Is your food or beverage brand looking to expand its sales in the on-trade?
Nothing could be more logical! This sector is a veritable economic lung for France, and is brimming with business opportunities. To help you get to grips with this richly complex market, Sidely offers you an overview of its organization and the commercial issues surrounding it for the agri-food industries.
We'll start with a review of the key trends and figures for the CHR sector in France, followed by a look at its specific features in terms of distribution and business development.
📚 Warning: long format, we're back on the school bench for about fifteen minutes 🤓
Here's what you can find out by reading this dossier:
CHR, an acronym for Café, Hôtel, Restaurant, is an essential sector of the French economy.
The variety of establishments that make up this sector makes it difficult to establish overall figures, but the commercial foodservice sector alone would represent no less than 179,000 establishments, with almost 500,000 employees.
As for tourism, it accounts for 7.5% of French GDP, giving an idea of the importance of the hotel sector to the French economy. The hospitality industry employs over one million people, a figure that is still insufficient, as many establishments are still struggling to recruit. A real feat, for a sector that has shown great resilience in the wake of the COVID-19 pandemic.
Technological innovations and new consumer expectations are driving the sector to continually evolve, opening up new business opportunities for brands willing to venture into the market!
Food manufacturers consider the on-trade to be an extremely strategic market. For example, the sector accounts for 25% of beer sales on the French market (versus 75% for supermarkets).
💡 The acronym moment
You might also hear the acronyms HCR, CHRD, HORECA or CAHORE, or even CHRD depending on the language or region. They all stand for CHR!
For the full list (RHD, CHD, F&B, etc.), see out-of-home catering.
Cafés and bars play a central role in France's social and cultural life. In 2019, there were around 45,000 cafés and bars in France, with sales of around 5 billion euros. These establishments are places of conviviality and encounter, emblematic of the French way of life. Brands know that drinking in these places is associated with relaxation and conviviality. This makes them a strategic location for sensorial marketing!
France's cafés and bars have evolved over the years to meet the changing needs and tastes of consumers:
In addition to these "traditional" formulas, there are more recent models that are better adapted to new consumer expectations. These include eco-responsible cafés, featuring sustainable practices such as the use of organic products, waste reduction and recycling, as well as hybrid concepts, combining coworking spaces with bookshops or art galleries, designed to offer a "multifunctional" experience. In major cities, the trend is to create third places that combine several activities (children's activities, exhibitions, cafés, restaurants, etc.) at the same time. New modes of consumption are developing around brunch and coffee shops, or mixed-use venues (such as YouTube artist Natoo's café/hairdressing salon). The trend is to create places where you can do more than just have a meal or a coffee.
While the long-term trend seems to be towards a decline in the sector (France had no fewer than 200,000 establishments in the 1960s!🍷), the café and bar sector in France remains dynamic, innovative, and above all culturally important for the French, its social dimension having clearly regained its place after the Covid!
The foodservice sector is just as diverse and dynamic, with a variety of options to suit all tastes and budgets. In 2019, it numbered some 175,000 establishments, generating sales of almost 57 billion euros (twice as much as the catering industry!). This figure is said to have exploded since then, but largely under the effect of recent inflation, demand being much the same or even falling slightly, also due to the cost of living.
France is renowned for its culinary diversity, with restaurants ranging from small local brasseries to prestigious Michelin-starred establishments.
It includes :
The foodservice sector is constantly evolving to meet new consumer expectations. Here are a few key trends:
The foodservice sector continues to reinvent itself to appeal to a diverse and demanding clientele, while remaining true to its rich gastronomic heritage.
The hotel sector is a mainstay of the French tourism economy, with a varied offering that attracts millions of visitors every year. In 2023, France counted some 17,000 hotels with 650,000 rooms. 80% of these establishments are independent, contrary to the image of a highly concentrated market. They represented sales of 21 billion euros and nearly 180,000 jobs before the Covid crisis.
Tourist hotels can obtain a star rating (from 1 to 5), regardless of the number of rooms they have. This classification is optional, but almost all hotel operators ask for it, so much so that this principle of evaluation is expected by customers.
Stars are awarded on the basis of criteria divided into four categories:
For brands aiming to distribute their products in hotels, this classification is an obvious way of creating marketing segments corresponding to the type of customers they are targeting (habits, purchasing power, values, etc.).
In addition to traditional hotels, our beloved country offers a wide range of accommodation options:
The hotel industry is evolving to meet new customer expectations:
France's hotel industry continues to adapt and innovate to maintain its appeal and offer guests memorable stays, contributing to France's reputation as a top tourist destination.
In terms of marketing and communication, this target group brings the brand face to face with an international audience. The "discovery" dimension can be both an opportunity and a barrier.
Despite its vitality and capacity for innovation, the RHC sector is beset by major structural difficulties. The Covid-19 pandemic has not helped the long-standing shortage of human resources in the sector. Recruiting, training and retaining staff in the food and beverage sector is complicated, and this difficulty is limiting the development of many establishments.
In addition, rising raw material, energy and rental costs are weighing on the profitability of companies in the sector. The cost of gas and electricity, in particular, has weakened many establishments.
However, digitalization offers significant opportunities to improve operational efficiency and the customer experience. Online ordering applications, integrated management systems and contactless payment technologies are increasingly being adopted. They represent a partial but effective response to the shortage of human resources in the sector.
Among the major trends impacting RHC, we should also mention ecology and sustainability, as well as local tourism, which is also more eco-friendly and generally based on authenticity and heritage enhancement.
📚 A survey conducted by NielsenIQ in December 2023 on the theme of purchasing power and its impact on CHR identifies various trends:
🔭 So much for the sector overview.
But for a brand looking to accelerate its development in the on-trade, what do you need to know about the sector?
→ We'll now turn to the topic of distribution, before venturing into the world of business development!
For agri-food manufacturers, the food service sector is a specific market. Compared to supermarkets and hypermarkets, this distribution channel requires a larger sales team, for three main reasons.
Added to this is a turnover of establishments in the 10% range, forcing your sales force to canvass them anew. This not only creates new opportunities, but also means your database is constantly being updated!)
Last but not least, competition is no less flourishing than elsewhere, and the big players are often in a position of strength. More on this below.
A catering distributor is a company specialized in supplying products and services to the hotel, restaurant and café sector. This intermediary plays a crucial role in facilitating the supply of establishments and offering appropriate logistical solutions. It helps to optimize costs and guarantee continuity in service operations, thus contributing to maintaining the satisfaction of the establishment's customers.
Finally, the distributor generally handles invoicing on behalf of its supplier (the brand, in other words), as well as promoting its products. However, this last point needs to be put into perspective, as many observers consider that distributors are not sufficiently active in this area.
The French CHR market includes many national and international distributors, such as France Bières Groupe, CHR Boissons, Sysco France, EuroCHR, C10 and Distriboissons.
In most markets, there are also "specialist" players. For example, there are major beer suppliers and distributors such as Taffanel, France Boissons and Pernod Ricard. As distributors of their own brands, these behemoths enjoy a considerable strategic advantage in terms of customer care and low prices. They also boast extensive product catalogs and ranges, enabling catering managers to order exclusively from them. For the establishment, this means a considerable reduction in administration.
In addition, funds are made available to help new venues get off the ground (usually via the framework contract). Finally, certain beverages like Coca Cola are a must-have for bars and cafés, which can't do without them.
To benefit from these substantial advantages, establishments will most often have to agree to sign a framework contract committing them to large and, above all, chronic order volumes. If you're looking to build customer loyalty and generate more regular income with CHR, find out all you need to know about framework contracts.
But the presence of these very powerful players should not make us forget three fundamental points when it comes to prospecting in the CHR world:
Brands therefore generally have several distributors, as well as - if this is part of their strategy - end customers addressed directly (establishments not under contract with distributors).
The CHR customer life cycle generally follows the following logical order:
Sales efficiency in the on-trade therefore relies on a structured organization to maximize results at every stage of this theoretical customer journey.
In the CHR sector, the trade includes a number of specific professions, such as the CHR (as in supermarket distribution) sector manager or CHR salesperson, but also the brand ambassador, who represents the brand's values and acts as a product expert.
Faced with the complexity of the market, catering sales staff have to juggle a multitude of tasks: making blind rounds to identify new targets, qualifying target outlets and businesses through unannounced visits or from the web, making customer appointments and organizing tastings, etc...
Qualification is an essential step in assessing the relevance of targets. For example, beer brands take into account the number of spouts or kegs sold to identify the best sales potential. In other industries, it's the number of place settings that counts, and so on. To each his own!
Above all, it's essential to identify the presence of a distributor beforehand. If the brand has a contract with the latter, it is in a favorable position to place its products there, and prospecting can be carried out with the appropriate distributor. Cross-tours can also be organized between distributor and brand, often with the brand ambassador. The challenge for brands wishing to penetrate the on-trade is therefore to have access to qualified databases.
The first order is sometimes hard to act on, and buyers don't hesitate to ask for significant effort in return for "taking the risk". For this reason, brands generally offer discounts or sales challenges. In this way, they can motivate their customers, for example by making a future discount conditional on the volume of products sold. This notion of challenge tends to motivate both bar and front-of-house teams.
But price isn't everything! The customer must first perceive the value of the product, and its coherence with the menu, the target clientele, and so on.
In France, the sale of alcohol is subject to numerous taxes, such as excise duty, VAT and social security taxes. This specificity can complicate order taking and invoicing, and has prompted most brands to equip themselves with a CRM designed for the on-trade, which can be integrated with their ERP systems and distributors.
But signing a contract is only the beginning of the adventure! One of the main challenges facing brands in the on-trade is to develop loyalty while keeping sales costs under control, the aim being for customers to remember them and recommend them without being systematically approached by sales staff.
But this is a perfect world. In the real world, you have to deal with fluctuating levels of customer traffic and consumption, and above all, competitors lurking in ambush to snatch back customers that the brand isn't taking care of enough.
In addition, the catering sector is particularly subject to the notion of "cadencier", i.e. order frequency. Taking orders too early can limit sales volumes and create overstocking by the customer. Ordering too late, on the other hand, can result in lost sales, or in the customer being able to place an order elsewhere.
Here again, CRM makes a major contribution to consolidating and increasing sales value by anticipating strategic moments for visits and recommendations, using a scoring and customer knowledge system (location characteristics, order history, etc.). As a result, CHR sector managers avoid making unnecessary visits (the famous "white visits"), and brands maximize the return on investment of their sales actions.
Using commercial software to model order frequencies also enables us to detect customer risks by automatically alerting us to missed deadlines. Generally speaking, 5 missed orders means the customer is lost.
However, whether the recommendation is made spontaneously or not, the customer visit remains an imponderable, for at least two reasons:
Another key aspect of sales development in the on-trade is, of course, collaboration with distributors.
Indeed, choosing to attack the market indirectly means coordinating sales activity with your sales partners, who must receive the order form, and who in turn will handle invoicing. The integration of CRM / ERP-type tools solves many of these challenges.
In fact, it's quite common toorganize sales tours jointly. The brand then sends its brand ambassador alongside its distributor's representative. These meetings allow for more in-depth, personalized selling, as the brand ambassador knows the characteristics of each product, and can therefore accompany and advise end-customers in their choice of products. Last but not least, it's the best way to present new products, and so forge a strong bond with the customer, who feels privileged.
As in most industries, certain customers or distributors are considered key accounts, and are the focus of more intense and coordinated sales actions, in line with their weight in the company's sales. They are sometimes taken in hand by managers, who take care to maintain solid, long-lasting relationships with them, and intervene to resolve any problems or disputes.
Let's end this guided tour with a look at the marketing challenges facing brands that distribute their products to the on-trade.
Has this article reinforced your desire to tackle the CHR market? Find out how Sidely can help you accelerate your business development, by completing an online demo!
