Beer continues to be an essential category for convenience stores and one that requires more than the usual amount of observation, knowledge, planning, execution and overall savvy.
According to The Nielsen Co.:
• Nearly 787 million cases of beer were sold in the c-store channel during 52-weeks ending March 6, 2010; down 1.5% from 799 million cases the prior year. Dollar sales were up 0.4% to $15.1 billion.
• Domestics are down 1.2% in case volume and up 1.2% in dollar sales in the c-store channel.
• Imports are down 7.4% in case volume and down 7.5% in dollar sales among c-stores.
• Craft/microbrews are showing double digit growth in both dollar and case volume in the c-store channel.
“We’re seeing a growth almost across the board,” said Lundy Edwards, general manager for Forward Corp., which operates 28 Forward-branded convenience stores in Standish, Mich. “About 52% of our SKUs sold are in single sales. That’s an abnormality in the industry.”
What Edwards sees happening in the beer category is this: “The budget end going up makes sense with the economy where it is. That one’s a no-brainer because people are trading down,” he said.
Consumers who shop the craft and upper-end segments are not feeling the same pain, however.
“There is a certain portion of society that is still not in dire straights,” Edwards said. “That segment of people is not brand-loyal, which is no different than the upper end of the scale in the wine and liquor business. They tend to try new things, so what we’re seeing is that the people who were loyal to Budweiser or Miller are still drinking their Millers and Buds, but they’re also moving into that upper-end segment and trying these new craft and specialty beers that are coming out.”
Forward has expanded its single sales area to more than a door for the first time. “We run a five-door set that includes a door-and-a-half of just single beers,” Edwards said. “We’ve also expanded our craft beer SKUs this year about another 10%.”
Overall, the chain’s percentage of total inside sales, not counting lottery, that come from beer is 11.16%.
Premium and sub-premium beers are also being merchandised in the same doors. “We’re just merchandising the premium beers across the ‘eye-to-thigh’ section and doing our sub-premiums on the tops and bottoms of those doors instead of segmenting them,” Edwards added. “It seems to have allowed us to have growth in those categories.”
Twenty-six of Forward’s 28 stores have liquor licenses.
Fuel to the Fire
Huck’s Convenience Stores is seeing a lot of the large economy packages like Keystone Light flying out of its doors. Craft beer sales also are strong as the chain continues to promote its popular “Choose Your Brews” section, where customer can assemble their own six packs from the beer brands offered in the cold vault.
“We just went through a planogram change as we do every year around this time,” said Todd Jenney, CEO of Martin & Bayley Inc., which operates the 104-store Huck’s chain. “We honestly look at the space-to-sales, and we continue to put in cooler caves as we open new stores.”
Steve Boomershine, director of category management for Thorntons Inc., operator of 161 stores in Louisville, Ky., said most c-store operators are probably only taking a look at their sets once a year. “If that’s the case, I think it adds fuel to the fire that you absolutely have to be taking a look at your sets at least twice a year,” he said. “Certainly as you take a look at this economy you’re going to have to continue to monitor your offering. I suspect that as you do, once this economy turns around you may see some of that below-premium business go back to the Buds and the Millers of the world.”
Nor, Boomershine added, will that turnaround happen any time soon. “I just sat in at the NACS state-of-the industry meeting in Chicago, and based on what the economists said at that meeting, I would not anticipate an economic rebound in 2010.”
But if you look at the economy, the people who have been hit relatively lightly by this recession haven’t had to change their beer-buying habits at all. “The craft buyer is still there and he’s looking at new items and thinking, ‘Let’s try them,’” Boomershine said.
Brewers are spending more time creating new items in super-premium and craft areas than they are in the import business, resulting in more new offerings. “That would explain why they’re up,” Boomershine said. “Those are extremely small bases of the beer business in relation to the imported piece of the business. If we take that above-premium piece and say it’s made up of imports, crafts and super-premiums, imports would make up the largest share of that business. That’s why it’s going to take a little bit more for them to move that needle.”
The crafts and super-premiums represent a small share of that above-premium business so anything new would have the ability to move that needle a little quicker, which is one reason why those numbers are growing.
Boomershine urged operators to do a better job rationalizing the bottom end of their beer doors if they are not improving the bottom line. “It may be one piece of the puzzle you probably haven’t taken a look at in the last five years because up until the last two years the economy has been relatively decent,” he said. “Now all of a sudden you’re looking at that piece of the cooler and thinking, ‘How do I make it work better for me?’”
Grow the Category
It’s imperative to the long term success of the category that convenience store retailers spend the time to study their beer sales, said Nick Lake, Nielsen’s vice president and group client director-beverage alcohol.
“The reason it’s got to grow for retailers is because it is such an important category to their gross margin,” Lake said. “Where beer is legal it’s the No. 2 or No. 3 contributor to in-store gross profits. It’s got to grow.”
As far as the beer industry is concerned, the past decade has shown that when beer sales slow in the convenience channel the industry itself is down, which is easy to understand since a little more than 30% of all beer sales come in the channel. “What that says,” Lake noted, “is that this is a very important category for retailers and the channel is very important for brewers and wholesalers.”
The most effective way to grow sales is matching the right assortment to your customer base, Lake noted. “The assortment has got to be tailored, not only to the chain, but to the individual store,” he said. “A store in an upscale suburban neighborhood needs a different mix of products than a store in a downscale urban neighborhood.”
Secondly, he said, stores must offer cold beer—the colder the better. “That seems intuitive, but if you have the right assortment and it’s in stock, customers will come to your store to buy beer.”
Third, recognize that 50% of unit volume in convenience store beer sections comes from singles. “You have to have a viable singles program. Viable means having the right brands priced correctly,” Lake said. “I’m not suggesting that convenience store retailers get overly aggressive on price, because at the end of the day they’re still selling convenience. But they also have to ensure that they’re priced competitively with each other and
with the other retail channels in town. It doesn’t have to be the lowest price, but it’s got to be competitive.”
Finally, Lake said, he recommends that retailers figure out how beer plays into their foodservice offerings. “More and more retailers are spending a lot of time, money and effort on going after foodservice whether that is prepared meals, take-home pizza or hotdogs on the run,” he said. “You need to be able to tie beverages, and in particular beer, back into that equation. For example, if you’re doing pizzas, why not do a bundle deal with a six pack?” CSD