock more value brands until their revenue improves. On the other hand, there is evidence that some consumers are opting to spend more on drink brands to treat themselves, with 55% opting for only premium brands since reopening. Premiumization is evident, as alcoholic drinks are a relatively easy and financially safe form of treating oneself after several months indoors. This does pose a threat to brands that sit in the middle, with extra efforts required to maintain their share of throat.

With health and wellbeing already an advancing trend in the On Premise industry, it appears to have accelerated due to COVID-19. 1 in 3 Chinese consumers bought healthy food more often than usual in lockdown and are continuing to do so, while the equivalent figure for “healthy drinks” is 29%. Further, the number of consumers who cite healthy options as ‘very important’ in deciding where to visit has risen from 29% pre-lockdown to 40% post-lockdown. The impact on alcohol consumption is a concern, and offering alcoholic beverages with health benefits or those considered “less unhealthy” could be a key to stocklists. In the US, hard seltzers were experiencing a burst of success; along with something similar, these could be important items for summer sales as venues reopen.  

Accompanying health, hygiene has also risen in importance for consumers. Pre-COVID-19, 31% stated hygiene standards as a factor in choosing where to eat/drink pre-COVID-19. Now, this figure stands at 45%. Venues can easily combat these concerns by promoting healthier options, while also ensuring measures such as PPE, visible hygiene practices, distancing and temperature checks are common practice.

The final large scale trend we see proliferating to the US is an increase in local venue/brand support. 84% of consumers from Chinese cities bought more local products during lockdown, and 74% plan to continue to do so post-lockdown. Furthermore 25% plan to visit local bars and restaurants more, with 47% visiting with the same frequency. A combination of a renewed community pride and a reluctance to visit city and town centers has resulted in an uptake in visits to local outlets, even within our Chinese city-based sample, suggesting local suppliers and operators can capitalize here through focused promotions and supporting their local community. However, city center operators have some work to do to enhance their marketing strategies to attract consumers back in. 

While US consumers have not suggested they will have as strong an aversion to city centers, they do highlight a similar feeling of rapport for their local venues and feel the need to protect them. This could be promising for small venues which are typically the least well-placed to cope with sudden shocks to revenue. While the Chinese market has clear differences to the US, the trends discussed above align with the suggested behavior we have seen in US consumer research. Even in a nation where consumers have expressed greater conformation to lockdown and a higher resistance to returning, over half of consumers are revisiting the On Premise in the first month or two after lockdown. This suggests an optimistic picture for the US where research has suggested the consumers feel more comfortable returning to venues. 

With every state is behaving differently through their shelter in place restrictions and journey to recovery, it can be difficult to predict an effective approach. That’s why we’ve invested lots of expertise, passion and energy into a number of recovery products that can help our partners (and the wider industry) tackle this. With the right strategies in place, On Premise recovery is possible in the US. 

For more information on how Nielsen CGA can help you, or if you have any questions or inquiries about our recovery products and services, simply contact us below.

 

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