By Howard Riell, Associate Editor
In terms of volume sales, the largest beer category continues to be mid-priced standard lager, which accounted for a 43% share of total U.S. beer volume sales last year, according to research firm Euromonitor International.
Broken down, the top four brands in the U.S. beer category are all mid-priced standard lagers: Bud Light, Coors Light, Budweiser and Miller Lite.
“However,” Euromonitor stated, “this category has been in decline since the recession and a trend of premiumization persists, where consumers have shown a preference for imported lagers and more flavor-rich beers, like dark beer and stout. Younger Millennials are also a cause for concern, as they are avoiding drinking what their parents drink (standard lagers) and are embracing other beer choices.”
The younger U.S. beer consumer is less loyal and continually in search of the next flavor introduction, according to Eric Schmidt, director of alcohol research for New York City-based Beverage Marketing Corp. (BMC).
“This is one reason why we see seasonal flavors come out earlier and earlier every year, with suppliers trying to get those consumers earlier,” Schmidt said.
“American consumers have grown appreciative of the diverse beer offerings available in bars and restaurants, allowing them to sample intriguing unfamiliar brands and companionship amongst friends without fully committing to a traditional six pack of 12-ounce beers.”
While the stereotypical beer drinker in the U.S. is a working class male, the research group noted, such perceptions have been beaten down of late as beer advances from an avenue through which to unwind from a day’s hardships, to one of varied product appreciation.
“As mass-produced domestic lagers have lost their importance in the U.S. beer market to diverse craft and import options, beers have become an enticing affordable luxury to a broad consumer base,” according to Euromonitor.
In addition, Schmidt continued, brands with an authentic brand story do well, which is a main attribute of craft brands. “I don’t have any numbers on c-store versus supermarket, but I will say that amount of selection offered bodes well for supermarkets who have space to offer that larger selection beyond the mainstream brands. These are typically the higher-priced, higher-margin brands. I think the limited cooler space puts c-stores at a disadvantage.”
The legislative landscape when it comes to beer remains tricky, with local variations the norm.
In Colorado, for example, c-stores are at a disadvantage against liquor stores, which are open on Sundays and can sell full-strength beer. Other states are still prevented from selling beer altogether, while Indiana c-stores are prohibited from selling cold beer.
In October, a Sheetz location in Shippensburg, Pa. became the first convenience store in the state to begin selling wine. A law that was passed earlier this year altered the way alcohol is sold in Pennsylvania.
As reported by the National Association of Convenience Stores (NACS) Sheetz is a “driving voice for reforming how alcohol is sold in Pennsylvania.”
Sheetz sells beer in more than 200 stores across the five other states in the company’s footprint, plus four recent locations in the Keystone State.
Also in Pennsylvania, Rutter’s Farm Stores has been approved to sell beer at two of its York County locations. The company, which operates a total of 66 stores, said it expects to begin beer sales in early October at its store in Mercersburg, Franklin County. It would be the first Rutter’s in Pennsylvania to offer beer. The goal is to stay competitive with retailers like Giant, Weis Markets and Sheetz.
The Rutter’s location will be renovated to include what Rutter’s calls its beer cave. It will have seating for at least 30 people. While the stores are open 24 hours, state law restricts beer sales to 7 a.m. to 2 a.m. Monday through Friday and 9 a.m. to 2 a.m. Sundays. Under state law, customers will be limited to purchasing 16 ounces of beer at a time for in-store consumption and 192 ounces for off-premises consumption. The c-store will sell an assortment of domestic and craft beers by the six pack or individual can or bottle.
While legislation is of course important, the fate of any category hinges on consumer trends.
Meghann Eaton, marketing assistant at Duxbury, Mass.-based VERC Enterprises, the family-owned, 40-year-old retail convenience store/gasoline and car wash group operating 26 stores in Massachusetts and New Hampshire, is also tracking shifting demographics. The customer base for beer is changing because fewer of her stores’ customers grab the normal case of Budweiser each weekend.
“They want to switch it up or try something new,” Eaton contended. “What sells great one month might slow down the next month, but pick up the following month. Carrying a variety is important for these customers, and in a c-store you are, again, challenged with space there.”
Marketing comes with challenges, VERC has found.
“It is tough promoting beer at the c-store level,” said Eaton. “When you are working with small stores that don’t just sell beer, finding space to store buy-down deals is hard. That being said, buying in bulk is saved for our No 1. package of Bud, Bud Light, Coors Light and Miller Lite 18 packs. Then depending on whatever they are offering on a small, buy-down deal, I will run 12-pack deals on the mainstream craft lines like Sam Adams and Harpoon, or imports like Corona and Heineken.”
Eaton said she has seen impressive growth in the singles door and among the non-malted beverages such as SpikedSeltzer, an all-natural, low-carb, gluten-free beverage that contains 6% alcohol, and Truly Spiked & Sparkling.
A c-store can become a beer destination by making a name for itself either for its variety or for having good deals.
“If a customer knows you can satisfy their changing taste buds week after week, you have built a regular customer,” Eaton said.
Eaton said when she talks about options, it’s craft beers.
“The craft brewers have so much of the variety that customers are looking for. You just have the challenge of space for all varieties of craft. We have to let customers know c-stores can carry variety, too, and when they know this, c-stores can thrive.”
Beer Brands Keep Trending
Domestic light beer results through 2016 have been mixed, according to BMC’s Eric Schmidt, with Bud Light continuing to struggle while Coors Light and Miller Lite are up incrementally.
“The star in this segment continues to be Michelob Ultra,” Schmidt said. “Despite changing packaging to America, Budweiser continues to lose volume, although at a slower rate than we’ve seen previously.”
The import segment continues to grow at a strong rate, Schmidt continued, and is helping to stem losses in other categories in the market. Brands like Corona, Modelo and Stella Artois are the strong gainers in this segment, while Heineken is growing but at rates below the overall import category.
Craft beer continues to grow but at a slower rate, said Schmidt. “The larger volume brands are struggling with increased competition from local brewers and a proliferation of brands, seasonals and flavors are making it a very competitive environment.”
Cider, which a couple of years ago was growing at triple-digit rates, has seen that growth disappear with consumers fatigued on flavor and a limited amount of innovation able to supplant lost volume.
The flavored malt beverage segment is seeing strong growth from the hard soda and seltzer segments of the market, which have seen an influx of products and line extensions to current portfolios.