Consumer preferences continue to trend toward craft, import and flavored malt beverages.
By Brad Perkins, Contributing Editor
In convenience stores, overall beer sales—impacted mostly by dragging domestic sales—rose less than 1% for the 52 weeks between October 2016 and October 2017, and down 1.2% for the month of October, according to Nielsen C-Store Data.
The Brewers Association, which promotes small and independent American brewers, announced in December that there are now more than 6,000 craft breweries in the U.S. These “small, independent and traditional” breweries accounted for $23.5 billion in retail sales and a 6.2% increase in volume sales last year, which is driving craft beer sales in many regions.
“The high end is beginning to hit critical mass with over 40% share of beer volume,” said Brian Sudano, managing partner of Beverage Marketing Corp. “We expect the high end to grow in mid-single digits, which will offset declines of around 2% we are projecting for premium and value brands.”
As tastes change and shift away from macrobreweries and value brands, craft beer and imports can be the main driver of a successful beer strategy.
“You can count on Bud Light leading the majority of markets, which is why it’s hard to win as they have been down mid-single digits in 2017,” said Chris Cope, category manager at Pilot Flying J. “Beyond the leader, the trends for craft, import and flavored malt beverages (FMB) are going to be strong.”
Of course, there will always be stalwart followers of Budweiser, Miller and Coors. But with higher price points, more distinct and varied flavors and non-traditional sizes of packaging, craft beer will continue to grow.
“We are definitely seeing a shift to craft beers, imports and FMBs,” said Mike Clifford, category manager at Clifford Fuel, which operates 18 stores in central and western New York. “It’s a premium price point that you don’t have to put a discount to, so you can make more margin off those categories.”
That’s important as market changes and tastes dictate greater discrepancy in offerings.
“It has become tremendously more challenging to meet the demands of today’s customer as it has transitioned from three light beers and three value beers to every region with up to 10 subcategories,” Cope said. “With more options than ever, customers expect to find a product that meets the occasion.”
CONSUMING LOCALLY
It’s clear that expanding beer options is a key component to success. But how do convenience stores get started? By partnering with suppliers and local breweries and using social media tools that show what’s popular in a given area.
“With the number of breweries dramatically increasing over the past five years, the definition of ‘local’ beer is becoming a smaller radius around each brewery,” said Jake Hafele, category manager at Kum & Go. “Consumers are looking for more “hyper-local” options when purchasing.
We use our partnerships with local breweries and beer distributors to keep a pulse on the demands of local consumers. We rely on their expertise to help us identify the correct beers for the correct stores. We also use beer rating websites and apps such as Untappd to see what beers consumers are excited about and recommending to their friends.”
Although well-known brands still take up the majority of shelf space, customers are looking for options beyond the usual six- or 12-pack of lager.
“Imports and premium options such as Corona, Modelo and Michelob Ultra continue to flourish,” Cope said. “Flavored malt beverages such as Mike’s, Twisted Tea and Four Loko will continue to grow within the single-serve markets. We should also see established craft brew players emerge as front runners; for example Goose Island, Lagunitas and Sweetwater. With single serve continuing to drive growth and margin, it is important to have a great promotional strategy and sku assortment to compete.”
Single serve is a key area of growth, as breweries experiment with different-sized cans. Founders was the first to release a 19.2-ounce can with its All Day IPA. Other brewers like Sierra Nevada, L agunitas, Dogfish Head and New Belgium are also reportedly coming out with the large size cans.
“A lot of them have come out with 16-ounce and 19.2-ounce cans,” said Clifford. “It seems like it’s a focus from the bigger craft breweries. That was the one thing that we were missing. Now we’re able to have the craft offering for the single offering.”
HIGH ABV
Mintel’s research showed that can production has increased 30% since 2012, while bottle output decreased the same amount. In addition to cans, breweries are also experimenting with higher ABV in larger packages and lower ABV session offerings that will vary from the usual IPA into golden ales or lagers.
“High ABV beer products are experiencing strong growth, especially in flavored malt beverages,” Sudano said. “Major brewers going after the high ABV space. Large bottle and can sizes are expanding as companies launch increasing numbers of brands in large multi-serve packages.”
In addition to adding shelf space, many stores are adding dedicated spaces. Clifford Fuel added beer caves in two new stores that led to double-digit increases in sales percentage. And Kum & Go partnered with local breweries to add growler filling stations.
“Adding growlers to our beer offering has helped expand our beer sales and attract new customers,” Hafele said. “Consumers are looking to have beer packaged in a way that is convenient for their specific needs at the time, whether that is craft beer in a single serve, a package of cans, bottles or even a growler. And with consumers in search of more local beer options, selling growlers has been a great way to meet this demand.”
Tailoring stock to what’s popular in the each area helps. But it still comes down to offering choice.
“Expand offerings of high-end beer,” Sudano said. “Focus on local craft, Mexican imports and high ABV FMBs. Mainstream beer should be reduced as part of mix as there is still demand for it but it is shrinking.”
And craft beer, FMBs and ciders can replace such demand, enabling c-stores to bring in new customers, Cope said.
