Craft beers continue to entice convenience customers with homestyle brands and broader selections.
By Howard Riell, Associate Editor
Craft beer has been a surprising boon to the convenience store channel for the last couple of years. As more specialty beer options have flowed, consumers have spent more and retailers have responded in kind with a variety of fresh and flavorful types.
For the 52-week period ending Nov. 1, 2015, Chicago-based IRI’s Infoscan review shows convenience store sales of $785 million, a steep 29.4% increase over the same period last year. Some top brands include Samuel Adams, Sierra Nevada, Shiner, New Belgium, Lagunitas, Small Town and Sweetwater.
“Craft beer is well-aligned with rising consumer expectations around c-store environments and product selection,” said Chris Randall, managing director and partner in L.E.K. Consulting’s Consumer and Retail practice in Boston. “The upscaling of the in-store food-and-beverage programs across many operators is a great analog for the craft beer opportunity.”
There’s an opportunity for convenience stores to align and benefit from increasing consumer focus around local products, creating the means for retailers to use the adult beverage choice as another trip-driving solution for a growing sect of consumers, Randall said.
NOTHING LACKLUSTER
Vivien Azer, managing director with the Cowen Group Inc. in New York City, agreed that it’s a good idea for c-stores to widen their craft beer selections.
“The beer industry broadly—from a volume perspective—has been relatively lackluster since we came out of the recession,” Azer said. “But there is some real bifurcation in terms of growth. Craft beer has been consistently growing by double-digits since 2010, with the rest of the growth really concentrated in Mexican imports.”
Fueling the growth, Azer added, is craft’s sense of authenticity, local appeal and more robust flavor profiles.
Craft/Domestic Specialty Beer volume grew at a 10.5% clip at a $35.37 average case price for the 52 weeks ending Nov. 7, 2015, according to Nielsen-tracked data. For the same period, volumes for premium light, premium regular and below-premium beers fell by 0.9%, 1.3% and 3.7%, respectively. Mexican imports rose by 12.7%. She expects the strength of craft beers in the c-store channel to continue.
“Our survey data would suggest that Millennials show an outsized preference craft beer, which leads us to believe that really the only limiting factor is the discretionary dollars available to that consumer to spend more money on beer,” Azer said.” But, they certainly have an outsized preference for the product.”
YOUNGER CROWD
As older patrons continue to be loyal to certain beer brands, younger consumers—including Millennials—tend to search out particular craft selections that they hear about on social media or via word of mouth.
“We do sell it because there is a demand for it right now,” said Bill Walsh, general manager of Wood Oil Co. of Vacaville, Calif. Almost all of Wood Oil’s five locations carry craft selections.
Walsh takes issue with those who say craft beers are too expensive to sell well in c-stores. “That is completely wrong. People go looking for it nowadays.”
In making craft choices, Wood Oil bases its decisions on input not only from vendors and consumers, but from store employees.
“We’re people too,” said Walsh. “Sometimes you go back on your own experience. We picked up (Heretic Brewing Co.’s) Evil Cousin… and a couple of the other ones just because we like them. We have put them on the shelf and we have seen the consumer take a liking to them.”
Input from consumers and vendors, however, remains critical to determining patron preferences, Walsh added.
“For me it’s always being aware of your customer base, knowing what your customers are interested in and what they are looking for.”
Walsh works overtime, literally, to gain those insights, studying what’s trending in the craft market.
“A lot of managers and owners I know don’t work later,” said Walsh. “I will go to my stores later on Friday evening or Saturday evening and see what those customers are purchasing. I could always look at the numbers, but I want to see them come in groups and look at my cooler and talk about what they’re looking to buy. That’s how I know social media is so important.”
Most of Wood’s craft buyers tend to belong to a younger crowd of consumers, Walsh noted.
“When it comes to the alcohol, basically you are looking at the younger generation,” Walsh said. “They have heard about it, read about it on the Internet or seen a story on it so they want to experience it, too. We don’t see a lot of young people running to grocery stores. They are going and getting gas and seeing it when they come into the store.”
ENHANCING MARGINS
Friendly Express, which operates in South Georgia, has experienced an 18% rise in craft beer sales over the past year. The company has responded with expanded space for more offerings.
“We’re doing pretty good with it. It’s not a big category, but it is growing, and it’s large margin growth category for us,” said Ken Johnson, director of marketing for 36-store Friendly Express, Inc., based in Waycross, Ga. “It’s definitely enhanced my margin in my beer category.” The average price for a six-pack of craft brews in his stores is $12.99.”
Now, 20 Friendly Express locations stock craft brands—a number that will increase in 2016. Stores stock from 10-20 craft varieties.
“We are seeing the Budweiser drinkers going up to the crafts and among the Millennials, we are getting a lot of people asking for certain brands that I’ve never heard of,” Johnson said. “There is so much. Probably the whole chain will have at least a pretty decent sized offering of crafts.”
Johnson said he has been following the category dutifully, attending multiple craft beer shows this year. He also notes requests from steady shoppers.
“Some of the smaller microbrew stuff here in Georgia isn’t real easy to get for a c-store; they don’t make enough product to get down to our level.”
But the c-store is still pondering devoting a shelf next year exclusively to Georgia breweries.
“In Atlanta, there are four decent-sized micro or craft breweries. My Miller wholesaler, who is a big craft proponent, has talked about making a real designated spot for Georgia craft to highlight that segment.”
Merchandising, including both signage and lighting, is also helping move product. “We’re not doing the gaudy neon, but we are doing LEDs, which actually look kind of cool,” Johnson said. “They are cleaner, and it’s just kind of a different look.”
L.E.K. Consulting’s Randall suggested, success in craft sales can be had by finding the right assortment of beers, which must be merchandised consistently and supported with marketing, promotions and in-store signage.
However, there’s more to consider.
“First, work with small local distributors that know the local craft beer scene,” said Scott Kerkmans, instructor and program coordinator for brewing industry operations at Metropolitan State University of Denver. “Then search out the closest craft breweries that package their products. Do your best to highlight local and seasonal offerings, which are the biggest market drivers right now.”
