Stay Home or Go Out? Can the New Roaring 20's Survive Soaring Inflation?

After a booming summer for socializing, things are starting to cool off. Inflation and the cost-of-living crisis are catching up with consumers who might still have some pent-up desire to go out. These conflicting desires leave consumers dangling between spend and save, while still looking for ways to continue their social lives. So what are they doing? How are people getting together when money is tight? On the tail end of the holiday season and as the popular “dry January” ends, our expersts discuss what’s next in this transitional time. Join Michael Shaefer, Spiros Malandrakis, and Zora Milenkovic as they discuss: Will financial pressures cause a decline in spending on social occasions? Or is there enough pent-up desire to outweigh the costs? Or will consumers simply find different, perhaps cheaper, ways of getting together? What opportunities exist for brands in this evolving landscape?

Want to learn more about the biggest consumer trends this year? Check out our new report Top 10 Global Consumer Trends 2023, where you'l learn about Budgeteers, Here and Now, and Young and Disrupted. 

00:04:45 Affordable luxury indulgence.
00:10:43 Consumers shifting to experiential on-trade.
00:16:31 Nostalgia drives consumption habits.
00:21:48 Premiumize, but be mindful.
00:25:00 Premiumize experiences, not products.
00:30:03 Adapt to changing consumption trends.

Transcript

00:00 JESSICA Hello and welcome to Euro Monitor International's podcast series. My name is Jessica and today we are listening in on a conversation between three of Euro Monitor's experts about the changing face of social occasions. After a booming summer for socializing, things are starting to cool off. People in the cost of living crisis are catching up with consumers who might still have some pent-up desire to go out. These conflicting desires leave consumers dangling between spend and save, while still looking for ways to continue their social lives. So what are they doing? How are people getting together when money is tight? On the tail end of the holiday season and as the popular dry January ends, Michael Spiros and Zara discuss what's next in this transitional time. Will financial pressures cause a decline in spending on social occasions? Or is there enough pent-up desire to outweigh the costs? Or will consumers simply find different, perhaps cheaper, ways of getting together?

01:05 ZORA And what opportunities exist for brands in this evolving landscape? So we've seen some tensions lately, as Jessica's pointed out. So people keen to go out and socialize physically and yet we're all strapped for cash. You know, we're what, three points away from a global recession. You know, we've been told by the World Bank. So what's happening to social occasions? Spiros, do you want to start? Thank you Zara.

01:33 SPIROS I think I can start. And I start with a reminder that I give to many of the major alcohol players I've been talking to over the last couple of months or even the last couple of years that have been quite volatile for all of us, I'm sure, even more so for the alcohol and hospitality industries. And what I always start reminding them is that the alcohol industry by its nature, its recession resistant and resilient, but not fully recession proof. So there is an effect that is inevitably going to hit many of the key categories, many of the key markets around the world. But that doesn't mean that we shouldn't diminish our buoyancy or enthusiasm for the industry's future, at least in the medium to long term. It's mostly a discussion about what are the short term effects or what are the short term hiccups, if you wish, in this kind of long term process?

02:22 MICHAEL How do you see that, Michael? Yeah, I mean, I think I agree with a lot of that. I think one of the things we see looking more at the food service side of things are the changes that we've already seen, you know, due to COVID. You know, obviously a lot of us spent quite a lot of time at home. We saw the way many of us work changing. We're seeing more and more people working two or three days a week from home. And so on top of this process of, you know, perhaps consumer caution, consumer concern about the economy, I think the geography of where we work and thus where we socialize after work, how we get together with people, that is becoming that's becoming more dispersed. And I think there are just there are just more options. We've we've done a lot of experimentation over the last few years trying to figure out, you know, new habits, new ways of interacting with people when the old routes were closed off to us. And so now that those are available, by and large, once again, in many places, I think, again, we're just seeing more diversity in terms of how people are doing that. And I think to your point about, you know, relatively recession proof industries, I think we are seeing some of that in part because consumers simply have more options, more ways to approach this very, you know, this very important part of our

03:50 SPIROS lives. One of the I mean, and thank you for the the the passing that direction. I think it's interesting to mention what kind of ways to consumers have when we're talking about this cost of living crisis that we call it from the UK, but recessionary pressures appearing in the US as well that we've been following the news in the last couple of days and it gets increasingly more bleak. I think the key ways for consumers to start revisiting the way they consume alcohol or their rituals or even they're going out rituals. I would formulate it in three kind of key bastions. One would be trading down that most consumers are familiar already in their planning, most likely, and many of the major producers are starting to incorporate it as well in their strategic planning for the next couple of years. Then we have trading across, which is something that I've been hearing much less about. Perhaps it's less known to our listeners as well. Trading across, by the way, can give a small example, would be a drinker of premium blended malt whiskey, for example, scotch moving into the direction of a premium rum. Now, both these products are aspirational. Both of them are positioned as premium, but at the same time, rum is de facto more affordable than whiskey. So it's more about the perception, this perception of affordable indulgence or affordable luxury, if you wish, that can actually allow them to indulge in something that they enjoy, something that is within their budget, but at the same time without breaking the bank. I think trading across is something that we have analyzed much less in the last few years. And I think we're going to see much more momentum moving forward, at least for the next six months to a year and a half, which is more or less the timeline of the recessionary pressures as I see them. And of course, the last one, again, a very interesting phenomenon, as I see evolving over the last few years, is the rise of polarization. Essentially, it is the term encapsulating this diametrically opposed forces in alcoholic drinks that sometimes might actually be confusing for some of our listeners as well, because we have been seeing a lot of the comments coming out suggesting that premiumization, consumers moving into more and more expensive, more aspirational, less volume led, more value led products has been ongoing and hasn't slowed down massively, even in the face of these pressures. But I do believe that this is happening when it comes to certain demographics or certain socioeconomic classes or certain markets, certain categories. But at the same time, we start seeing only the last couple of months, I would even suggest that it starts being the case in the last couple of weeks of the first clear signs of trading down. So this combination of on the one side, economizing, trading down and on the other side, continuing this premiumization narrative, I think combining these two, we're talking about polarization, a society and obviously reflecting that society breaking patterns that are moving into a much more polarized direction in both sides of the pricing spectrum.

07:05 MICHAEL There's a lot to unpack there. But let's expand that a bit, because my remit, I'm looking a lot more at things like coffee and broader food service and so on. I think it's interesting if we compare this with, let's say, 2008, 2008, 2009, where we saw some similar behaviors, trading down, trading across, people getting more judicious and premiumization because of economic uncertainty or very certain economic downturn in that case. But what I think has changed, and I think to your point, is the constellation of options in the last 10 years, more than 10 years, has grown pretty exponentially. And so I think that's a really important point. Like no one was talking that much about premium around, say, 13, 14 years ago, it was out there, but it has expanded. One of the things we talked about in 2008, 2009 were things like people trading down from a coffee shop visit to buying a pod coffee machine. And we talked about things like that during the pandemic, people upgrading their home setups, whether it had to do with spirits or coffee or what have you. We also see, of course, expansion into new active ingredients. You know, cannabis was not part of the conversation or not the same part of the conversation, let's say, 10 years ago. So it's funny, so many of the things we talk about, Spiros and I talk about, you know, we've been harkening back to pandemic days, but now I think we can talk a little more about historical antecedents with recessions. And I think, yeah, there are just many more options. And maybe the last thing I'll say about this is I think generationally, the younger you get, the younger the consumer cohort, maybe less disposable income, but also perhaps a bit more adventurous in terms of products, in terms of where they're working, in terms of what they're trying. And so again, I think all of this allows consumers to maintain a lot of their social habits. But it's becoming harder to predict, you know, where they're going to go and what that's going to look like. And I think that's a big shift.

09:24 SPIROS Which kind of brings me to the question about what is your views about the on trades, Michael, and I think we discussed pricing strategies and moving up and down the pricing chain and globalization and polarization and trading down all of these extremely relevant concepts and ideas that will be with us for the foreseeable future. As I said earlier, I expect this kind of period of volatility to last for about a year, a year and a half. That is largely the kind of consensus when it comes to the economics of this situation. Now, the big question, Mike, is and I think it's related to everything that you just mentioned, Michael, both the after effects of the pandemic trauma that we all went through and the industry went through as well. And it's still kind of recovering from. But also the effects of what happened in 2007, 2009, what we called back then the great recession. And interestingly, I was even revisiting some of my writings from back then because they are, you know, I think that human behavior and drinking patterns and rituals are actually cyclical in nature. So it's actually there's a lot to be learned and gleaned from revisiting this kind of seemingly old analytical perspectives. And a couple of things I found. First of all, I think the as you mentioned, there is a transition into new kinds of on trade. So if you if we want to have consumers continuing to go out and do the same that will have to be structured around new experiential forms of going out, be it advanced mixology or be it some kind of combination with crazy golf venues. Essentially a reason for consumers to leave the comfort and safety of their houses or the fact that they were used to staying in their houses during Covid as well, or they had to because of the economic concerns they have and and convincing to come back out into the city centers. And I know, Michael, we had many conversations about that and how this transition to working from from home most days of the week, the shift in the what do the city centers mean and what they are about. And obviously the place of the on trade establishments in this kind of new era post Covid and how that play out. I think that, as I said, experiential, providing some kind of unique twist on what consumers can actually buy at the comfort of their own homes with both will both become extremely important in the next couple of years as consumers will have to start cutting down somewhere. And obviously on trade will be one of the first places to cut down. At the same time, I do believe that opportunities are there for what I call back in 2007 in 2008, I call them recession cocktails, talking about ready to drink cocktails in a can essentially provided the convenience and affordability for this kind of home tame and occasion that you also mentioned when it comes to coffee or soft drinks coming in a pod becoming much more affordable, much more accessible. What is your opinion when it comes to this kind of new geography of cities, this new geography of going out?

12:41 MICHAEL Well, I think how I would how I would look at that is if we look at on trade, food service, the restaurant industry fairly broadly. I mean, obviously the big shift we've seen over the last few years has been in terms of diversity of formats, particularly formats that serve home consumption. You know, most markets were seeing more takeaway. We're seeing more delivery, of course. And these together add up to a lot more at home occasions. And that has alongside shifting, shifting work habits, shifting work geography. We've seen a big shift in terms of formats, a lot of experimentation with delivery only or takeaway and delivery only locations. We see coffee players in particular, but others as well experimenting with things like advanced vending machines. So imagine a vending machine that you can use your phone to order. So we see examples of that in the UK and elsewhere. Coca-Cola has invested quite heavily in that with their Costa Coffee brand. And so what all this adds up to is, I think, for those locations that we're actually leaving the house and going to exactly to your point, like it becomes much more necessary to to make that case. The range of options to us, if we want to stay in, maybe have some people over, keep our budgets in line. That has expanded pretty significantly in terms of things coming closer to us, in terms of things like vending machines and so on. And so I think the last thing I'll say about this is that I think the restaurant industry, even the bar industry in particular, we're seeing a similar shift to what we saw and are seeing in the broader retail space where you need to make that case and where the physical locations become almost as much a part of branding and marketing and that experience of, you know, I'm giving you two hours of my time. And so and then I increasingly I don't necessarily have to do that, even if we're talking about getting together with our friends. And so I think that is really creating a lot of evolutionary pressure, if you will, to you know, move up the up the chain in terms of those experiences.

15:05 ZORA So we've talked about where we consume and when we consume. So, you know, the location and the time home versus outdoors, local versus city centers. You talked about old routes being closed off. And I'm interested now in the what what we consuming if we've been dragged out, finally convinced us to go out. You know, what is the socializing of the future given all these tensions? No booze. You know, we talk a lot also about blurred lines between, you know, sort of alcohol and non-alcoholic beverages. Dry January, you had another example of that spurious, didn't you? And so on. So what is it that's convincing us to consume when we do go?

15:49 SPIROS That's a great question, Zora. And I think it has many stages and many, many ways to approach it. I would start with an umbrella approach when it comes to that. And I think it is one of the findings that I found fascinating when revisiting my my old writings from 2009 and the common the commonality, because it's extremely difficult as we as our listeners probably know, to to find common themes when we're discussing about the entire planet or at least the vast majority of Western markets right now. We're not talking about only one country or one category. So the commonality, the big umbrella, if you wish, term or strategic direction is the power of nostalgia. And at least as I as I witnessed it back then, it was obviously proven in the decade that followed that kind of 2008, 2009 Great Recession. And what do I mean by that? It is human nature and social, sociologically, even speaking, the direction of travel, that people tend to shift their focus towards yesterday year by rose tinted glasses. This is the power of nostalgia. It always comes up in times of macroeconomic or other societal crisis in just to make it more specific and not keep it in completely abstract terms. And for our listeners to understand what I'm talking about, it's actually much simpler than it sounds. And in this case, I can use the examples of the rise of English gene in the UK following the Great Recession. It was it happened to be around those years. English gene before that was just another drink that was lost under the shadow of vodka. But somehow the reference to Victoriana or this kind of perceived kind of glorious Great British past, even if it was primarily, you know, an imaginary land, it actually provided massive branding momentum and it was one of the major driving forces behind the massive rise of English gene in the UK and around the planet. And Victoriana references advertising campaigns and positioning. Equally, the US in about the same period, we had out of the blue, the rise of American whiskey, bourbon and all things Americana, from the old fashions to all the bourbon maturation warehouses in their extremes across all of the states. Equally, there was there was whispers in from Brazil, re-embracing Katasha in a much more premium positioning to Greece, finding Tsipouro once again after many, many years considered to be a granddad's drink. I believe obviously history never repeats itself exactly in the same ways, but it does rhyme. So I do believe that we will see something similar happening this time, like some kind of revisit of traditional recipes, traditional positioning, traditional cocktails that will provide and categories that will provide this much needed psychological support for consumers. And I don't want to be specific because again, as I said, we are talking about so many markets and so many categories. But this common thread of nostalgia is, I think, something that we will be seeing much more moving forward to your question, Zora. Is that is it something that you see or that makes sense for you, Michael?

19:14 MICHAEL I think the nostalgia point is interesting because I am thinking back to 2008, 2009, and they're definitely you're absolutely right that there was a lot of that going on. But I think another part that I find interesting and I think we will see more of, you know, depending on how the economy goes, is that kind of creativity in finding cheaper ways of socializing, tying into that nostalgia with almost like a certain nostalgia for working class activities or, you know, quote unquote, old school beverages or products, you know, like you mentioned. And certainly there were premium versions of a lot of it, but I do think it's it is interesting how time and again, we have seen consumers during economic downturns look to the local, look to the less expensive, look to, you know, almost embrace that in a way of what are the what are the lowest cost options? What are the simplest options? You know, rather than going out for drinks and dinner, maybe we just have have a drink and a snack. And that, you know, not to not to in any way minimize the impact of an actual recession, but that can have some very interesting effects in terms of branding, in terms of products and how that how that moves forward, you know, going forward, because I think it is always a push and pull between premiumization on the one hand and trading down on the other. You know, we that's been the consumer story for as long as you and I have been have been doing this and probably since before. So that, I think, definitely keeping an eye out in the in the food service space, looking for those more humble, simpler, probably more local options, you know, with real possibility for price savings, you know, things like grocery stores thinking about how to get in on that and so on.

21:15 ZORA So I'm definitely keeping an eye out for that over the next next year, I'd say. Are we changing what we're consuming based on location then as well, you know, on price? Are we bringing the luxury home? Are we taking the private label out?

21:28 SPIROS I mean, what's the, you know, feeling and does that differ between the generations? I think I think many generations for the last 20 years have been kind of almost trained to this kind of mantra of alcohol drinks, which was less but better. Yeah. So this which is essentially encapsulates the premiumization narrative, essentially, as I said, the premiumization narrative. So it will be something that is almost embedded in multiple generations mindset and an approach to drinking right now. I don't see that massively changing. And that's why from the beginning, I mentioned that was if we are talking, if we're talking about a slowdown, and I think there will be a degree of a slowdown inevitably, some kind of which will most likely decline inevitably. We are talking about the next couple of years, not the long term strategic approach, because I do believe that in the long term, we're talking about the next, you asked me about the next five to 10 years, I would still believe that this premiumization narrative will continue retaining its relevance. We will continue moving in that direction. People will continue trying to drink better, most sophisticated things, take care of their health and saying, talking about taking care of their health, obviously, the mention of I think we've kind of kind of mentioned it more or less, all of us did the rise of non-alcoholic adult beverages, which are driving developments in a number of countries around the world, and they're only moving upwards and onwards. I have a small concern for a number of years about many of these products now because they tend to pigeonhole themselves as super premium or luxury products only, and I think that could potentially be one of their, it's essentially their Achilles heel that in the times of significant macroeconomic crisis, obviously, that is, if everything in one category is one side of the boat, the boat can very easily capsize. So ideally, I would like some more differentiation and some more range of options, economizing options, mainstream options when it comes to the non-alcoholic adult beverage segment. And also there is, but there is another side, I think the side that led by the consumers rather than the producers, and that side is what I would call moderation as thrift. So essentially the idea that consumers, if we don't offer them the options of lower priced non-alcoholic adult beverages, they will just drink the same premium products that they drank before, just less of them. So not because it's better for their health, it's better for a sustainable good night out, but it's also better for their wallets. So I think that that is something that we start seeing much more of this kind of, as I said, moderation as thrift, like thriftiness that is enforced because of the macroeconomic situation, but it actually can take the form or the mantle of moderation.

24:15 MICHAEL Is that something that you see as well, Michael? I think so. I mean, I think it does. I think you've raised a really interesting point about, and not just that's been talking about alcoholic and non-alcoholic drinks, but more generally with this process of premiumization, it is possible that, you know, in a way, paint yourself into a corner, if you will, you know, where do you go from here? And I it got me thinking about I do think maybe stepping outside of this narrative of recession for a moment, but thinking just more generally over the next 10 years, I think I think effective premiumization could get more difficult. I mean, premiumization is about stories. It's about finding information that maybe the general public wasn't as aware of and surfacing that, you know, the story of, you know, rum from Haiti or, you know, wherever that might be. And that process is getting faster. It's speeding up. You know, we all have more information at our fingertips than ever. This is not new, but it it doesn't seem to slow down, you know, and we have we have more and more of that. And so I do think again, I'm even stepping outside of this, the idea, thinking about a recession, just premiumization in general. I feel like all of our industries might need to rethink this a bit. And maybe this is where the experiences come back into play. Maybe this is where more investments in that come in, because I think it's especially true in alcoholic drinks. I think you could speak to this. I mean, so many categories have been premiumized, you know, and many of that. A lot of that is based on products that are historically consumed somewhere. And, you know, that search will always go on. But, yeah, I'm very curious. And I could say this about coffee. I could say this about other things of, yeah, where does premiumization go from here? And so maybe a recessionary environment gives us more time to experiment, players to experiment with, you know, a lower cost premium experience in person.

26:16 SPIROS I don't know your thoughts on this, Spiros. I think the problem I'm facing with many of my discussions with the industry has been until this point, a certain degree of complacency and a certain degree of, I would even call it, delusional lack of focus when it comes to the inevitable slowdown that we're discussing now. I think what has happened until this stage is there was this, and I think, you know, Jessica's introduction mentioned that as well. We have had this momentum behind us for the last couple of years because of savings during the pandemic, because of not going out for basically two years. And essentially, exactly like we predicted in some previous discussions that we had, we entered the new roaring 20s, exactly a century before, after the last roaring 20s. So this kind of the need to go out for two or three years, of course, it wasn't expressed. That just came out. And obviously a massive spike in the sales of alcohol drinks. That was not sustainable, both because of the savings are almost run out and also because the shift in the macroeconomic environment was quite sudden and quite pronounced. I think many producers are only waking up to the fact of the limits of minimization that you very rightly point out, Michael, only in the last couple of weeks. And up to even now, they're trying to convince themselves that it's all going to be fine. And of course, it's all going to be fine. And that is what we're trying to say here. It's going to be all fine in the long term. But at the same time, I think it is a time to acknowledge that some losses, both in terms of hospitality side of things and within the retail sales of in terms of pricing, will inevitably have to be taken into account. Many consumers will have to take down. Some will have to cut down their going out, you know, patterns. There are changes like we mentioned earlier about how people work. How do they go to the office? Where are they even based? So I think hopefully, I hope this conversation we're having today can initiate this conversation and can provide this kind of challenge even for some of the major producers out there that have tried to avoid the inevitable question of what do we do when minimization hits the ceiling of macroeconomics or hits its own kind of ceiling of everything is becoming premium. So how do you differentiate at that stage? And I think this conversation is a conversation that perhaps doesn't have clear solutions, as you mentioned, but I think we need to start having it basically.

28:59 MICHAEL Yeah, I think I mean, the idea of that conversation and yeah, what does premiumization look like? What's the product portfolio look like? Again, I come back to that idea of so many shifts in terms of geography and in terms of what formats look like. And I think all of that is very much in flux. What is a bar going to look like in five years? What is a grocery store going to look like in five years? And something I talk about endlessly is all of that is to some degree becoming linked together by our phones. More and more of these occasions are mediated through that, are talked about through that. And so a whole other discussion and one we could talk about for another two hours is I think it's over time going to get harder to draw strict distinction between this is the entree. This is bars. This is restaurants. This is for retail. This is home consumption, because again, those those occasions are increasingly in competition. And so, yeah, I mean, if I if I were to leave our listeners with anything, it is that idea of complacency is is really quite dangerous and thinking, well, you know, it's a recession. People will trade down. We'll sell more premium products at home. You know, it'll be fine. I think there are going to be are and will continue to be investments made in new ways of consuming, whether it's a machine at home, whether it's a better vending machine near your house, whether it's, you know, different ways of having products delivered. And so, yeah, to your point about rhyming, I mean, we can absolutely see similarities, but it's not.

30:42 ZORA Yeah, too much has changed for it to to go exactly like what we saw before, certainly. And, yeah, exactly. It'd be interesting to see how these default behaviors, you know, sort of how do they evolve or do they spearhead something entirely new? And at that point, I shall call on you again for Mark two of, you know, how is this evolving, you know, how is socializing evolving? So all that remains is for me to thank my guests today, Michael Schaeffer and Spiros Melandrakis and our audience for joining us today, too. Thank you. Thank you. Thank you.