Battle of the Brews
By Don Longo
The convenience channel holds the largest share of beer sales among all retail channels, and total beer sales at c-stores are growing. However, the channel is losing beer share to supermarkets and liquor stores, which are growing faster, according to Nick Lake, vice president, client services, for the beverage alcohol group of The Nielsen Co.
Lake was a special guest presenter at Convenience Store News' 2008 Cold Vault Roundtable, held in St. Petersburg, Fla., in late March. The research executive presented a review of channel competition, the c-store consumer and the convenience beer business.
Among Lake's main points:
-- The convenience channel is under intense competitive pressure as many retailers and formats are attempting to encroach on the convenience positioning.
-- The core convenience shopper is being significantly impacted by current economic conditions, including rising gas prices.
-- Imports, super premium, crafts and mainstream light beers led share growth last year among the beer segments, but are significantly underdeveloped in the c-store channel.
-- The premium light segment generated nearly 50 percent of actual dollar growth in the convenience channel.
-- Healthy pricing in the category boosted dollar growth.
-- The majority of c-store beer unit volume comes from small packages, although large packs (18-plus) are growing share as c-stores compete for the multi-pack consumer.
"C-stores are the largest off-premise channel for beer and showed the second largest growth in total dollars versus a year ago," said Lake. Convenience stores accounted for $14.8 billion in beer sales in 2007, according to Nielsen data, but grew by only 1.9 percent, or $272 million. In contrast, supermarkets garnered $8.5 billion in beer sales last year, but grew by 4.4 percent, or $356 million. Drug stores, meanwhile, generated $800 million in beer sales last year, yet grew by 4.1 percent, or $32 million.
Lake told the retailers around the table that beer should be used as a catalyst to increase the dollar basket ring within the cold vault and the entire store.
Within the beer category, imports, super premium, crafts and mainstream light brands led the share growth, and mainstream light was the top dollar sales growth segment in the category while "high-end" segments also had strong growth.
Nielsen data also showed that the category has experienced moderate price increases across all segments, from a high of $1.15-per-case increase for flavored malt beverages and wine coolers to a low of 15 cents per case for "near premium" brands.
The majority of c-store unit volume comes from small packages (51 percent for singles, however large packs (18-plus) are increasing share (9.1 percent, up 0.4 points).
Growth in mainstream 18- and 24-pack bottles (up 26 percent) and economy 30-pack cans (up 15 percent) highlight the growth of large packs, according to Lake.
Lake concluded with these recommendations for convenience retailers:
-- Each beer segment plays an important role in overall category management strategy.
-- Retailers must target assortment by store to maximize ROI.
-- The premium/premium light segment needs to be the cornerstone of c-stores' core beer category strategy because these products drive traffic.
-- Imports, crafts and super premium provide significant upside for the convenience channel, so it is imperative to identify a strategy for these segments.
-- The below-premium segment is important to the convenience channel, but should be strategically managed to avoid trading down by consumers.
-- An appropriate mix of singles and large packs is critical.
The convenience channel holds the largest share of beer sales among all retail channels, and total beer sales at c-stores are growing. However, the channel is losing beer share to supermarkets and liquor stores, which are growing faster, according to Nick Lake, vice president, client services, for the beverage alcohol group of The Nielsen Co.
Lake was a special guest presenter at Convenience Store News' 2008 Cold Vault Roundtable, held in St. Petersburg, Fla., in late March. The research executive presented a review of channel competition, the c-store consumer and the convenience beer business.
Among Lake's main points:
-- The convenience channel is under intense competitive pressure as many retailers and formats are attempting to encroach on the convenience positioning.
-- The core convenience shopper is being significantly impacted by current economic conditions, including rising gas prices.
-- Imports, super premium, crafts and mainstream light beers led share growth last year among the beer segments, but are significantly underdeveloped in the c-store channel.
-- The premium light segment generated nearly 50 percent of actual dollar growth in the convenience channel.
-- Healthy pricing in the category boosted dollar growth.
-- The majority of c-store beer unit volume comes from small packages, although large packs (18-plus) are growing share as c-stores compete for the multi-pack consumer.
"C-stores are the largest off-premise channel for beer and showed the second largest growth in total dollars versus a year ago," said Lake. Convenience stores accounted for $14.8 billion in beer sales in 2007, according to Nielsen data, but grew by only 1.9 percent, or $272 million. In contrast, supermarkets garnered $8.5 billion in beer sales last year, but grew by 4.4 percent, or $356 million. Drug stores, meanwhile, generated $800 million in beer sales last year, yet grew by 4.1 percent, or $32 million.
Lake told the retailers around the table that beer should be used as a catalyst to increase the dollar basket ring within the cold vault and the entire store.
Within the beer category, imports, super premium, crafts and mainstream light brands led the share growth, and mainstream light was the top dollar sales growth segment in the category while "high-end" segments also had strong growth.
Nielsen data also showed that the category has experienced moderate price increases across all segments, from a high of $1.15-per-case increase for flavored malt beverages and wine coolers to a low of 15 cents per case for "near premium" brands.
The majority of c-store unit volume comes from small packages (51 percent for singles, however large packs (18-plus) are increasing share (9.1 percent, up 0.4 points).
Growth in mainstream 18- and 24-pack bottles (up 26 percent) and economy 30-pack cans (up 15 percent) highlight the growth of large packs, according to Lake.
Lake concluded with these recommendations for convenience retailers:
-- Each beer segment plays an important role in overall category management strategy.
-- Retailers must target assortment by store to maximize ROI.
-- The premium/premium light segment needs to be the cornerstone of c-stores' core beer category strategy because these products drive traffic.
-- Imports, crafts and super premium provide significant upside for the convenience channel, so it is imperative to identify a strategy for these segments.
-- The below-premium segment is important to the convenience channel, but should be strategically managed to avoid trading down by consumers.
-- An appropriate mix of singles and large packs is critical.