Convenience stores are paying heed to customers’ thirst for better wine selections.
By Howard Riell, Associate Editor
Wine usually isn’t top of mind for consumers when they stop at a convenience store—which is why operators need to draw their attention to the category, which can provide some good incremental sales.
This past August, Technomic reported that on the heels of strong volume growth earlier in the decade, the wine industry’s upward trajectory continues, but the rate of growth has decelerated. In 2014, total wine volume rose 1%, and projections for 2015 and beyond call for a similar pace of industry expansion.
While the leading wine brands achieved mixed results, the fastest-growing wine brands reveal that a range of variety of styles, varietals and regions appeal. The roster also shows consumer interest in wines with interesting back stories and philanthropic connections, unique production methods and convenient packaging.
Vivien Azer, who last year joined Cowen and Co.’s equity research department as director of beverages and tobacco, called wine a stable and healthy segment right now.
“It continues to grow at a single-digit clip (among convenience, food, drug and mass retailers, which Cowen measures together),” Azer said. “It’s a very healthy, solid grower.”
Over the most recent 12-week period, she added, more than 90% of sales did in fact come through those retailer channels.
“Wine in convenience stores is more expensive than in food, drug and mass retail,” Azer said. “Keep in mind this Nielsen data does not capture specialty wine stores; that is where you are going to buy your expensive bottle of wine. And so when I look at just the grocery store channel the average price point for a bottle is about $4, and it’s about twice that when you add convenience stores in, even though they only account for about 7% of the category. That makes sense because the convenience stores are not carrying the massive jugs of wine and boxes of wine. It’s largely a 750-milliliter format.”
The keys for c-store operators, in Azer’s estimation, should be maintaining affordable price points and keeping in mind that in their locations wine is more of an impulse, drop-in type of purchase.
Azer would not be surprised to see wine continue to grow in the c-store channel.
“Wine is a highly-fragmented category with not a lot of brand loyalty,” Azer said. “There are hundreds and hundreds of players in the market. Even the biggest manufacturers have only a 20% share. This is not a highly-concentrated category like soda.” Wine-buying c-store shoppers generally look for the right varietal and an attractive label, she added.
Azer urged c-store operators to stick with the wine category. “I think if it offers an incremental sales opportunity then yes, it should make sense.”
TYPE, PRICE AND BRAND
Most wine consumers look at type, price and brand of wine when making their selection, said Katen Patel, a merchandising director for 7-Eleven, which is a linear way for retailers to approach wine sales.
“Merchandising the wine by type, followed by price, can help the consumer make their decision. This also helps our employees narrow down what the customer may be looking for based on their price range,” Patel said.
Patel recommended placing bottles in order, from the most expensive, closest to the register, to the cheapest. “Most wine consumers come into the stores knowing what type of wine they are looking for. Depending on their price range, they are able to select which one fits their budget.”
The optimal price range for wine in a convenience store setting can be anywhere from $5 to $25, Patel has found. “I think as a c-store, within that range, we cover most of our customers’ preferences.”
Patel said he is also a proponent of cross-merchandising wine with upscale beers. “Craft beer has done a great job of capturing the Millennials, but more importantly the female consumer. Cross-merchandising wine with craft beer makes sense for that reason.”
C-stores can go wrong when it comes to selling wine by carrying too large a selection, according to Patel.
“While some may think that having a lot of selection is good for our customers, it confuses them and makes it more difficult for them to decide what they want,” Patel said. “We are not a liquor store, and it is better to pick and choose the top-selling wines and brands to meet the needs of the everyday customer.”
Lynette Henry, a manager at Daigle’s Phillips 66 in Jennings, La., said her location has developed a loyal core of repeat customers. “We are a store that pretty much sees our regular customers, the same people, every day. We don’t advertise; we have ConocoPhillips gas, and they don’t allow signage—so we just direct people to the wine.” Employee training on wine has been deemed unnecessary, she added.
Daigle’s Phillips 66 carries about some 50 wine SKUs, ranging in price from $2-$15 per bottle.
“We don’t have too much expensive wine in our location,” Henry said. The bottles are merchandised in a couple of cooler doors. Holiday displays are added near the front of the store.
Henry said that women have proven her most consistent wine customers. “A lot of women like to relax after work. They want to pick up some wine and go home.”
Because of its strong repeat business, Daigle’s Phillips 66 makes it a point to act on customer requests.
“If our customers ask for it then we get it,” Henry said. “As long as they buy it then we don’t mind getting it. As I said, we pretty much have regular customers, and so we’ll get one or two things for them that we know will sell.”
Selections of wine can vary greatly, making it harder to know what will sell, and to help customers make an informed choice.
“Most c-store employees don’t have an extensive knowledge of wine, if any at all,” said Holly Kruep, president and CEO of Karco Inc., a wholesale fuel company in Mount Vernon, Ill. “A one-page cheat sheet next to the register with the varietal, dry-to-sweet ratio and food pairing will help them answer a customer’s question.”
Kruep is a c-store industry veteran who served as the marketing director for the 10-unit One Stop convenience store chain that operates in southern Illinois. Karco eventually sold the stores to Alimentation Couche-Tard’s Circle K in July 2012 before purchasing a chain of 13 RollnUp Smoke Shop & Liquor stores in the region.
Kruep suggested that c-store operators keep their wine sets simple—both for staff and patrons.
“Varietals together: top shelf highest price to bottom shelf cost-conscious brands. The shelf set should flow from dry to sweet, with whites and red. Locals and box wines are in their own section,” Kruep said.
Regarding ordering, one mistake that c-stores can avoid is trusting sales representatives too much to determine what sells best.
“When a salesperson tells you he sold so many cases of XYZ wine in your market, ask for specifics,” Kruep said. “They may sell XYZ wine at a high-end dining establishment, but it may not be the best fit for your store set. A c-store shopper is probably not going to invest in a $50 bottle.”
C-store retailers must do the research and find out the best most trusted brands under $15, Kruep stressed. They should make sure when purchasing a new wine SKU offered with promotional pricing that they know the everyday cost. Even if the wine proves popular, the sudden jump in price could scare customers off.
“When a new wine is pitched they may have a buy three bottles for the store at an intro price offer. When you sell through that SKU and reorder a case the cost can be significantly higher,” Kruep said.