Are convenience store retailers truly good at their craft? The craft of selling craft beer, that is — since all signs point to continuing growth for this well-evolving segment.
“Year over year, we’re seeing tremendous growth in the craft beer sector, and 2014 proved that craft beer is moving into the mainstream,” said Bart Watson, chief economist for the Brewers Association. “Consumers are making a conscious choice to buy and try the plethora of options produced by small and independent craft brewers.”
Beer drinkers have more sophisticated palates today, according to George Ward, director of off-premise national accounts for craft beer major The Boston Beer Co., which offers more than 60 styles of beer including the leading craft brand, Samuel Adams Boston Lager.
“Craft beer drinkers are passionate, curious and always looking to explore different flavor profiles and styles of beer, and pair or cook with beer as part of their everyday life,” Ward told Convenience Store News. “Beer drinkers of the new generation have adopted and are exploring craft beer the way their parents adopted wine 30 years ago.”
From the independent craft brew arena, Sam Calagione, president and founder of Dogfish Head Craft Brewery in Milton, Del. — reported to be the country’s 14th largest craft brewery — agrees that consumer passion for craft beer parallels that of other beverage and food trends, and he believes it fits well into the convenience channel.
“It’s the beer component of the artisanal food trend. People are looking for more intense, exotic flavor, whether it’s from coconut waters or gourmet potato chips or beef jerky options — all packaging that fits well into the c-store environment,” Calagione relayed. “Consumers are trading up to more intense flavors, prioritizing and voting with their wallets to support smaller companies from the state where they live or smaller companies in general. Today’s consumer is less loyal to global brands and more interested in exploring artisanal brands.”
The Pantry Inc., acquired in March by Alimentation Couche-Tard Inc., is one c-store chain in the crafty loop. According to Bob Gulley, director of beer, wine and spirits for the Southeast chain, beer is the second-largest category in-store, with sales up 4.5 percent last year. This growth was driven largely by single-serve (up 15 percent last year), much of which came from new craft brands in its c-stores, he reported at Wells Fargo Securities LLC’s recent Beer Industry Summit.
Mintel Food and Drink Analyst Beth Bloom estimates that total sales of craft beer (including craft-style offerings) reached $20 billion in 2014, doubling the sales of just five years prior. The category is forecasted to reach $36.3 billion in sales by 2019.
A recent Nielsen survey covering four generations — Millennials (ages 21–36), Gen X (37–48), Baby Boomers (49–67) and the Greatest Generation (68 and up) — found that all generations of beer consumers are increasingly shifting toward above-premium and craft beers from below-premium and premium beers. However, Millennials in particular are strong consumers of craft beer and the most likely to select products they have never tried before.
Unlike with overall beer drinkers where brand is a top factor in purchasing decisions, “craft beer drinkers are a bit more discerning and most likely to say beer style such as an IPA (India Pale Ale) or stout is important in product selection,” Bloom relayed.
According to Mintel research, among the top factors that craft beer drinkers consider when making a beer selection are style (51 percent) and full-bodied flavor (44 percent). On-package product design (31 percent) is another influencing factor.
THE LOCAL CONNECTION
With U.S. brewery counts returning to historic levels last year, passing the 3,200 mark in November per the Brewers Association, convenience retailers have a great opportunity to partner up with local breweries or at least feature local brews in their stores and put some community excitement around the offering.
Nanoseconds, a single store in Escanaba, Mich., is nearby to some small Upper Peninsula microbreweries that recently opened (Michigan is one of 13 states in the country now with more than 100 breweries). Store owner Bill Carne is taking full advantage of the opportunity.
“We have a new plan to increase our selection of local beers, give more exposure to the beer cooler and highlight craft beer floor displays,” Carne told CSNews.
Meanwhile, some c-store chains are incorporating local brewery “flavor” into their new store prototypes and redesigns, such as Mark Oil Co. in Charlotte, N.C. (North Carolina is another state with more than 100 breweries). Mark Oil’s new Shopton Commons BP store features a beer cave that was inspired in design by microbreweries in the area (see page 74).
For example, the color palette utilized features warm metal and wood finishes indicative of the old mills that have been renovated and repurposed into breweries around Charlotte’s South End neighborhood. While this store is not a prototype per se, design elements such as the micro-brewery-inspired beer cave will be included in future stores, according to Mark Oil President Bill Tome.
There is a strong sense of community in the craft beer world, noted Mintel’s Bloom.
“Consumers like to share knowledge with one another and are highly invested in the products they choose. Not only that, but craft brands share exposure through collaboration, a practice almost wholly unique to the craft beer market,” she explained.
THIRST FOR KNOWLEDGE
The craft beer boom is said to have a lot in common with the wine renaissance of the past decade. This is not only because the leading purchase driver among craft beer drinkers is style, pointing to a more discerning consumer, but also because “craft drinkers consider themselves knowledgeable and adventurous” and they’re “eager to share this knowledge,” said Bloom.
The thirst for knowledge opens up sales opportunity for forward-thinking convenience stores. The way Calagione sees it, it would be helpful for c-stores to have someone on staff who is passionate about craft beer and can share in the exchange of knowledge.
Whether it be from the corporate level or local level, Dogfish Head’s founder believes one way c-stores can get ahead in the category is to have their own “in-house expertise in the stores that, to some degree, relies on their biggest distributors and beer suppliers, but also takes into account their own outreach capabilities” — for example, integrating an in-house craft beer guru with social media efforts to stay relevant with the craft beer renaissance.
Calagione also advises c-store operators to have some sensitivity to their local and regional brands, while keeping in mind there may be certain brands that are growing by double-digits on the opposite coast. A local and national mix of indie craft beers is what c-stores should shoot for, he believes.
When thinking about craft beer, convenience retailers also don’t need to limit themselves just to the beer category. The craft beer consumer is “more likely to make spontaneous buying decisions on higher-margin and more upscale artisanal items in the store,” opening up yet another area of opportunity, Calagione said. Dogfish offers hop-infused spicy pickles under its Brooklyn Brine brand.
BACK TO THE CAN-CAN
In terms of packaging, more craft brewers are beginning to choose cans over glass bottles, deviating from the standard trend at craft beer’s inception, Mintel reported.
Advocates for the can format say there are clear advantages to using aluminum cans over glass bottles, including faster cooling protection from beer-degrading light and space savings. Additionally, cans allow for a wraparound design and are recyclable and sustainable, which is appealing to the Millennial consumer set.
“We see the trend of offering craft beers in cans continuing,” said Ward of Boston Beer Co. “Over the years, as can technologies have continued to improve, more and more craft brewers have decided to offer their beer in cans. Offering cans allows drinkers who stop at c-stores to enjoy craft beers when they travel to places where bottles aren’t necessarily allowed, such as on a boat, golf course or at the beach.”
Boston Beer released its Samuel Adams Boston Lager in a newly designed “Sam Can” in 2013, and it now offers its Rebel IPA and seasonal brews — Summer Ale, Octoberfest, Winter Lager and Cold Snap — in cans as well.