The terms on-trade and off-trade generally refer to beverage distribution channels: immediate consumption on the premises in the former case, or outside the point of sale in the latter.
These anglicisms are mainly used by the beverage industry, i.e. manufacturers of alcoholic and non-alcoholic beverages, and their distributors.
Off-trade refers to distribution outside the HRC: this can include take-away sales (cellars, liquor stores), but also and above all supermarkets (GMS).
Yes, the lexicon of distribution is complex... That's why Sidely invites you in this article to an overview of what there is to know about these two distribution channels favored by beverage brands!
Trade: an anglicism specific to beverage distribution
In the beverage trade, the term "trade" generally refers to all commercial activities linked to the distribution, sale and marketing of beverages, whether alcoholic or non-alcoholic.
Let's take a look at the main uses of this very business-like term!
Trade de Boissons
It encompasses all commercial operations linked to the purchase, sale and distribution of beverages. This includes agreements between producers, distributors, wholesalers and retailers, as well as marketing strategies to position products on the market.
On-Trade and Off-Trade
On-Trade refers to the sale of beverages consumed on the premises, such as in bars, restaurants, hotels and other catering establishments. This market segment often focuses on customer experience, service and immediate consumption. Anglo-Saxons also use the expression on-premise*. As mentioned above, establishments integrating this on-trade channel are grouped together under the acronym CHR in French, or HORECA among our European neighbors and other English-speaking countries.
* No link with on-premise software
Off-Trade refers to the sale of beverages for consumption elsewhere, such as in supermarkets, grocery stores and specialty stores. Here, the emphasis is on packaging, distribution and price. The Anglo-Saxons also say off-premise, which could be translated as "off-site", i.e. to take away.
Trade Marketing
In this sector, and particularly in mass distribution, trade marketing focuses on strategies to increase the visibility and sales of products to retailers and distributors. This can include specific promotions, training for sales staff, and special arrangements at points of sale.
However, the term is not exclusive to the beverage industry, and is used more generally in the world of agri-food.
Trade Agreements
Commercial agreements between beverage producers (e.g. breweries, wineries, etc.) and distributors or retailers are crucial to ensuring product availability on the market. These agreements often determine margins, distribution conditions and product placement strategies.
The term "trade agreements" is mainly used in Anglo-Saxon societies. In France, we speak of commercial agreements, and of course distribution contracts. Find out more about the EGAlim law and its impact on mass retailing.
On-trade VS off-trade: key features
Food and beverage manufacturers, in particular, tend to divide their distribution circuit into two distinct channels: on-trade and off-trade.
This distinction makes it possible to evaluate and compare the revenues generated by each channel, but it goes much further. In reality, each distribution channel requires its own strategies, means and resources.
To help you see things more clearly, here's a table comparing the different aspects of each channel.
Characteristics of on-trade and off-trade channels
Channel
On trade
Off trade
Trade land
Beverage brands generally recruit brand ambassadors. In most cases, these are product experts responsible for training and supporting professionals in the sale and use of their products. For prospecting and sales follow-up, catering sales representatives take over.
Sales management is entrusted to field sales representatives, generally called area managers. They are in charge of a sales portfolio made up of different sales outlets or banners.
Retail establishments often charge higher prices for drinks to cover the costs of running a physical location and paying staff.
Off-trade retailers, while having lower overheads, may also charge higher prices for individual bottles or cans, as they need to compensate with a sufficient profit margin on each sale. Supermarkets generally offer the best prices, due to their unrivalled volume purchasing capacities.
Assortment
Products chosen for their consistency with the spirit and positioning of the venue, the purchasing power of the target clientele, but also storage capacities. It's not uncommon for brands to develop specific products or special packaging for the on-trade. These emblematic venues are fond of high-end or special products, and consumers are willing to pay more for an experience they won't get at home.
Generally more extensive, the assortment in specialist outlets (liquor stores, cellars) is defined by width and depth. Hundreds of references of beer, wine and spirits can be offered. In supermarkets, it depends on the type of store and is generally defined by the brand(read more).
User experience
Establishments seek to create a consumer experience by working on location, human contact and atmosphere.
Supermarkets focus on satisfying every need and facilitating the buying process. Wine merchants also work on the buying experience, notably through advice and support.
Marketing targeting
Restaurants, cafés and other clubs or nightclubs focus on well-identified, often younger, customer segments.
Wine merchants target an older clientele, or those who are familiar with the products. Supermarkets try to meet the needs of all consumer categories in their catchment areas.
Off-premise advertising
The Loi Evin governs advertising for alcoholic beverages, which must be essentially informative. There are no special provisions for non-alcoholic beverages, apart from so-called health warnings such as "For your health, avoid eating too much fat, too much sugar or too much salt", which apply to all food products.
Point-of-sale advertising
Point-of-sale advertising (POS) is an essential part of stimulating consumption in CHR establishments. Their provision can be governed by the distribution contract, or negotiated on a case-by-case basis between the supplier and the establishment. A distributor can also intervene between these two parties.
POS advertising is also present on supermarket shelves. It encourages shoppers to try out or take advantage of special offers, while POS (point-of-sale) information is displayed by retailers to guide shoppers through the purchasing process.
Logistics
Independent sales outlets have to make do with the storage space available to them. With fresh produce, deliveries need to be optimized to avoid wastage due to SLEDs and unsold products. For non-perishable products, or those with a long SLED, volume purchasing is strategic to take advantage of discounts, but represents a risk in the event of unsold products, and can prevent you from taking advantage of promotional offers due to overstocking. Between the supplier and the point of consumption, there is often a distributor who will stock and distribute according to need.
Distributors often use central purchasing agencies to order in bulk, and logistics platforms then deliver to local sales outlets.
Is your brand looking to develop its sales in the on-trade or on-trade? Discover Sidely, the CRM for beverage brands!
