To help operators capitalize on beverages' profit-center potential, R&I explores consumer trends for all things sipped.
This article first appeared in the 1 June 2007 issue of Restaurants & Institutions (R&I).
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By Allison Perlik, Senior Editor
Trading up-to fresh ingredients, local products, house-made mixers and premium offerings-is an overarching theme. Witness Oak Brook, Ill.-based McDonald's exploration of espresso beverages and flavored iced coffees; San Francisco restaurant Jardinière's emphasis on local and sustainable spirits; Columbus, Ohio-based Cameron Mitchell Restaurants' introduction of fresh fruits and house-made syrups behind the bar; and beer-and-food pairing dinners at upscale eateries across the country.
"We're in this trending-up mode right now," says Alpana Singh, director of wine and spirits for Chicago-based multiconcept operator Lettuce Entertain You Enterprises (LEYE). "It's all about small luxuries."
Overall, energy drinks, tea, bottled water, wine and spirits comprised the top growth categories in 2006, while carbonated beverages, noncarbonated soft drinks and frozen juices/drinks saw sales drop, according to The Nielsen Co.'s Beverage Alcohol Annual Snapshot. Sippable stalwarts such as American-style lagers, chardonnay, brewed coffees and cola still represent hefty shares of their markets. Nevertheless, a consumer base increasingly eager to experiment means that in key categories-cocktails, beer, wine, soft drinks, coffee, tea and water-a new batch of trends is brewing.
Cocktails: Shaken and Stirred
Vodka remains the most-consumed spirit, but whiskeys, tequila, rum and cognac are enjoying a renaissance as well, in part because of one of the cocktail segment's most potent trends: a return to classic quaffs from Sazeracs to Sidecars.
"Innovation's always going to be there, but let's innovate with what we already know is good," says Will Earls, beverage director at Firefly in Washington, D.C.
In cocktails both traditional and inventive, bartenders are reaching for seasonal produce (muddled, puréed, juiced or infused); house-made syrups and infusions; and unexpected herbs and spices. At chic San Francisco bar Rye, a daily mise en place of a dozen choices such as strawberries, peaches and nectarines guides Co-owner Greg Lindgren's menu. His Bengal Bloody Mary features fresh tomatoes, basil, lemon and red curry paste mixed with vodka, vegetable juice and spicy sherry.
International spirits are another influence to watch. "Every bar in America should have a bottle of pisco [grape brandy] and a bottle of cachaÁ§a [Brazilian sugar-cane spirit]," says Tony Abou-Ganim, a Las Vegas-based beverage consultant.
Red, White and Wonderful
As wine draws an ever-more-enthusiastic audience-22% of consumers buy more wine now than they did a year ago, according to Chicago-based Technomic Inc.-wine lists are becoming more expansive and user-friendly.
Pinot noir, cabernet sauvignon, riesling and pinot grigio remain red-hot, but greater wine knowledge among consumers and increased openness to guidance from servers is stirring interest in such varietals as Austrian grÁ¼ner veltliner, French sauvignon blanc, Spanish tempranillo, Argentinean malbec and Italian sangiovese.
LEYE's Singh notes that pricing as well as curiosity guide guests to new choices. "People may dine out three or four times a week now, so instead of splurging on the $80 Napa cabernet, they'll try something less expensive from Spain, Argentina or Southern Italy."
Also driving sales are broader availability of by-the-glass choices, as well as greater variety in pour sizes, from 3-ounce flights to 8-ounce quartinos.
"As customers become more inquisitive about wine, you need a by-the-glass program to service that process," says George Miliotes, director of beverage and hospitality for Orlando-based Seasons 52, which serves 70 wines by the glass. "It can be hard to talk somebody into buying a whole bottle of something new."
At Go Roma, an eight-unit fast-casual chain based in San Francisco, President Yorgo Koutsogiorgas' decision to menu half-bottles and glasses rather than full bottles has paid off. About 20% of customers order wine, and 60% of wine sales are of half-bottles, which Koutsogiorgas deemed a better fit for the concept.
Coffee: The New Joe Cool
Younger consumers' fondness for sweet blended drinks and a continued interest in customization among Americans in general drive innovation in the competitive coffee category. Customers more educated about all aspects of coffee demand premium products at venues ranging from quick-service chains to fine dining.
"Rather than drinking a cup of coffee, students are going more toward sweetened espresso drinks such as lattes," says Chuck DiVerde, general manager of retail operations at Illinois State University (ISU) in Normal. "The biggest flavors are vanilla, almond, hazelnut and just about anything with chocolate."
For ISU's cafes and other coffee concepts, human and environmental issues draw concern from consumers, so many offer some variety of organic, sustainable and/or fair-trade coffees. Other concepts, including Seattle-based Starbucks, have announced shifts to dairy products free of artificial growth hormones.
Specials score big with consumers across venues. Creative concoctions such as Butter Brickle Blonde and Chocolate-Orange Sunrise tempt habit-driven drinkers to try new choices at Long Beach, Calif.-based It's A Grind, says Vice President of Operations Rick Kowalski. Seeking to take customization to the next level, the chain also is testing single-cup brewing.
Also on the cutting edge is Dallas-based 7-Eleven, where strong demand for cold energy drinks inspired the introduction of Fusion Energy coffee, which is blended with herbal extracts thought to boost energy and sharpen mental alertness.
Tapping Beer's Full Potential
Cold, frothy and full of flavor, seasonal brews, imports and craft beers are elevating beer's status beyond pubs and sports bars. "Consumers aren't settling for drinking whatever marketers tell them to," says Scott Kerkmans, chief beer officer for White Plains, N.Y.-based Four Points by Sheraton Hotels. "Brewers are putting out significantly better products, and they're doing a good job of furthering education and promoting accessibility."
Ales such as Belgian whites, American and India pale ales and wheat beers are in high demand, and seasonal selections-fruity choices in summer, winter ales in cold weather and spiced varieties around the holidays-also sell well. Consumers are more open to sampling new choices-a trend evident with women as well as men.
Marketing and educational strategies more often associated with wine-flights, tastings, food pairings and brewer dinners-also are raising beer's profile.
"Beer is becoming a fun industry," says Joel Freeman, general manager at Carolina Ale House, a Raleigh, N.C.-based chain that offers as many as 36 beers on tap and 45 in bottles. "Everyone can be a connoisseur. When they try products, they can place flavors like honey, chocolate or malty tastes, hoppiness."
Soft Drinks Shine On
"One-third of restaurant guests will not purchase an alcoholic beverage, so there's a big upside in premium, nonalcoholic drinks," says Glenn Schmitt, founder and president of Mission Viejo, Calif.-based beverage consultancy MarkeTeam Inc.
Operators across dining segments are heeding this call, evident in recently debuted fruity "Slushes" at Carrollton, Texas-based T.G.I. Friday's; "No Proof" choices such as Green Tea Soda at Michael Mina's Stonehill Tavern in Dana Point, Calif.; and sparkling selections flavored with pomegranate and elderflowers at London-based Wagamama's new Boston outlet.
Carbonated sodas still lead by sales volume but saw a slight sales dip in 2006 whereas sports drinks rose 12% and energy drinks rose 50%, according to New York City-based Beverage Marketing Corp. Meanwhile, beverages with functional properties are growing up to three times faster than conventional drinks.
On the chain and campus front, this evolution is playing out in single-serve, nonfountain options ranging from sodas to juices and energy drinks. "Guests are looking for options other than carbonated sodas," says Kim Menzies, director of food and beverage for San Diego-based fast-casual Daphne's Greek Cafe, where bottled juices, tea and flavored vitamin waters have registered strong sales.
Operators, take note: Tea drinking has grown at a faster pace than coffee drinking over the past five years, according to Chicago-based Mintel International Group. Iced tea still accounts for most sales, but awareness about tea's health benefits and range of varieties also fuels interest in hot applications.
"Teas are definitely a growth vehicle," says Schmitt, noting that Walt Disney parks serve premium loose-leaf and bagged teas and that Glendale, Calif.-based ESPN Zone carries eight bagged options.
Green and herbal teas are most popular among students at Illinois State University, says DiVerde. At upscale restaurant Sage Grille in Highwood, Ill., customers favor organic, herbal and caffeine-free choices among the eight bagged selections, says General Manager and Wine Director Mark Melzer.
In the cold-beverage arena, tea is emerging on cocktail menus. The T-Teanii at Riingo in New York City blends tea-infused gin with citrus in sugar-rimmed glasses, while at Blue Velvet in Los Angeles, Earl Grey cocktails are mixed with Earl Grey-infused simple syrup, bourbon and fresh lemon juice.
Americans' thirst for bottled water is far from quenched, and operators are looking to garner their share of the profits. Already, 20% consumers say bottled water is the beverage they order most often from restaurants during the week at full-service restaurants, according to Chicago-based Technomic Inc.
R&I's New American Diner Study finds that 24.5% of Gen Y (age 26 or younger) diners say they ordered bottled water with their most-recent restaurant lunch. On campus, bottled water ranks No. 1 among beverages, and the bigger the bottle, the better, says Vicki Dunn, senior director of marketing for Gaithersburg, Md.-based Sodexho's Campus Dining. Flavored vitamin waters pique students' interest as well. "Millennials want something that multitasks. They think, 'While I'm quenching my thirst, what else can it do for me?'" Dunn says.
Recently added flavored vitamin water is doing fairly well at Daphne's Greek Cafe, says Menzies. The chain is tapping regular bottled water as a marketing opportunity by branding bottles with its logo.
Not all water trends spring from the bottle. A handful of chefs are eschewing the plastic containers and installing their own filters and carbonation systems to save on transportation energy and costs as well as waste and storage space. The equipment can be quite expensive, so some restaurants, including All' Angelo in Los Angeles, charge for the treated water, while others, such as Poggio in Sausalito, Calif., do not.