The convenience channel continues to experience growth in beer, while there’s also opportunity for growing wine and adult beverages sales in some regions.
By Lisa White, Contributing Editor
There is sizable interest for beer, wine and spirit manufacturers and retailers to work together to win over consumers, according to a new study from IRI.
Millennials, Generation Xers and baby boomers make in-store shopping trips more than once per week, and 40% of buyers walk into the store undecided on what product to purchase. Of the 60% who do have a planned beverage purchase, 21% end up changing their mind in store, and 50% of those who change their mind ultimately buy a different brand than they originally intended.
Certainly, when a convenience category shows growth, it pays to make the jump and become a trendsetter.
Mad Max Convenience Stores, based in Saukville, Wis., has 12 locations in its home state, where the retailer is experiencing increased in-store sales of beer, wine and liquor.
In the last four years, all of its new stores have included an alcohol section, no matter where the site is located.
“We’ve discovered that wine and liquor are markets that the c-store industry as a whole doesn’t want to get involved with, maybe due to regulations or the price points, but it’s a category we need to have, expand on and tweak, depending on the area,” said Steve Magestro, Mad Max’s president.
Liquor has been a part of Mad Max stores’ lineup for about six years, and sales have followed a seasonal ebb and flow. Being up north, these products begin to move in spring and gradually build to a peak season in November and December. January and February are the slowest months for moving beer, wine and liquor.
“Our liquor distributors tell us how grocery stores move these products, and we essentially see the same buying patterns,” said Magestro.
According to data from the Nielsen Co., 23% of convenience stores reported selling alcoholic beverages in 2015, with approximately 82% of these stores selling beer, close to 70% providing wine and about 32% offering liquor.
Although c-stores are not expected to be a primary stop for beer, wine and liquor, customer support makes it evident that there is growing potential in this retail channel.
“We learned over the last four years that it takes two years to mature a liquor market in our stores, for customers to understand we have a full line and for them to tell their friends,” said Magestro. “Will we ever be as big as liquor or big box stores? No, but we will carry the items that turn, and customers show us that it’s worth it by buying the product.”
The success of the category can be attributed partly to Millennials, who are visiting c-stores multiple times a day, rather than once daily or a few times a week like other consumers.
Liquor distributors are starting to realize that, depending on the store’s location, convenience stores can help the segment by expanding sales opportunities. “What’s interesting is, if a c-store is competitive, it will have customers coming in to buy product; however, the wine side is more fickle,” said Magestro. “Wine is like craft beer; stores can’t sell the same wine types year in and year out.”
These offerings have to be constantly changing, as consumers are seeking something different with wine and craft beer month to month.
“With wine, it’s important to foster relationships with suppliers, since they know what’s selling in the big box stores,” said Magestro.
Mad Max relies on a couple of its distributors, which serve as partners rather than just order takers, to determine the best wine varieties to carry.
Jeff Lenard, vice president of strategic industry initiatives, for the National Association of Convenience Stores (NACS), based in Alexandria, Va., has seen more of a focus on local beer and growlers.
“There are a record number of breweries in the country now and many are too small to bottle or can their product, so beer is only available in kegs,” Lenard said. “I have seen stores like Kum & Go and Mendez Fuel both do a great job with growlers and local beer. And then there is Kent Couch, who has 50-plus taps in Bend, Ore.”
Beer, wine and liquor sales and trends are regional and also can vary from store to store in the same city.
In some states, the landscape of retail sales is changing. For example, starting July 1, 2016, Tennessee grocery stores are now permitted to sell wine.
“Although we were not the first c-store in Tennessee to get a wine license, Git N Go was the first c-store chain to acquire a license and start selling wine in the state,” said William Baine, CEO of the four-store operation. “The margin on wine is around 30%, however the category has some additional shrink issues in our space.”
The regulations, licensing fees and ongoing training cost make this an expensive category to get into for retailers in the state. Consequently, this creates a significant barrier to entry in the convenience channel.
“Our stores are in the top quartile in NACS inside sales, and we still expect half of the category margin to go to ongoing costs,” said Baine.
Some Mad Max stores do well with craft beer, depending on the area and its demographics.
IN NEW YORK
Tonawanda, N.Y.-based NOCO Energy Group’s 36 NOCO Express stores started seeing the popularity of spiked or alcohol-infused water and seltzer water rise by mid 2016.
“If a c-store doesn’t currently carry it, it’s in the mix for 2017,” said Heidi Rembecki, NOCO’s director of merchandising.
Varieties include Mark Anthony Brands’ White Claw Hard Seltzer, Boston Beer Co. affiliate Hard Seltzer Beverage Co.’s Truly Spiked and Sparkling Spiked Seltzer.
NOCO Express stores, located in western New York, do not sell wine due to state regulations.
“There is definitely a leaning toward more craft beer, and we have a couple stores centered around these products,” said Rembecki. “It’s important to stay on top of these brands and evaluate new lines as they are launched.”
Designating space for beer, wine and other alcoholic beverages can be challenging in smaller footprints.
NOCO Express stores typically allocate five doors in the cold vault for beer, with some stores incorporating beer caves.
Beer vaults are typically located at the rear of the store or off to the sides, with beer caves adjacent to cooler doors.
“One of our newer locations includes an open air craft case,” said Rembecki. “We’re focusing on craft cases as part of remodels and new builds when they make sense to the area, as this is a growing and profitable segment, though still a smaller portion of the overall beer category.”
Craft beer in cans, as opposed to bottles like in the past, have become more prevalent recently, as well.
Mad Max’s Class C-size stores, which are 4,750 square feet, include 15 coolers and a walk-in beer cave, for a total of 35 linear feet of wine and liquor.
“We make sure to have big walk-in coolers to accommodate these products,” said Magestro. “We believe in the wine, liquor and beer segments and need to expand offerings.”
As impulse items, these products are kept in the front of the stores. This also provides easier accessibility for customers seeking a quick one-stop shop.