Take me out: giving on-trade venues the off-trade factor

Location: UK

For a growing number of venues, adding an off-trade element to their business has been a good way of driving interest and loyalty as well as extra profit. Julie Sheppard reports

Diversify or die’ states one rather stark business mantra, encouraging companies to evolve in order to succeed. In the on-trade, this could mean serving cocktails in your pub or adding a seasonal by-the-glass section to your wine list: simple ideas that could
make you easy money.

But have you thought about stepping completely outside your comfort zone and venturing into the murky world of – whisper it – the off-trade?

This might sound anathema to some of you, but in fact the idea is becoming more widespread; an increasing number of venues are combining a traditional restaurant, bar or pub offer with a retail element.

But what’s the best way to do this? And are there any pitfalls that should be avoided?

On-trade v off-trade

‘I wouldn’t add anything commercial as it doesn’t make sense for a restaurant to offer a wine that the guest can buy in Waitrose,’ says Laure Patry, executive head sommelier at Jason Atherton’s The Social Company.

Patry opened Social Wine & Tapas in central London in 2015, with the intention of focusing on retail. ‘My first concept was to do a wine shop, but the space I found was too big to do only a shop, so we added tables and developed more of a bar/tapas concept,’ she explains.

From the outside, the venue looks like a wine shop. Look more closely and you’ll notice the back counter serving food and drink; but it’s not until you go downstairs that you discover a proper restaurant space. Despite this, it is on-trade sales that drive the business.

‘We do about 6% of total revenue on the off-trade sales, so it’s only an add-on for us. Profit on retail is very low in any case,’ adds Patry. ‘But I think the retail adds to our guest experience. For them to be able to buy a bottle they discovered with us, or buy the glasses they drank from.’

For Patry, getting the retail offer right for her audience is crucial. ‘We sell more boutique wines and small growers, glasses like Riedel and Zalto, accessories like Coravin and wine books. Even wine producers buy some wines from us when they come to visit as they love the selection. Some of the wines we sell are on allocation so not easy to get everywhere,’ she explains.

Specialisation has also been key to retail success for Paul Belcher and Adrian Copplestone of Donostia Social Club. Championing Basque food and wine, they started out with a food truck, before launching a tapas bar and a specialist import business, supplying Basque wines and artisan ingredients to other restaurants.

Their latest project, The Tapas Room in Tooting combines both sides of their business, selling their own wines for customers to take away or enjoy at the counter with a plate of tapas. Each wine has two prices: one for take-home and one for drink-in. Retail sales account for around 15% of profits.

‘Having retail allows us to offer a greatly expanded wine list, which is more
attractive to customers,’ says Copplestone. ‘The two-tier price structure allows us to run promotions where customers are able to drink in for the take-out price, while controlling the determined profit margin.

‘On the whole, customers will upgrade on their normal selection and will be more likely to buy the same wine at restaurant prices on a subsequent visit.’

But how do customers feel about seeing on-trade and off-trade prices side-by-side? ‘People have yet to question the dual pricing,’ says Copplestone. ‘Our drink-in prices are lower than most restaurants’ and customers do generally understand that the additional
revenue is to pay for the service and premises costs.’

Copplestone also points out that the gap between take-out and drink-in prices is capped ‘so that the difference doesn’t seem out of line between wines of differing values.’

A growing concept

The Tapas Room is located in a south London market, alongside other food and drink outlets that combine a retail and on-premise offer, including Unwined, Graveney Gin and beer supplier Craft Tooting. But these hybrids aren’t just a hipster London fad.

The Hereford Beer House has been open since November 2015 and stocks a global bottled craft beer range and Hereford cider, with six taps and bar snacks.

‘We’re primarily retail and our plan was always to be that,’ says owner Jonny Bright. ‘But
as the concept was coming together we realised that it would be beneficial to have
an on-premise licence. It was a concept we’d seen executed well in America – more innovative ways of retailing have really helped the craft brewing scene there.’

In the first year of trading revenue was split 45% retail and 55% on-trade. ‘We make
more money from people sitting in,’ admits Bright. ‘It’s good for a small business to have dual revenue streams. If we were just a shop, we wouldn’t have survived.’

But the benefits of combining an on-and off-trade offer are more than just financial. Bright’s venue was the first craft beer bar in Hereford, and being able to offer tasting samples helped customers to embrace the concept.

‘How a beer tastes can be difficult to explain,’ says Bright. ‘Confidence is the one thing that will help people here spend £10 on a bottle of beer.’

Trading this way also builds up customer trust and loyalty. ‘We’re small – we’ve only
got 22 seats – so we’re always here, talking to people. It’s rare for a customer to choose
something without us recommending it. We’re particularly good at remembering what our customers like and what they’ve tried already – and our customers really like that,’ concludes Bright.

Reaping the rewards

Over in Bristol, Danny Walker of Psychopomp Microdistillery has noticed similar benefits.
‘Plan one was just open a distillery, then we realised the space was attractive and had enough space for shelves to stock our gin and for stools. We’ve all got a background in hospitality and having guests in, serving them gin and tonics, changes the atmosphere of our space,’ he says. ‘People drink while we’re distilling and become more invested in the brand.’

Key to success was designing a space that worked equally well for retail and serving drinks on premise. ‘If you’re wanting people to sell bottles to take home, you’re not a bar, you’re a shop,’ says Walker. ‘So to encourage people to drink in a retail unit, you’ve got to make a comfortable atmosphere.’

Case study: Humble grape

Owner James Dawson knew that he wanted to combine a wine shop and a wine bar on the same premises when he opened his first branch in Battersea in 2015, but was surprised by how his customers initially reacted to the space.

‘We wanted something that looked like a wine shop, so we thought we’d put the bar in the basement. But people loved sitting among the shelves of wine,’ he says. Dawson worked with French architect Jean Dumas at the newest branch of Humble Grape in Islington, to create a space where wine shelves are an integral part of the restaurant design.

‘Our retail sales aren’t a lion’s share of our revenue, but having a display of wine for sale is integral to our brand as it makes us look like we’re very wine-focused,’ continues Dawson. ‘It helps customers take us more seriously and makes them feel more comfortable trading up.’ While most restaurants sell the highest volume at house wine level, Humble Grape’s volume sales are around the £30-£40 price-point.

‘Our restaurant price for our entry-level wines is double the retail price. But as the wines get more expensive, the margin gets smaller. So customers can drink a wine for £60 or £70 that they’d pay £200 for in another restaurant,’ he says. It clearly works – Dawson opened his third branch in July.

If retail is starting to sound like a business no-brainer, Dawson has a caveat. ‘If you’re running a restaurant and suddenly think you can start retailing wines, it’s unlikely to work. It’s diffcult to start suddenly showing customers retail prices. It’s hard for them to understand.’

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