King Of The Cooler

After weathering a rough few years, premium beer is eyeing a rosier future

Anyone who has ever walked into a convenience store to purchase a six-pack knows the choices are endless. But even as beer products fight for space in the cooler, consumers time and time again reach for premium beers.

Although sales numbers for premium beer have dipped slightly in the past few years, it is still well ahead of the lower-priced alternatives. As the Convenience Store News 2011 Industry Report showed, premium beer sales per store fell 4.1 percent in 2010 to $66,621. Despite the drop, that figure still came in far above the No. 2 seller, budget, which rang up $15,814 in per-store sales.

There are indications that, while still on the negative side, premium beer is rebounding. According to Nielsen Co. research, premium beer sales were down only 1 percent as of early November, compared to 2010. In fact, all segments seem to be climbing back to the plus side.

Real-life experience at Maverik Inc. supports the numbers. According to Ryan Morton, segment value manager at Maverik, the convenience store operator began to register declines in premium beer sales in 2009. The trend ramped up in 2010 and through 2011.

Bud Light reigns as the king of the chain's premium beer sales, but Maverik has noticed consumers shifting toward lower price points, like budget beer. In addition, Morton said consumers are moving to grocery stores for a one-stop shopping experience.

Premium beer accounts for 60 percent of the cooler at Maverik stores, with some adjustments made as sales fluctuate. The retailer also notices a differentiation in beer sales depending on where a store is located. Some areas sell more budget beer, while others may see a big push for craft beer, Morton explained, noting that beer is not a one-size-fits-all category.

Maverik is not sure what to expect in 2012. "Honestly, we thought we would be past this by now, but our main consumers are facing higher unemployment than ever before," Morton said.

For some of the chain's consumers, it could come down to choosing between stopping for a 12-pack after work or making a mortgage payment. "The extra change has not been there for the past few years," said Morton.

Maverik is not alone in feeling the effects of the economy on its premium beer sales.

"From the standpoint of beer as a category, it is probably more analogous with convenience stores than other categories," explained Craig Purser, president and CEO of the National Beer Wholesalers Association (NBWA). "The same general challenges that affect the convenience store industry also affect the beer industry. Underemployment and unemployment in the key legal drinking age demographic — 21-to-30-year-old males — affect the industry."

Other factors also come into play, including fluctuating prices of other consumer products such as fuel. "Fuel prices definitely affect the package pull," Purser said. "Someone is not going to buy a 24-can package of beer when they just spent $80 to fill up their gas tank."

Beer overall has experienced a downward trend over the past three years in just about every region of the country, but there are pockets where it's been worse than other areas. For example, in areas where the construction industry has faltered like Florida, Texas and Arizona, beer consumption is down, according to Purser.

"It's like when the hammer stops swinging, people stop drinking beer. That is not to say the beer industry has suffered like the housing market," he said. "We are not down double digits, but nonetheless the softness is there."

There is some light at the end of the tunnel, though. Sales figures in Florida and Texas are starting to improve, he observed. Even with the gloomy present, the industry is looking toward a brighter future, as Purser noted that the association held its 74th annual convention in October and despite the challenges in the industry, the "conversation was upbeat."

Conventional wisdom says that in tough times, people still drink beer, he added, but figures show beer sales aren't immune from the overall economic malaise.

When consumers do drink beer, premium remains the top choice, according to Jeff Schouten, director of c-store solutions at MillerCoors LLC. "Premium beer, like everything else, is affected by the economy. But the focus in convenience stores has always been on premium beer. It is the bread and butter of convenience stores," he explained.

MillerCoors' premium line — including Miller Lite, Coors Light, Miller Genuine Draft and MGD 64 — can be found in just about any c-store cold vault or beer cave across the country.

While premium beer still holds the premier spot in the cold vault, the trick is finding the right mix to fill in c-store cold vaults. "The right selection is very important in these tight convenience store cold vaults," Schouten said. "The cold vault is really anchored by premium beer; it should take up at least half of the space. From there, it really depends on what your shoppers want. There should be a selection of popular and budget beers, and a full door or more of singles. Almost half of the beer traffic in convenience stores is singles."

As the future begins to look a little rosier for the beer category, what does it hold for premium beer? For MillerCoors, the immediate future is focused on package innovation. In the past few years, the company introduced the Coors Light Cold Activated Can (2009), the Miller Lite Vortex Bottle (2010) and the Miller Lite Aluminum Pint (2009). It is also readying the national launches of the Coors Light Aluminum Pint this month and the Miller Lite Taste Flow Cans closer to the summer.

And as Convenience Store News reported in November, MGD is going back to basics — basic black. To showcase the brand's global popularity, MillerCoors is unveiling a new look for its MGD primary and secondary packaging. Building on the brand's heritage as the "original cold-filtered draft beer in a bottle," the newly designed black-label packaging will highlight the brand's fresh draft taste and connection with the energy and nighttime potential of the world's great cities, the company reported.

Anheuser-Busch InBev is also gearing up to do its part in improving premium beer numbers. The brewer's Bud Light Platinum was set to hit stores in January. According to the company, the new offering "appeals to a key group of beer drinkers and expands consumer occasions."

In response to the new product news, reports indicated that beer enthusiasts theorize Bud Light Platinum is Anheuser-Busch's attempt to capture some of the craft beer momentum.

That may not be a bad move. "Craft and imports are growing, but are still a fairly small volume. Craft beers are more profitable and bring more interest to the category," Schouten explained, adding that the No. 1 craft beer in convenience stores is MillerCoors' Blue Moon. "Craft is very important to MillerCoors."

Even with its growing popularity, craft still has a long way to go to catch up to premium.

"The good news is that we are starting to see a shift toward higher-priced beer," Schouten said.

For comments, please contact Melissa Kress, Associate Editor, at [email protected].

Bottom Line I

• Conventional wisdom says that in tough times, people still drink beer but the category is not immune from recession.
• While craft beer is still a relatively small sub-category, consumers appear to be shifting to higher-priced brews.
• Hard-hit construction areas saw premium beer sales fall the most.