From Welcome to Hospitality Second Edition: An Introduction, 2nd edition, by K. Chon and R. Sparrowe. © 2000. Reprinted with permission of Delmar, a division of Thomson Learning, fax 800-730-2215.

Beverage Management

Overview
Beverage sales are a major consideration in the foodservice industry, and trends in consumption patterns for beverages of all types are followed closely by foodservice operators. In addition, beverage sales and service, particularly of alcoholic drinks such as wine, beer, and mixed drinks, follow a certain etiquette of presentation and service. The fine dining restaurant, for example is expected to offer beverages that complement its menu and ambiance, and to prepare and serve these beverages as tradition dictates.

Objectives
When you have completed this chapter, you should be able to:

1. Name the variety of beverages available in today's foodservice market and describe current trends in nonalcoholic beverage sales and consumption.
2. Examine current trends in alcohol sales and service and relate them to today's emphasis on healthier, more moderate lifestyles.
3. Differentiate between the way wines from Europe and the United States are named and list at least four notable red and white wines.
4. Explain briefly the process of fermentation as it relates to wine making and brewing beer and the process of distillation that is used in the production of liquor.
5. Name two major legal issues related to alcohol sales and tell how restaurants and bars protect against violations in these areas.

Trends in Beverage Consumption
Throughout the 1990s and into the 2000s, the nonalcoholic beverage industry has seen relative stability, while the alcoholic beverage industry has undergone considerable change. Public consumption of nonalcoholic beverages, such as milk, tea, coffee, and citrus juices, has remained fairly constant.

Per capita consumption of soft drinks and bottled water in the United States steadily increased between 1992 and 1996, whereas the consumption of other beverages did not change dramatically. (See Figure 9-1.) Coffee consumption, which had been on the rise, appeared to be approaching a plateau.

Source: Adapted from data presented in Beverage Industry, March 1998.

Figure 9-1. U.S. beverage consumption 1992-1996.

Per capita consumption is the most important indicator of the health of each of the segments of the beverage industry because it reflects increases or decreases in the marketplace. Per capita consumption is affected by fundamental business and societal trends. Broad lifestyle issues, such as societal acceptance of alcoholic beverage consumption, affect the consumption of beer, wine, and spirits. Demographic shifts, such as decreases in the number of young people below the age of 21, affect the per capita consumption of milk and soft drinks. However, per capita consumption is not the only important indicator of trends in the beverage industry and the health of each of its segments. Per capita consumption can decrease at the same time that sales and profits increase in a particular segment of the beverage industry. This occurs when consumer preferences shift from low price/low margin brands to premium, high price brands. Put simply, consumers may drink less but spend more. This pattern has been evident in the case of spirits, where declines in consumption have been partially offset by a shift to premium brands. Similarly, although the volume of coffee sold dropped almost 3 percent from 1995 to 1996, the overall sales rose 10 percent as consumer preferences shifted toward specialty coffees.

Table 9-1 shows the top ten brands of soft drinks, beer, and bottled water in 1997 by market share.

Table 9-1. Top beverage brands by market share.

Source: Beverage World Publication Group, 1997.

Increased awareness of fitness and a trend toward healthier lifestyles influence beverage purchases. In addition, societal emphasis on moderate and responsible alcohol consumption has prompted many to make alternative beverage choices.

The economy can also affect beverage selection and sales, although soft drinks are affected less than more expensive drinks such as fine wines and spirits. During tight economic times, people have less discretionary income and so are less likely to spend money on luxury or higher-priced items.

Carbonated soft drinks. The per capita consumption of carbonated soft drinks has been rising steadily, despite industry experts predictions that it would plateau. However, within this market, the popularity of individual brands and types of drinks changes rapidly. The 1980s saw tremendous growth in diet soft drinks, so that by 1993 Diet Coke was the third most popular soft drink with a 9 percent share of total soft drink sales. Caffeine-free colas, on the other hand, appeared to be losing market-share from their 1991 to 1992 highs. Any new product, such as the clear colas which made their first appearance in early 1993, has the potential to do one of two things. Either it can cannibalize (eat away at) the market share of existing products, or it can attract new customers who might have chosen another beverage over a soft drink.

International sales of soft drinks are expected to continue to see large volume growth, as market saturation in the United States forces soft drink producers to seek growth opportunities overseas.

Coffee and tea. New trends in coffee and tea products began developing in 1992 and 1993. Earlier in the 1980s, espresso bars in the United States opened as free-standing specialty shops, kiosks, and within traditional restaurant operations. Specialty coffees made from gourmet beans, as well as espressos flavored with nonalcoholic syrups, became a big new market. Because a commercial quality bean-grinding and espresso machine could be purchased for a relatively small investment ($2,000-$3,000), many restaurateurs added this popular product.

At the same time, gourmet coffee chains have become popular, like Starbuck's Coffee Company of Seattle which started in 1971 as a small specialty shop. With over 1,600 stores, its net income in 1997 reached $57.4 million on sales of almost $1 billion. Starbuck's phenomenal growth is due mainly to two marketing strategies: extending its line into supermarkets to go head to head with the traditional brands, and opening European-style cafes where customers can sit, socialize, and enjoy their coffee.

Although per capita consumption of coffee appears to be approaching a plateau (see Figure 9-1), Starbuck's and other coffeehouses are likely to prosper because their success depends upon a shift in consumer preferences toward specialty drinks such as latté and cappuccino.

Tea consumption has also begun to show the effects of a shift in consumer preferences. Although the per capita consumption of tea fell somewhat during the 1990s, specialty teas are growing in popularity at coffee houses and sales are rising at supermarkets.

Bottled water. Between 1984 and 1996, annual per capita consumption of bottled waters in the United States rose from 4 gallons to almost 12 gallons. The increased consumption of bottled waters is the result of several factors occurring in the marketplace. The first is the growth of the market segment concerned with health, including baby boomers concerned about aging. These consumers know that drinking six to eight glasses of water each day contributes to general health. Some bottled waters have been marketed as "pure," and therefore seem more healthful than ordinary tap water. Second, the acceptance of bottled waters is part of the broader trend in consumer willingness to purchase specialized or premium products. Bottled water marketers thus have sought to invest their products with a special "cachet" or set of ostensibly unique characteristics. The third factor involves packaging. Spring water bottled in an attractively shaped plastic container with a spiffy label and squirt top is convenient for people to take to an athletic club and perch on a treadmill. Carrying that same container to the office or the mall conveys the impression that the individual lives an active, healthy life.

The challenge faced by the marketers of bottled water is to persuade consumers to pay for a product that they can get for free (or for significantly less) simply by turning a tap. In the late 1980s, a small number of producers overstated the health-inducing benefits of "pure" bottled waters. Further, in several of these cases, bottled "spring water" was found to contain significantly more impurities than tap water. Consumers were, in effect, paying a premium for bottled water that was worse for them than what was available from their municipal water supply. In 1993, the Food and Drug Administration proposed new labeling standards for bottled waters to prevent misrepresentation.

Juice drinks. Frozen slushy drinks, many of them nonalcoholic versions of popular drinks like margaritas and strawberry daiquiris, have been restaurant staples for years. In addition to these frozen drinks, many restaurants offer "mocktails" or nonalcoholic cocktails of orange, pineapple, or cranberry juices. Juice bars, operating as specialty restaurants or kiosks, have also gained popularity by offering stylishly served fresh fruit mixtures of pineapple, papaya, melon, and oranges.

Nonalcoholic beer and wine. Unlike the other nonalcoholic beverages, nonalcoholic beer and wine are marketed toward a more limited audience--the adult who enjoys the taste of beer or wine, but for health or social reasons prefers to abstain from alcohol. On store shelves and on menus, nonalcoholic beers and wines are grouped with the alcohol originals.

In the early 1980s, only ten nonalcoholic beers were marketed in the United States, but by the early 1990s more than sixty brands were being retailed. Market leaders in nonalcoholic beer sales in the 1990s were Anheuser-Busch's O'Doul's and Miller Brewing Co.'s Sharp's. Industry experts predict that nonalcoholic beers will ultimately account for about 3 percent of all U.S. beer sales.

Nonalcoholic wines have been slower to gain popularity, in part because much of wine's distinctive flavor and aroma comes from the alcohol itself. Sutter Home Winery in the United States offered its first shipments of alcohol-free Chardonnay and White Zinfandel in late 1992. Sutter Home uses an alcohol-removal process called the spinning cone, first developed in Australia for fruit juice. The spinning code breaks the wine down into its constituent parts, which are then recombined without the alcohol.

Nonalcoholic beer and wine consumption depends on a societal and cultural link between certain social activities and the consumption of alcoholic beverages. As long as consumers associate alcoholic beverages with social gatherings, sports events, or restaurant dining, these products will offer a way to participate in such occasions without appearing to abstain.

The two main groups of alcoholic beverages are fermented and distilled. Fermented beverages are those formed by the action of yeast on sugar-containing substances such as grain or fruit. Wine and malt beverages, or beer, are the two most common fermented beverages. The alcohol content of fermented beverages varies between 2 and 20 percent. Beers typically range from 2 to 7 percent alcohol; most wines contain between 12 and 14 percent.

Distilled drinks, also called spirits or liquor, are made from a fermented product which is then put through a distillation process that recovers and adds additional alcohol. Both these processes are discussed in greater detail later in this chapter. Distilled beverages generally contain between 12 and 55 percent ethyl alcohol.

Course Home | Intro and Lessons | Midcourse Exam | Final Exam | Mentor Pages | Policies and Forms