C-store Operators Uncork Opportunities in Wine & Spirits
NATIONAL REPORT — Early in the COVID-19 pandemic, alcohol sales underwent a sea change as shoppers sought to consolidate trips and turned to convenience stores for their purchases. Wine and liquor sales in the channel rose by an incredible 30.9% in 2020.
Fast forward three years and consumers could return to their old habits, but convenience store retailers and their supplier partners are working to make sure they don't. C-store operators are increasingly leaning into wine and liquor as a means of differentiating themselves and delivering more value to their customers — and it's working.
In 2022, the category kept a firm grip on the top 10 spot it gained during the pandemic, based on in-store sales. Average per-store sales of wine and liquor increased 6.4% last year.
Laval, Quebec-based Alimentation Couche-Tard Inc. launched its first collection of private label wine at more than 3,000 Circle K stores in the United States last spring. Curated specifically for shoppers in search of both convenience and quality, the bottles come in a range of prices, from the under-$8 Sunshine Bliss line to a selection of six fine wines priced at $10 to $25 each.
Casey's General Stores Inc., headquartered in Ankeny, Iowa, is another c-store chain looking to differentiate itself in alcohol. The retailer is not only the No. 3 chain on the 2023 Convenience Store News Top 100 list, but it is also the No. 4 U.S. chain in total liquor licenses held.
"Even before the pandemic, we saw our guests moving from beer to liquor and while beer still represents the majority of our alcohol sales, we don't want to give our guests any reason to have to shop anywhere else for their alcohol needs," said Chris Stewart, vice president of merchandising for Casey's, which operates more than 2,500 stores.
Casey's plans to increase its off-premise liquor licenses to better deliver for its guests, according to Chief Merchandising Officer Tom Brennan. However, the retailer has been getting involved more deeply in liquor for some time now. In 2021, it collaborated with Buffalo Trace Distillery to develop a single barrel bourbon to be sold at select Casey's stores in central Illinois. And earlier this year, Casey's expanded its Single Barrel Select program by partnering with Sazerac to offer Myers's Rum at 90 of its stores.
"We think partnerships with industry-leading brands like Sazerac and Buffalo Trace help us build credibility in our guests' mind and make Casey's top of mind when they are deciding where to shop for their alcohol needs," Stewart said.
Crafting an Effective Assortment
To succeed with wine and liquor, c-store operators must invest in active category management. This includes gathering and analyzing store-level data, as well as seeking out consumer insights pertaining specifically to the convenience channel.
"Due to being so different from grocery, mass and club, it is important to better understand what the consumer is looking for when shopping for spirits in convenience," explained Jay Hornback, manager of convenience channel sales for Beam Suntory, the 2023 CSNews Category Captain for wine and liquor. "In addition, learning about key trends earlier to help share our finding to retailers can help them influence their future assortment and features."
Retailers may benefit from promoting the category based on holidays, seasonality and other recurring catalysts for purchases as they do with other in-store merchandise, but they must bear in mind that sales of wine and liquor products don't always shift in the ways other categories do.
"Seasons do play a role in the types of wine that succeed, in addition to regional preferences that already exist across the country, but in my experience, the wine category experiences less seasonal volatility than other alcohol categories," noted Capri Brixey, executive vice president of strategy consulting at Insite AI, an artificial intelligence (AI) enabled category and revenue growth partner for major consumer brands.
Brixey recommends c-stores take advantage of new ways to analyze data that is specifically relevant to them and the markets in which they operate, as opposed to acting based on broader category shifts only.
"The opportunity now is for brands to maximize growth in a channel where consumers have more recently established buying habits by identifying granular insights to deliver on region-specific preferences in assortment and improve execution in on-shelf availability," she said. "That ensures brands meet the needs of their shoppers and continue to take advantage of growing trends."
Trends on the rise in the liquor category include tequila, according to Hornback, who reports growing demand for more offerings beyond the typically limited assortment in c-stores.
"As tequila in general is a very hot segment in c-stores, it is now playing catchup to the general retail market," he said. "Our recommendation due to limited space for assortment is to focus on the leaders within each price tier."
Sales of ready-to-drink cocktails are also on the rise, possibly as a result of consumers growing accustomed to preparing and enjoying mixed drinks at home during the pandemic and wanting to continue to enjoy them conveniently now.
"Ready-to-drink cocktails continue to show huge growth, but on a very small base," Casey's Stewart reported. "We do see guests trading up from seltzer to this higher-alcohol option and expect them to continue to do that throughout the remainder of the year."
As convenience store retailers take steps to differentiate their stores through wine and liquor, Beam Suntory's Hornback offers four recommendations:
- Ensure consumers know you sell wine and spirits by making them visible, as many times this segment is an added purchase to already selected items.
- Keep pricing competitive with your local grocery and liquor stores.
- Where legal, include wine and spirits in your loyalty programming.
- Utilize your mobile app and in-store signage for new and featured items.
The growing use of AI provides another option for retailers to optimize their wine and liquor offering, but to do so effectively requires a data-based mindset, according to Insite AI's Brixey.
"There are a lot of practical uses of AI for c-stores. However, there is still a lot of confusion around it," she said. "Before consumer brands can fully benefit from AI, they need to embrace a culture of data-driven decision making and be willing to adapt their business processes and strategies to effectively integrate AI insights and recommendations into their operations."
For in-store merchandise in general, AI-enabled capabilities can optimize assortment, pricing, trade promotions and spaces in real time, helping consumer packaged goods brands (CPGs) and their retailer partners understand historical and current performance, and project the expected performance of potential category range scenarios and strategies.
"With wine and liquor specifically, there are wide-ranging regional preferences and price points. AI can help brands understand price elasticities across these categories with incredibly diverse price points, in addition to providing a more localized assortment across regions — based both on preferences and regulatory standards that vary from state to state," Brixey said. "AI can make precise recommendations that CPGs can then bring to c-store retailers, effectively increasing sales and meeting consumer demands."