On-Trade vs. Off-Trade: A Quick Guide to Alcohol Sales Channels

The alcohol industry traditionally operates through two main sales channels: on-trade and off-trade. On-trade refers to venues where drinks are consumed on-site, such as pubs, bars, and restaurants. In contrast, off-trade covers retail locations like supermarkets, off-licences, and convenience stores, where drinks are sold for consumption elsewhere.

For budding independent producers and distributors, understanding how these channels work – and how they differ – can have a major impact on your strategy. In this article, we’ll break down the key differences between on-trade and off-trade sales, explore the pros and cons, and help you identify the best opportunities for your brand to thrive in the UK market.

What Is On-Trade?

On-trade refers to the sale of alcohol in venues where drinks are consumed on the premises. This includes a variety of social and service-oriented environments such as pubs, bars, restaurants, clubs, and hotels. When a consumer orders a pint at their local pub or a glass of wine with dinner at a restaurant, they’re engaging in on-trade sales.

In the UK, as of 2022, around 30% of alcohol by volume is consumed at on-trade venues. This is a significant recovery from around 16% during the COVID pandemic in 2020, though it still falls below the 2019 peak of 39%.

For producers, on-trade sales offer more than just a product transaction – they are part of a broader consumer experience. In these venues, drinks are often served with care and attention, creating a moment for the customer. For example, a carefully poured beer in a pub or a perfectly mixed cocktail in a bar can quickly elevate brand perception.

Producers can influence this by offering unique serving suggestions, partnering with the right venues to showcase their products and reach specific audiences, or providing staff training to ensure drinks are served at their best.

In short, on-trade venues allow for a deeper connection between a brand and its consumers. Through personal interactions, like recommendations from bartenders or staff, brands can leave a lasting impression that goes beyond the look or taste of the product. This makes on-trade an important channel for building brand loyalty and delivering a memorable drinking experience.

What Is Off-Trade?

Off-trade refers to the sale of alcohol in retail environments where customers purchase drinks to consume elsewhere. This includes supermarkets, off-licences, convenience stores, and specialised bottle shops. When someone buys a bottle of wine from a supermarket or picks up a pack of beers from an off-licence, that’s an off-trade sale.

In the UK, as of 2022, around 65% of alcohol by volume is sold at off-trade locations. Despite falling from its 80% peak in 2020, the channel remains inflated compared to 60% in 2019.

In the off-trade channel, the consumer experience is more focused on convenience and price. Unlike on-trade, where service and presentation play a key role, off-trade customers are typically looking for quick and easy access to products they can enjoy at home or at events. Producers have less control over the final consumption experience, but they can still influence how their products are perceived through branding, packaging, and shelf presence.

Standing out in the off-trade space requires strong visual appeal and competitive pricing. Since consumers don’t interact with the product until they’ve left the store, packaging design, clear labelling, and recognisable branding become essential tools for attracting attention.

Producers can also work with retailers on promotions or strategic placement to increase visibility and drive sales, making off-trade a valuable channel for reaching a broad audience.

What About DTC?

Direct-to-consumer (DTC) sales are a growing trend in the drinks industry (68% of SIBA member breweries have a webshop as of 2023), offering producers a way to bypass traditional on-trade and off-trade channels and sell directly to customers, often through online platforms. In this model, consumers purchase alcohol straight from the producer’s website or a dedicated e-commerce platform, with the products delivered directly to their door.

DTC doesn’t fit neatly into the on-trade or off-trade categories. Unlike on-trade, the product isn’t consumed at a venue, but it also bypasses any traditional retail environment.

For producers, DTC offers higher margins and more control over the customer experience – from the branding and packaging to direct communication with consumers via marketing, newsletters, or social media. A personal connection allows for deeper brand loyalty, as consumers feel they are engaging directly with the people behind their favourite drinks.

Another major advantage of DTC is the ability to offer exclusive products or limited editions that might not be available in on-trade or off-trade settings. Producers can build unique offerings, such as subscription boxes or personalised packages, which add value to the consumer experience and create a more tailored, brand-led interaction.

However, DTC also comes with challenges, such as logistics and the need to manage distribution networks independently. For smaller producers, the opportunity to connect directly with customers is invaluable, but scaling this model can be resource-intensive. Despite this, the appeal of DTC is changing the way many producers approach the market.

What Are the Big Differences?

Although on-trade and off-trade both involve selling alcohol, they work in very different ways. These differences affect everything from how customers experience your brand to the way products are best marketed, priced, and distributed.

As a producer or distributor, getting to grips with these distinctions can help you tailor your approach to each channel and make the most of your opportunities.

Let’s take a closer look at some of the key differences between on-trade and off-trade and how they can impact your business strategy.

Consumer Experience

The consumer experience is vastly different in on-trade and off-trade settings. In the on-trade, the focus is on social interaction and service. Customers are paying for the full experience: a well-poured pint at the pub, a cocktail crafted to perfection, or a glass of wine recommended by a knowledgeable staff member. This gives producers the chance to influence how their product is served and consumed, adding value through presentation and storytelling.

In the off-trade, the experience is more about convenience. Shoppers are buying alcohol to enjoy later, often looking for value, ease of purchase, and brand familiarity. While there’s less direct control over the drinking experience, producers can still make an impact through standout packaging, clear branding, and strategic placement in-store to catch the consumer’s eye.

Product Range

On-trade environments typically favour a narrower, premium-focused range. Craft beers, niche spirits, and high-end wines are more common in pubs, bars, and restaurants, where consumers are looking for a unique, curated experience. Seasonal and specialty offerings also do well here, as venues often rotate menus to keep things fresh.

In the off-trade, the focus shifts to broader product lines with more options at different price points. Consumers are looking for convenience and value, so larger pack sizes, multi-buy deals, and recognisable brands tend to dominate shelves. Producers might also find success by offering entry-level options alongside premium varieties to capture a wider audience.

However, it's important to note the growing trend of premiumisation across the market. Even in off-trade, premium products, low and no-alcohol options, and wellness-conscious drinks are gaining traction as consumers focus more on moderation and wellbeing. For example, in 2022, one-third of adults consumed no/lo alcohol drinks at least once in the last year.

Marketing

On-trade marketing is all about building brand visibility at the point of consumption. Collaborating with venues on visibility, custom glassware, staff training, or promotions can make a lasting impression. Events, tastings, and partnerships with local venues also help boost brand exposure, as customers look for unique experiences.

In the off-trade, marketing focuses more on packaging, shelf positioning, and promotions. Eye-catching labels, special offers, and multi-buy deals can influence buying decisions in crowded retail environments. Digital marketing also plays a significant role in both channels, helping brands create direct relationships with consumers.

Pricing Strategies

On-trade pricing often supports premium positioning. Higher margins can be achieved by serving drinks as part of an experience, allowing venues to charge more for craft or specialty products. Prices are flexible and can vary based on location, time of day, or even the type of event.

In the off-trade, pricing is more competitive and volume-driven. Multi-buy deals, promotions, and discounting are common tactics to attract customers. Producers might also offer different price tiers, ensuring there’s something for both budget-conscious buyers and those looking for premium options.

Distribution Methods

For the on-trade, distribution often involves wholesalers or regional distributors that work with multiple venues. This model is efficient but offers producers less control over branding and product placement. For smaller producers, self-distribution can work well locally, allowing direct relationships with pubs, restaurants, and bars. However, it becomes more challenging as the distribution radius expands due to logistics and cost.

In the off-trade, supermarkets demand larger volumes and reliable supply, typically favouring traditional distributors. Smaller, independent retailers or bottle shops, on the other hand, may welcome unique, artisanal products and are more suited to self-distribution.

Independent producers often need to weigh the benefits of direct relationships with retailers, which can lead to better margins and brand control, against the scalability that comes with traditional distribution channels. The decision to self-distribute or rely on wholesalers depends largely on a producer’s capacity, geographic focus, and long-term goals.

Licensing and Regulations

Both on-trade and off-trade channels are governed by strict licensing and regulatory requirements in the UK. In the on-trade, venues must hold a Premises Licence and have a designated Personal Licence Holder responsible for alcohol sales. Producers supplying these venues must also navigate local alcohol regulations, which can vary depending on the region.

In the off-trade, supermarkets, off-licences, and bottle shops must sign up to the Alcohol Wholesaler Registration Scheme (AWRS) to ensure compliance when selling to other businesses. Additionally, producers handling larger volumes of alcohol may benefit from working with a bonded warehouse to defer duty payments until the point of sale.

On-Trade vs. Off-Trade: The Pros and Cons

For independent drinks producers, deciding how to approach the on-trade and off-trade channels – or likely navigating both – is a critical part of building a successful brand. While partnerships with wholesalers and distributors can sometimes limit control over the exact channel mix, understanding the strengths and weaknesses of each channel can help producers refine their strategy and optimise their product offering.

The dynamics of the UK market – rising production costs, economic uncertainty, and the continued focus on premiumisation – impact how both channels perform. Producers, particularly those in the craft segment, need to weigh the pros and cons to ensure they are reaching their target customers effectively while maintaining profitability.

On-Trade: Pros and Cons

Pros:

Higher Margins: Premium pricing in bars, restaurants, and pubs allows for stronger per-unit profitability, especially for craft or speciality products.
Brand Experience: On-trade offers producers a chance to shape the consumer experience through product presentation, staff engagement, and brand storytelling.
Consumer Engagement: Direct interaction with consumers through venues builds loyalty and gives immediate feedback.

Cons:

Lower Volume: On-trade sales tend to be more fragmented, limiting the ability to achieve high volumes quickly, especially for smaller producers.
Distribution Costs: Self-distribution, particularly in local markets, can increase costs. While wholesalers offer reach, they reduce margins and control over brand representation.
Venue Challenges: With ongoing pub closures and economic pressure on the hospitality sector, the on-trade market remains volatile, leading to reduced demand and increasing competition for limited taps and shelf space.

Off-Trade: Pros and Cons

Pros:

Wider Market Reach: Retail chains, supermarkets, and bottle shops provide access to a larger and more diverse consumer base, including families and casual drinkers.
Volume Sales: Off-trade typically provides greater volume opportunities, helping producers move more product quickly, particularly during promotions or seasonal peaks.
Longevity: Products can sit on retail shelves for longer periods, offering a more stable, long-term sales opportunity compared to the rapid turnover expected in on-trade venues.

Cons:

Tighter Margins: Due to discounting and competition in the retail space, producers often face lower profit margins, especially when dealing with supermarkets that demand competitive pricing and high volumes.
Less Control: Once a product is on the shelf, producers have less influence over how it’s presented or promoted, relying heavily on packaging, brand recognition, and price points to stand out.
Complex Distribution: Large retailers require consistent supply and scale, which can be difficult for smaller producers to manage without robust logistics or external distribution partners.

Conclusion

For independent producers, a balanced approach to both on-trade and off-trade can unlock growth, but careful consideration is needed. Leveraging the premium pricing of the on-trade while tapping into the volume potential of the off-trade requires adapting your distribution, marketing, and product strategies to the nuances of each channel.

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