Phoenix residents have no shortage of ways to get alcohol brought to them, with local stores like Lucky's Liquor and national companies like Drizly providing the service. But starting in early 2018, all of them will be competing with Pizza Hut.
The national chain recently announced a pilot program that will begin with one downtown Phoenix store, with potential to spread to other major metro areas in 2018. Delivery of beer or wine is baked into the $2 or $3 delivery cost, so there's no extra charge for getting a single-serve bottle or a six pack.
However, there's a catch for Arizona's craft beer lovers, as only AB InBev products will be sold. Orders can include $10.99 six packs of Budweiser, Bud Light, Shock Top, or Kilt Lifter, the latter a flagship Scottish Ale from ABI’s local High End business, Four Peaks Brewery. Beers will also be available individually, with Bud Light and Budweiser at $3 a bottle, and Shock Top and Kilt Lifter for $3.50.
The new menu addition comes at a needed time for the maligned food franchise. Until a recent third quarter earnings report by parent company Yum Brands, Pizza Hut had suffered four straight quarterly declines in same-restaurant sales. In November, it was seen as a huge turnaround when Pizza Hut saw growth of 1%.
Alcohol delivery may seem like a play to keep feeding that success, but the decision to bring beer directly to customers is also about a slowly changing future in the booze business.
Unlike beer-loving countries across the UK and Europe, where packed pubs and cafes are commonplace, the U.S. has long held a robust pastime of at-home consumption. Going back to the heyday of the TV dinner, there are decades of trends that have made it easy for Americans to stay within their own four walls to enjoy food and drink. The behavior has doubled down in years following the Great Recession.
In a 2010 report by Mintel, Americans at the time were consuming 10 drinks per month at home compared to about six at bars or restaurants. That showed in different ways in the years since, with beer sales by volume declining 1.4% between 2010 and 2015, including a 3% drop from 2014 to 2015. Overall, beer is still consumed with similar frequency as any time in the past 10 years, Tara Nurin reported for Forbes in 2016, but since 2007, sales in bars and restaurants have dropped as much as 12% in the Northeast, Midwest, and South.
Since 2010, an estimated 1.5% of beer sales moved from bars and restaurants to off-premise stores. It makes sense on paper: the change provides greater cost efficiency for customers who can grab a six pack for the price of one or two beers at a bar.
Even still, people continue to dine out—just not at major chains. National names like Chili's, Applebee's, and others have collectively had negative quarterly sales for two years, according to The Los Angeles Times. This has already influenced suffering companies to introduce delivery services and, in the past six months, branch out into alcohol delivery, too. TGI Fridays has partnered with Lash, a delivery company, to pilot a program in Texas, and Buffalo Wild Wings was set to start its own beer delivery in Ohio and Wisconsin this winter.
At the same time that on-premise sales are hurting, disruption has already taken hold in how people are buying beer. A small—but growing—number of customers are shifting their purchases online.
Heineken USA CEO Ronald den Elzen estimates online beer sales will grow from .2% of all transactions to 2.4% by 2021. Already, Nielsen shows that almost half of U.S. shoppers who bought groceries online last year also purchased alcohol digitally. Drizly, a nationwide leader in alcohol delivery, believes the total online sales could reach about 15% of off-premise share by 2028—a total worth about $15 billion.
“The models of delivery or distribution aren’t new, but the economics of it have changed,” Emory University professor Benn Konsynski noted last year. “Technology has allowed us to move away from retail outlets to a new means that allows spontaneous on-demand distribution. One of the best sandboxes of disruption is local and regional retailing.”
Drizly is already in 70 North American cities and recently doubled down on their expectation for the future by adding to its board of directors Bill Simon, the former CEO of Walmart’s U.S. business. Hopsy, which offers growler delivery, has expanded from California's Bay Area to New York City. There’s also DrinkIn, Buttery, and a host of other companies that have entered the space in recent years, not to mention Amazon, which now provides two-hour, on-demand beer, wine and spirits to Prime customers in a dozen U.S. cities.
Increasingly, it feels like getting a six pack alongside your pizza is a natural part of the future, if it isn’t already your personal present. All of which sets the stage for Pizza Hut, and perhaps others, to utilize different methods to maximize their sales and connect to consumer habits.
“‘Drinking at home’ growth is outpacing ‘drinking out of home,’” Danny Brager, senior vice president of Nielsen’s Beverage Alcohol Practice, told Beverage Media Group at the start of the year. “While both channels are critical, the off-premise continues to be not only significantly larger volumetrically than on-premise, but also the environment currently offering the larger growth opportunities.”
Pizza Hut and others are working to find themselves in the middle of a multi-pronged Venn diagram, where take-home experiences are on the rise, technology is shifting how customers can achieve that, and retailers are in need to new revenue streams. These changes aren’t going to revolutionize the way people eat and drink, but they sure are worth a lot of money. Especially when it comes to leaving breadcrumbs of data that can be used to better understand customers and preferences.
In the case of chains like Pizza Hut, where there’s potential to maximize interest in food pairings, even if it’s “just” pizza and beer. The partnership with ABI is a smart one for both sides following Budweiser’s annual “Battle of the Burger” sponsorships, in which the St. Louis subsidiary backed events to find the best examples in cities like New York and Washington DC, alongside its flagship Lager. The brand name recognition of both companies, along with cost effectiveness, could act as a welcome combination for clientele.
To boot, recent research by London's Foresight Factory, a consumer analytics company, analysis of about 98 million social media beer posts showed a 147% increase in conversations about food and beer over the past two years. The company found that informal foods were most associated with beer, including burgers and pizza.
The partnership also comes at a time when almost a quarter of Americans are doing some or all of their work at home, according to the U.S. Department of Labor Bureau Statistics. Work hours are at a high and vacation use at a low in the modern workforce, and by some measures, “alternative work” through freelance and contract opportunities is pushing job creation.
Needless to say, efficiencies in food preparation and grocery shopping are also garnering great interest, from delivery services like Blue Apron and PeachDish to pre-bagged groceries ready for pickup at the local store through services like ClickList and Instacart.
Cutting out one more step in procuring a six pack, then, just makes sense—especially if it shows up in 30 minutes or less.
—Bryan Roth