What is on-trade? And why is succeeding in the on-trade channel so critical?

SharpGrid is a data and tech company reinventing the on-trade channel (sometimes also called HoReCa) market research. We chose this mission because the on-trade channel has always been very challenging to grasp and analyze in its entirety with traditional methods of market research. Its complexity starts with the name “on-trade” itself and what type of outlets (points of sale) the channel encompasses. 

Because companies and professionals differ in naming conventions and on-trade outlet or point of sale definitions, we want to clarify the confusion by setting common ground and vocabulary, but also share some interesting facts about the channel to underpin its importance for brands and vendors.

Access HoReCa European big data tool & reports for free today - trusted by Coca Cola, Heineken, Asahi & more

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Part 1: What is the on-trade channel? 

There are 2 major business channels for food & beverage producers like Coca-Cola, Heineken, Unilever and others. They are called on-trade and off-trade and they consist of outlets or points of sale where transactions take place. The difference is simple: 

• An off-trade outlet is a place where you buy food or beverage and take it away to consume elsewhere, typically at home or work. Think of supermarkets, hypermarkets, convenience stores and the like.
• An on-trade outlet is a place where you will be served “ready-to-eat & drink” food and beverage and you can consume them at that place. 

Generally speaking, you can count all sorts of food & beverage outlets as a part of the on-trade channel. We’re talking about:

• Restaurants, bistros, pizzerias, eateries
• Pubs, (wine) bars, clubs, discos
• Cafés, bakeries, sweet shops
• Fast food places with often limited service or seating
• Eateries (canteens) serving to people in offices, factories, schools or hospitals
• Places that are a part of some other service, like a hotel breakfast buffet, refreshment corner in an amusement park or a gas station café 
• Temporary on-trade outlets like wedding caterings, kiosks, ice-cream stands etc.
• … and other types of formats that are often local or emerging

‍The on-trade channel is a union of all these outlets serving food and beverages. But not every outlet or POS is relevant for every vendor or brand. For example, alcohol manufacturers omit outlets that do not offer alcohol like bakeries or school canteens, whilst food manufacturers do not target outlets that sell beverages only. As a result, the scope of the on-trade channel is driven by the product portfolio of each vendor, be it brand manufacturer, distributor or service provider.

To add to the confusion, specific on-trade outlets can be called differently, depending on the market or an individual point of view. “A coffee place” in Greece is quite distant in terms of proposition and product selection from a coffee place in Germany or Spain. Bars in Spain or Italy often serve various purposes during different stages of the day (like eatery during the day and a proper bar at night). The difference between pub and restaurant is also not exactly clear and may differ by market. 

SharpGrid has addressed these discrepancies by coming up with a specific, universal segmentation applicable to all markets, and also by applying our “core consumer occasion” approach. With that, we are able to determine what every outlet is popular for (like coffee, beer or active fun like live music or dancing), thus enabling a consistent view and analysis of the on-trade across local markets, avoiding naming confusions.

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On-trade in Europe

To see some cross-country research on various European on-trade markets (like for example which country has the most available alcohol or where are all the parties taking place), look up our series of European on-trade articles:

• Europe Uncorked: Which country tops the charts in eating and drinking out?
• To booze or not to booze: Europe's top alcohol-ready countries

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Browse our on-trade / HoReCa data for free

If you'd like to dive in the world of on-trade / HoReCa data and discover all you can about various European markets, now you can. With our limited trial offer for our flagship product Outlet Census Live, all you need to do is log in.

There is no catch - no hidden fees, no agreements. We simply want you to see all the possibilities of on-trade market research.

With Outlet Census Live you will be able to find every outlet in your chosen country, look up its profile, create lead list, access the market structure, brand penetration on the level of market/region/segment (e.g. how much is Coca-Cola dominating the restaurant segment in Bavaria, Germany) and loads of more data.

Read more and access the database here

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Part 2: The many names of the on-trade channel

While the definition of on-trade is not 100% consistent, the name of the channel is another story. “On-trade” appears to be the most widely used name for the channel but many other monikers are in the play as well. Just in English alone there are at least 7 more titles: 

• On-premise
• Out-of-home
• HoReCa
• Food Service
• Immediate Consumption (IC)
• Gastro
• Hospitality

There are also several ways to call the on-trade outlet (the place where you will be served food & beverage) itself. You might have come across names like POS, outlet, venue, etc. The naming conventions differ from country to country. A person from Belgium might say “HoReCa outlet”, another person from Spain might call the same place an “out-of-home point of sale” and someone else from France might go for “IC outlet”.

You might be starting to see that the whole thing is kind of confusing.

At SharpGrid, we have decided to use the words “on-trade” and “outlet” to be consistent in our communication (just consider our product Outlet Census), but we’re trying to use local naming conventions whenever possible. That’s why our international business development professionals are always native speakers with roots in the given country.

FREE ON-TRADE REPORT: Discover the on-trade market position of your brands and your competitors

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Part 3: The importance of on-trade channel 

Having said all that, it’s time to look at how important the channel is. For producers, it can be a huge source of profit, as prices of some beverages (e. g. a pint of beer) will be triple or more compared to their store-bought options. Producers typically achieve much higher margins and profit here than in other channels.

The second value is in brand/loyalty building. In the on-trade, it is possible to accurately craft the desired positioning and messaging for each brand, associate with the “right” outlets and consumer segments and build awareness, trial and loyalty.

Lastly, the on-trade is also the right place for testing innovations, trying new ways to get a product to the right customers, and launching new products.

While the above is true in general, the importance of on-trade as a share of total category turnover can differ massively between markets. 

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Part 4: On-trade markets in different countries 

Firstly, the sheer size of the on-trade channel and how much money and time people spend there depends on the preferences, culture and economic development of each market.

Secondly, the importance of on-trade for each category like beer or energy drinks will also depend on how and where local consumers prefer to consume it. Beer tends to have a higher on-trade share (more people consume it in pubs rather than buy bottles at stores) than non-alcoholic drinks which in turn have a higher share than spirits. Take a look for yourself:

a. The on-trade share of beer

• Beer on-trade share in Spain: 85 % 
• Beer on-trade share in the United Kingdom: 71 %
• Beer on-trade share in Austria: 60%
• beer on-trade share in Czechia: 30%
• Beer on-trade share in Romania: 22%
• Beer on-trade share in Poland: 14%

b. The on-trade share of non-alcoholic drinks

• Non-alcoholic drinks share in Austria: 66%
• Non-alcoholic drinks share in Germany: 54%
• Non-alcoholic drinks share in Switzerland: 51%
• Non-alcoholic drinks share in the United Kingdom: 31%
• Non-alcoholic drinks share in Poland: 21%
• Non-alcoholic drinks share in Romania: 20%

c. The on-trade share of spirits

• Spirits on-trade share in Austria: 56%
• Spirits on-trade share in Spain: 50%
• Spirits on-trade share in Italy: 43%
• Spirits on-trade share in Germany: 36%
• Spirits on-trade share in Romania: 8%
• Spirits on-trade share in Poland: 8%

While there are markets with smaller (but fast-growing) on-trade like Poland, the vast majority of developed countries pose a great opportunity for food & beverage producers. However, becoming an on-trade leader is no easy feat as there are many obstacles and unexpected hidden costs that can climb up to millions of Euros each year.

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Part 5: SharpGrid and on-trade: Big data for business growth

So there you have it. This is on-trade. The last thing to discuss is SharpGrid's role in it. 

Our core mission is to help vendors accurately measure and navigate the on-trade channel, target the best outlets with highest commercial potential, see their sales / branding performance, allocate resources effectively, set killer route-to-market strategies, save time and money and manage their sales teams better. All in the name of the highest achievable ROI. 

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Discover more on this topic

• Dive into our free on-trade report and look up the market position of various brands completely free of charge
• How is all this possible? Find out how the digital revolution brought SharpGrid to life
• Check out our 2 products Outlet Census and Market Meter or our custom services
• Read how our clients Heineken and Danone Italy succeeded in the on-trade with our data
• Discover various use cases for our products

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SharpGrid is a data & tech company reinventing market research in the on-trade channel. The on-trade channel consists of POSs (point of sale) 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, on-licence.

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