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November 9, 2022
min
The Czech on-trade market lost 3.4% outlets in six months. But there are some surprises
Martin Müller
Content Lead
The impact of the covid crisis, the highest inflation since 1993, the spectre of war in the East. The Czech and global economies are going through a rough patch, and the on-trade sector is one of the hardest hit. So how has the number of on-trade outlets changed over the last two quarters?
Overall on-trade market decline
Our BI tool SharpGrid Outlet Census monitors and analyzes every outlet in the Czech on-trade market on a quarterly basis. This gives us an accurate view of how the on-trade market is evolving over time and pinpoints exactly how the total number of outlets is evolving.
- On-trade in the Czech Republic Q1: 45,009 outlets
- On-trade in the Czech Republic Q3: 43,491 outlets
The Czech on-trade market has fallen by a total of 3.4% over the last six months. In more detail, we find that:
- 2,747 outlets closed.
- 1,229 new outlets opened
While during standard market conditions, the number of closed and opened outlets would have leveled off, in this case we see a clear downtrend.
The most and least affected on-trade outlet categories
However, the market downturn does not affect all categories equally, quite the opposite. By far the most affected outlet category is nightclubs and discos, while active accommodation outlets have even increased.
Why some categories are doing better than others
The overall decline of the on-trade sector is consistent with trends we have been seeing for some time. People are cutting back on consumption and the first things to go are the nonessential things, which include lunch in a restaurant or drinks in a club or pub. Food can be prepared at home and a bottle of alcohol costs incomparably less in a shop than a shot or glass in a bar.
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The worst performers in Q2 were outlets primarily focused on alcohol consumption, i.e. clubs, bars, pubs and wine bars. Compared to outlets focused on food or non-alcoholic beverages, their decline is truly diametric. These venues generally have a drinks-only offer (and small snacks or cold meals), which puts them at a disadvantage compared to, for example, restaurants where customers can go for drink but also have a working lunch or family dinner.
Market analysis shows that customers prefer to limit drinking in a pub rather than having lunch in a restaurant or fast food outlet.
There are several factors behind the dramatic decline in clubs. In the last two years, clubs have paid the price for being the best places to transmit the covid infection (lots of people in a confined space, lots of alcohol, minimal spacing). Because of this, they have been hit hardest by covid measures and have also developed a negative reputation. In addition, club parties are usually quite expensive and people have become used to 'partying' at home during the endless lockdowns in 2020 and 2021. Traditional "bohemian pubs" are also among the categories at risk, with their numbers shrinking by almost 6%.
The increase in accommodation, on the other hand, is linked to the recovery of the tourism sector, with at least some tourists returning after two years of restrictions (e.g. in France, the number of tourists is close to the pre-pandemic 2019 level). In the US, travel in the summer of 2022 has even been described as "revenge travel", an attempt to make up for travel experiences lost due to the pandemic. The immigration wave from Ukraine is also having a big positive impact on the accommodation sector.
Positive news from the Czech on-trade market
Looking at the overall figures, it is clear to see that despite the market downturn, there are still a large number of new establishments opening up for producers and distributors to target. Over 800 new restaurants and 200 cafes/pastry shops have opened in 6 months. Thus, despite the overall decline, the market continues to show dynamic segments with growth potential!
A more detailed geographic analysis by type of establishment (by price level, total turnover and type of cuisine) then shows large differences in the dynamics in these micro-segments.
How to weather the crisis
The Czech on-trade market is experiencing one of the most dynamic and complex periods in its history. The economic situation shows no signs of improving any time soon and customer sentiment is deteriorating and approaching the freezing point. In such an environment, it is more important than ever to accurately understand market trends, know where to invest and how to optimize commercial team capacity. We can support you in all of this with our Outlet Census and Market Meter tools. Get in touch - we'd be happy to talk you through what we can do for you.
SharpGrid is a data & tech company reinventing market research in the on-trade channel. The on-trade channel consists of POSs (points of sale) like restaurants or bars where food & beverage is bought and consumed, and is often also called HoReCa, on-premise, food service, out-of-home, gastro or immediate consumption (IC) channel, hospitality or on-licence.
