Alcoholic beverages provided one of few bright spots for c-store retailers last year, as customers flocked to convenience stores for large packs of beer and hard seltzer to help them weather lockdowns and social distancing rules.
As customers looked to relieve the stress of the pandemic, many also treated themselves to wine or pre-mixed cocktails at the end of the day, said Datassential Trendologist Mike Kostyo. And as lockdowns limited restaurant outings and large social activities, many customers partook at home. All of which meant c-stores were racing to keep beer caves and coolers stocked ahead of demand.
Dollar sales for beer grew 8.6%, hard seltzer climbed 251.8% and wine was up 19% for the 52 weeks ending Nov. 28, 2020, reported market research firm Nielsen.
With the COVID-19 pandemic far from over, retailers are boosting their alcoholic beverage sections to prepare for a busy Q1 in 2021.
Adapting to the ‘New Normal’
At Clark Oil Food Stores, with 49 locations across Mississippi and Alabama, alcoholic beverage sales were up over 14% in 2020. Vice President Herb Hargraves noted Clark Oil Food Stores customers were gravitating toward hard seltzers, vodka soda, tequila cocktails and other canned spirits.
With the exception of two weeks in March, the chain saw double-digit growth week-over-week overall, with general merchandise, grocery and packaged beverages among growth drivers.
Hargraves attributed the chain’s success to remaining open 24/7 throughout the pandemic, ensuring customers knew they could count on the stores for their needs any time. That included the alcoholic beverage segment.
For example, when the aluminum can shortage hit, the chain struggled with out-of-stocks in its alcoholic beverage section but worked fast to find a solution.
“I immediately got with the beer vendors and our packaged beverage vendors and said, ‘Look, throw the planograms out the window. Whatever you can bring me, bring me, and just fill my shelves,’” Hargraves said.
The strategy kept sales soaring throughout 2020.
What’s more, in Mississippi, it became legal to sell spirit-based products with an alcohol by volume (ABV) below 5% in stores with a state-issued beer permit in 2020.
“In the past, spirit-based products could only be sold in liquor stores,” Hargraves said.
Hard seltzer was up triple digits for the chain, with White Claw at 53% share of the seltzer sales, Hargraves noted. “And that number is with significant inventory challenges. Consumers expect us to have their flavor available — that flavor would be ‘variety,’ as the majority of seltzer sales are through variety packs,” he added.
Craft beer also performed well for the chain in 2020. The beer segment was up double digits, with 50% of the sales from local and regional crafts. In light of the pandemic, customers have gone back to brands they are familiar with, Hargraves said. “We are seeing previously declining core brands return to growth. Larger packages are being purchased. (We’re) looking at average unit dollar-sales-per-store increases in 18-packs (+31%) and 24-pack sales (+34%).”
Hargraves saw preferences play out by age group. The 21- to 28-year-olds are not brand-specific and are more interested in variety.
“They’re willing to try different flavors,” he said. “For example, Bud Light Seltzer came out with an Ugly Sweater 12-pack, which had some really interesting flavors in there. And they’ll buy that variety mix pack just to try the flavors, to see if they like it, even though it’s just a seasonal flavor.”
Meanwhile the 28- to 38-year-old consumer gravitates toward the tequila, vodka and rum-based cocktails, while the 45- to 55-year-olds are looking for traditional domestic beers such as Bud Light, Miller Lite and Coors Light.
To keep up with demand, Clark Oil expanded its hard seltzer and flavored malt beverage offerings in 2020, and it plans to do the same in 2021.
GetGo Café + Market, which operates 265 stores in Pennsylvania, Ohio, Indiana, West Virginia and Maryland, is seeing record sales growth in beer, as well as in wine at stores where it can legally sell the items cold. And, in areas where restaurants and indoor dining have been either closed or limited, the chain is seeing 25-30% increases in alcoholic beverage purchases.
“During the early stages of the pandemic, we became a destination for beer and wine, and the customer has continued to trust us with their business,” said Jon Cox, vice president and chief merchant for GetGo.
In the states where GetGo operates, alcohol rules vary, and as a result, so does the chain’s offering.
“In Pennsylvania, we have added our new Spiked Slushy lineup. A customer can come in and get a frozen alcoholic slushy in four different flavors,” Cox said. “In Ohio, we have added low-proof alcohol (including rum and vodka) in most of our stores. In all stores, we have expanded our seasonal beers as customers look for the one-stop shop solution as well as seasonal wine varietals.”
Due to the pandemic, “for alcohol specifically, we are seeing a transition into larger pack sizes as people are choosing to stay at home and not go out,” Cox said.
When it comes to beer, GetGo sees 15-pack and 18-pack cases of core items selling well.
“We are seeing a 20% increase in core items,” Cox said. “Craft beer is up double digits, but seasonal beer is up 50% (over last year).”
Wine became a destination for GetGo during the pandemic, with the chain doubling its wine volume compared to the previous year.
Hard seltzer saw 20%-plus increases in 2020, even as hard seltzer and some core canned beer items were “hit hard” by the aluminum shortage, which caused out-of-stocks.
The hard seltzer sales surge was enjoyed across the retail industry in 2020. According to Datassential’s Future of Drink report, 40% of adults of drinking age had a hard seltzer in the past month.
“On the foodservice side, hard seltzer was the top-growing item on menus overall last year,” Kostyo said.
New Year Expectations
Looking to 2021, Cox expects the alcoholic beverage category to continue to grow at 20%-plus for the first part of Q1. “We expect it to level off slightly once we start to cycle at the end of March,” he said.
Hargraves expects hard seltzers and craft beers to continue to expand and grow share, and for Mexican imports to continue on their current growth path. Clark Oil Food Stores is set to remodel its beer caves in 2021 to
accomodate the expanding category.
“We’re looking to reset all of our coolers by the March-April time frame. COVID did put us a little bit behind, so that’s why we’re not doing it at the beginning of the year like we normally would,” he noted.
The chain has roughly 30 beer caves and will be adding racks to allow for multiple levels, so it can fit more product and triple its variety. It expects to be finished remodeling the beer caves by April. “Our cooler is busting at the seams,” Hargraves said. “We’re having to take some 12-packs out of the cooler doors and bring them into the beer cave so we can have the pack out that we need.”
In 2021, customers may be looking to celebrate as lives return to normal, “which will include alcohol,” noted Datassential’s Kostyo, but he added customers are also likely to be more mindful of their health.
“They may not have eaten particularly healthy in the past year, and a global health crisis will still be on their minds, so they’ll look to incorporate more health-driven habits next year,” he said. “This push and pull between wanting to celebrate and enjoy some relative normalcy again in 2021, while also looking for healthy options, means there will be an opportunity to give consumers the best of both worlds next year.”
That could mean stocking alcoholic beverages that include healthy and functional ingredients.
“Sometimes a product that has that health-driven ingredient like a superfruit or fresh-pressed juice can give the consumer the permission they need to indulge,” Kostyo said.
He expects to see the hard seltzer segment evolve in 2021. Look for customers to seek out new and interesting flavors and formats that are adding excitement to the hard seltzer category.
“In the same way that hard seltzer grew out of the non-alcoholic cider trend, we’ll also see more operators and manufacturers looking to make every on-trend drink ‘hard,’” Kostyo said. “There are plenty of hard teas and hard kombuchas hitting the market, which also hit that ‘healthy indulgence’ need state.”
In good news for beer and craft beer, customers are already anticipating getting back to social gatherings in Q3 of 2021, and beer is a social beverage, Kostyo pointed out. “We expect next summer to be big for beer, so operators should start preparing their strategy and marketing now. We also expect to see a lot of the beer trends we were seeing prior to COVID-19 spike again, like sours and coffee beers.”
Kostyo expects that wine, like beer, will benefit from renewed socializing in the back half of 2021.
“Rosé will see growth again, particularly in the summer, and it continues to impact other categories, with rosé-style beers, ciders and hard seltzers also attracting interest from consumers,” he said. “Sparkling wines should be marketed for their celebratory potential for parties and celebrations, including 2021 holidays. Canned wines and natural or biodynamic wines will also continue to grow, particularly with younger consumers.”
The Future of Drink report also pointed to drink delivery as a major trend. The biggest issue with implementation can be legality, Kostyo noted, but c-stores are in a good position as they can sell packaged products.
“It’s absolutely something that c-stores should have on their radar in the future,” he said. “Overall, 63% of consumers say they are interested in alcohol delivery, and awareness of the option continues to grow.”