Beer Sales Bubble Over

Local and craft beer sales have gained positive momentum in c-stores, but they aren’t expected to replace domestic and import choices anytime soon.

By Jeffrey Steele, Contributing Editor

For decades, America’s convenience retailers have relied on beer to provide a steady flow of revenue and profits. Today, the increasingly localized nature of beer production is helping c-stores brew up opportunities to lure new customers and ring up larger sales.

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One of today’s key trends in convenience store beer sales is the craft beer movement and its capacity to relate a local story.

The record number of breweries now dotting the U.S. means you’ll find local brewers enable convenience stores to market local beers to customers in ways they can’t market, say, local produce.

This craft beer approach is winning fans at convenience stores across the country. Among the chains parlaying the strategy into greater profits is Ozark, Mo.-based Scrivener Oil Co., which runs 11 Signal Food Stores, in southwest Missouri.

“Right now, we have a local brewery [providing product] called Mother’s out of Springfield, another regional beer called Boulevard out of Kansas City and we have Urban Chestnut out of St. Louis,” said Vice President Sean Bumgarner. “All these are craft beers. Those three names could change next week. Everyone wants to try something new. So our challenge is to bring in new things people will like. How do I find them? I try new beers whenever I can, and vendors are good sources. We listen to what the customers are saying they like, too.”

To remain linked to local tastes, more convenience retailers are also growing growler/crowler programs to provide suds from local breweries.

In addition, Signal Food Stores sell a lot of what Bumgarner calls “the old standbys.” Topping this list are 30-pack Keystone, 24-pack Busch and a lot of Bud Light.

“Those are our mainstays still,” Bumgarner said, noting the standbys have a smaller presence in some of the chain’s locations nearer Springfield and the Ozarks, where larger populations and greater student presence increase interest in craft beers, seasonal and special editions.

In Chicago, Foxtrot Market has found there’s a drive to local items across categories, and beer is no exception. Dylan Melvin, the c-store’s beverage director, said there seems to be a pride in provenance and a perception of quality when it comes to its beer selection and customer preferences.

Foxtrot Market currently operates four stores in the Chicago area. Its business model blends e-commerce, on-demand delivery and a striking brick-and-mortar experience to meet consumers’ shopping needs for quick, quality goods and foods.

The Chicago craft beer scene is as strong as ever, with not only an increase in quality, but the variety of brands and styles,” Melvin said. “At Foxtrot, we’ve been able to build relationships with local breweries over the last few years to bring our customers a fresh, curated mix of new and limited releases to discover alongside their everyday staples.”
However, domestic beer sales remain strong at the Illinois retailer.

“Yes, domestic beer isn’t going anywhere,” Melvin said. “Macro still dominates beer sales throughout the country, and is an important part of our beer program—not just ‘light’ beer, but items like PBR and Old Style still maintain popularity among Millennial shoppers.”
The c-store channel is also seeing strong import sales in the c-store channel, as reflected at Signal Food Stores.

Import beers are also big sellers in some of the chain’s locations, Bumgarner said. Mexican brews, including Corona, Modello and Dos Equis are all favorites.

“Heineken does okay,” Bumgarner said. “We recently pulled Amstel out of our last location that had it, because it’s a poor seller for us. And Guinness sells well at certain times of the year, like St. Patrick’s Day.”

Because beer customers come in often, it’s important to prevent beer merchandising from growing stale, Bumgarner said. Signal Food Stores tackles major resets of its beer coolers twice a year, and the craft beer doors and import doors are refreshed more often.

“Anytime we think a current product has slowed down or run its course, we put something new in its place,” he reported. “We sell a lot of the tried-and-true like Bud Light, but we don’t really need to change that up, it kind of sells itself. And a matter of fact, I’d like to put more of my effort behind the crafts and imports, where I’ll make more money.”

Signal Food Stores launches quarterly promotions, putting what Bumgarner terms “excellent prices” on one or two of its old standbys. It also places stickers on the door.

“There’s a lot of competition,” Bumgarner said. “We have digital marketing for all locations, and we’ll put [promoted items] up there. We’ll put up digital signage in store. And if we work better with a vendor, we’ll let their brand have more digital signage space. If they give me a better deal, I’ll give them more space. I like to stay at 5% or 10% margins on promoted times. Depending on competition, we sometimes have to go lower.”

At Signal Food Stores, beer sales are consistent. But at Lawrence, Kan.-based Zarco USA stores, beer sales are expected to see a dramatic metamorphosis come April 2019.

“In Kansas we’re a 3.2 state,” said Zarco USA CEO Scott Zaremba, referencing states where c-stores and grocery stores are can only sell beer that is 3.2% alcohol by weight. “We are one of just four states left. We’ve been working on passing legislation for 23 years, and finally got it passed. Now we’re going to single strength in April. Anything 6% or lower we’ll be able to sell in the state’s convenience and grocery stores.”

Zaremba expects craft beers to be “a huge market for us.” One store features a proprietary barbecue operation, Stanley James Smokehouse. It will have beers on tap.

“We’re going to expand the beer category probably four-fold at both stores, in terms of the size of the display, the facings we have in the cooler and the number of skus we sell.”
Noting nothing is set in stone as of yet, Zaremba said there will likely be an enormous amount of education and advertising about the change.

“We’ll be doing a lot of outreach to customers ourselves, through social media and on-site signage,” he added.

Back at Signal Food Stores, Bumgarner is eyeing craft beers and imports as his future go-to beer categories. He also wants to sell more singles. Noting, “that’s a weird thing,” Bumgarner said he sometimes makes more profit off a 24-ounce single than from a 12-pack.

The retailer makes up to 34% margin on a single bottle or can, versus 5-12% on promotional 12-packs. “The singles drinker is more of a convenience drinker,” Bumgarner said. “If they have to pay a little more for the convenience, they will.”