Can You Still Build Brands On-premise?
The truism ‘brands are built in the on-premise’ is treated as gospel in the alcohol industry. Yet, if you look at the most disruptive and exciting brands in the market today – White Claw, Casamigos, Truly, High Noon, Teremana, etc. – they all have something in common: they weren’t really built in the on-premise. Does this mean the on-premise is losing its relevance? If not, how is the channel evolving in the age of online shopping, takeout, social media, and celebrity brands?
The Only Game in Town
The on-premise, i.e. bars and restaurants, has always been a place for new products to build awareness and drive sampling. The channel allows companies to tell their story, transfer the cachet and trust of consumers’ favorite bar or restaurant onto their brand, and create a positive association between their brand1 and a fond memory of a great night ‘out on the town.’
So the on-premise clearly offers powerful opportunities for marketers, but it’s perceived primacy as the brand-building channel is rooted in the fact that for many decades – especially for spirits – it was pretty much the only game in town. For the entire 20th century, digital engagement opportunities didn’t exist, and – in the case of spirits – TV ads were banned until 1996.2
“Because of the limited ways you could market spirits brands… [the assertion that brands are built in the on-premise] really was true.” Said Steve Chasen, VP trade marketing at Campari, during a recent episode of our podcast, Liquid Assets.3
Within this context, brands had to prove their success in the on-premise before getting attention from off-premise retailers. Given that the on-premise represents only a fifth of supplier revenues in the US, building a robust off-premise business was, and remains, critical to achieving scale. “Good luck going to a major off-premise chain… and trying to launch an innovative product with one of those massive guys without having had any success anywhere else first. It’s just not possible,” Chasen told us.
Despite the channel’s historical importance, the on-premise was never a one-stop-shop for building brands, but the first step in a sequence of marketing tactics.
In order to translate a consumer’s initial interaction with a brand in the on-premise into off-premise demand, the experience has to be reinforced with TV spots, social media ads, print media, events, merchandizing, and sponsorships. It must be backed by a trade-facing campaign to ensure distribution in retail accounts. All these coordinated touchpoints build on each other, combining to ensure that when a consumer finally does see the product in a grocery store, they not only recognize it, but feel the urge to buy it.
As access to tools like social media has grown, more and more of the burden of the brand-building process has been taken off of the on-premise. However, the wisdom of that sequence (sampling in the on-premise followed by reinforcement and then scaling in the off-premise) was never questioned – until very recently.
“What’s probably been getting turned on its head over the last couple of years is this sequence where consumers touch your product first and understand your product first.” said Chasen, suggesting e-commerce and social media are driving most of the disruption.
For a brand like Casamigos, a consumer’s first point of contact was almost certainly through digital media featuring George Clooney. But even for a brand that leveraged George Clooney’s celebrity status to gain awareness, the on-premise was critical for sampling and reinforcing the quality of the product.4 As the Casamigos’ CEO Lee Einsidler5 told Beverage Media Group in a 2017 interview, “Most ultra-premium brands are built on-premise, and that has always been our focus. People might try it because they heard it’s George Clooney’s tequila, but it’s got to deliver.”
For Aperol, a brand unquestionably built in the on-premise, this sequence has also been muddled by the digital age. Rather than discovering the product at a bar, consumers could very easily have their first interaction with a bright-orange spritz through the Instagram post of a friend or influencer, which is definitely complimentary (perhaps critical) to on-premise sales. Pregaming on awareness means that when the consumer sees a tray of the bright orange cocktails delivered to the table next to them, they are more likely to order one themselves.
Chasen, who played a critical role in executing Aperol’s winning strategy, conceded that many of the brand-building strategies traditionally executed in the on-premise are moving to other channels, but “someone has got to try your brand and figure out if they like it, and for most American consumers, that’s a bar. That’s universal. That’s forever.”
On-premise Is Still in the Game
Even though the growth in routes to the consumer have made the on-premise less of a monolith that does not mean it is irrelevant. As brands like Aperol and Casamigos have proven, the on-premise can be an incredibly powerful part of a modern brand-building strategy. And that is exactly the point: It is merely part of the process.
Thus, it’s probably time to change the old adage from ‘brands are built in the on-premise’ to ‘brands can be built in the on-premise.’
1To be clear this is a two-way street: the brand’s cachet is also super important for the on-premise account.
2Even once the ban was lifted, another decade passed before the medium was made widely available: spirits companies spent less than USD 3m in TV advertising in 2001; in 2005, they spent USD 102m. The massive rise in market share for spirits since then demonstrates just how powerful this new touchpoint with consumers proved to be. A seriously under-discussed narrative, in my opinion.
3Steve Chasen and restaurant owner Liden Pride – whose establishment, Caffe Dante, was recently named “world’s best bar” – joined us to discuss these heretical questions about the evolving role of the on-premise.
4Also, George can’t make all those margaritas himself!
5If the name seems familiar, Einsidler is often credited with building the Grey Goose brand.
Where to go from here
Bourcard NesinAnalyst – Beverages Read more