With many consumers reluctant to venture out to purchase alcohol, and indoor seating at bars and restaurants closed for much of the COVID-19 pandemic, the convenience of ordering alcohol online through retail sales channels quickly became the new normal.
According to LCBO’s Annual Report 2019-2020, alcohol sales via brick-and-mortar stores and online delivery increased by 5.7 per cent, representing 78.4 per cent of total sales in FY2020. However, sales to licensed bars and restaurants declined by 1.1 per cent, representing only 8.4 per cent of total sales.
Although all beverage categories saw a sales increase as consumers stockpiled at the beginning of the pandemic, spirits maintained the largest portion of LCBO product sales in FY2020 at $2.7 billion (or 40.1 per cent of total sales).
As the off-premise trend continues to grow, foodservice operators are implementing new off-premise strategies to recover spirit sales and enhance consumer convenience and engagement. First, operators are paying more attention to e-commerce as these new habits become permanently ingrained in Canadians. Since more people may decide to spend more time at home for the foreseeable future, operators are jumping on the e-commerce bandwagon to promote ordering that’s easy, flexible and safe.
“Ontarians are spending more time at home, so we created an e-commerce platform called Cibo Market where customers can order restaurant-quality food as well as spirits and wines,” says James Peden, director of Operations at Liberty Entertainment Group.
“Technology has evolved to make it easier than ever before,” says Jan Westcott, president and CEO, Spirits Canada. “You have to give kudos to the restaurant and bar operators because they’ve leaped on new technology and figured out how to make it work. It’s easy and hugely convenient for customers. Once these patterns are established, people keep doing it.”
Second, most Canadian provinces have adjusted their alcohol regulations to allow alcohol to be included with bar and restaurant off-premise orders. In response, operators are heavily promoting spirit offerings with their takeout and delivery services to encourage consumer adoption and sustain business operations. When it comes to spirit categories, ready-to-drink (RTD) products have undergone a massive resurgence.
“The RTDs outdistance everything by wide margins. In some markets, we’ve seen 40- to 50-per-cent increases. Whether that will last or not, we’ll see, but they’re the centre of attention right now,” says Westcott.
“We make pre-packaged cocktails because many people don’t have a lot of bartending equipment, so those have been a big success,” says Peden. “We’ve taken some of key products from our brands — Cibo, Blueblood Steakhouse and Xango — and made their flagship drinks, packaged them and are re-selling them on Cibo Market.”
Furthermore, Peden notes the trend toward premiumization has gained traction as consumers, who have been deprived of many traditional luxuries, are opting to splurge on high-end spirits. This rings true for on-premise diners especially, with the recent re-opening of many bars and restaurants.
“This summer has been shocking for specific tequila brands across our platforms, both online and
in-person dining. Premium tequila brands like Don Julio and Clase Azul Reposado are doing well,” says Peden. “The premium trend has helped our restaurants bounce back with some good revenue.”
Operators are doing their best to re-balance the COVID-19 effect on spirit sales, however, additional support is needed to ensure the industry fully recovers. Wholesale liquor pricing for licensees, which has been a long-time ask from Ontario’s foodservice industry, would be a lifeline and help operators recover from the pandemic sooner.
“If we got wholesale pricing for restaurants, which is decades overdue in my opinion, we can actually help the industry’s recovery,” says Peden. “We could keep margin dollars, keep people working and keep re-building the battered industry.”
“As larger purchases, they’re [operators] paying the same as ordinary consumers, who purchase much less,” says Westcott. “The foodservice-and-hospitality trade is going through a difficult time, and we’ve been advocating to the government that they need to continue supports to this group for some period time until they can work themselves back to an economic viable position.”
By Nicole Di Tomasso