Nothing to Wine About

Back in September 1977, Billy Joel sang about a bottle of red and a bottle of white in an Italian restaurant. If that song, named "Scenes from an Italian Restaurant," was written today, the wine list would be a lot longer.

Not only has the selection grown, but what was once a staple of upscale restaurants and wine stores has been expanding its reach to convenience stores.

"If you look at sales, wine represents about 1 percent of inside sales," explained Rich Faw, category manager for Jacksons Food Stores. "As in most convenience stores, the cigarettes, beer, beverages and candy are the big sellers. Out of 39 categories, wine is ranked 19th, so that puts it right in the middle of the pack."

That ranking puts it ahead of frozen food, frozen dispensed beverages, magazines and newspapers, and ice cream, he added.

Jacksons Food Stores, which has been selling wine since it became legal to do so in Idaho, carries the beverage in approximately 170 of its 210 convenience stores. Some stores aren't large enough to add it to the mix and others are located where the laws restrict the sale of wine.

In those stores where wine is part of the offering, it typically occupies a four-foot section with four shelves -- spanning 16 linear feet, Faw explained, adding that "we usually stock a shelf or two of cold wine depending on the size of the cooler."

The category has shown notable increases of late. "Wine has really grown. We experienced a double-digit increase last year," he said. "For year-to-date 2011, we are up about 15 percent over the first five months of 2010."

Wine's popularity among millennials could be a main ingredient in its success. "Wine is a growing category. People are treating wine like they do craft beer, trying different varieties," he noted.

7-Eleven Inc., which offers its own proprietary wine in some locations, is zeroing in on the legal-age millennial wine drinkers. In June, the retail chain introduced its first proprietary pinot grigio, VitAlma, to select stores in California, Oregon, Washington and Florida. One factor behind the addition, according to the company, is pinot grigio's popularity among new wine drinkers, particularly millennial women.

Another element in Jacksons Food Stores wine success story is availability. "Our increase is partly due to growth and partly because we are doing a better job making it more accessible," Faw explained. "It is in more stores. We do our research on the right SKU mix and we offer monthly specials."

As for the SKU mix, Faw said the retailer does not go too deep into wine selection, but rather tries to hit the sweet spot customers are looking for in taste and price. "For example, we will have five different cabernets -- a $14 bottle, a $12 bottle, a $10 bottle, an $8 bottle and a $6 bottle. We try to offer a price range within each category," he said, adding that the company also offers a $15 bottle of chardonnay down to 99-cent Sutter Home 187s.

Jacksons Food Stores also tries to bring in local flavor where it can. The c-store operator features bottles from local wineries in some areas: Ste. Chappelle in Idaho stores and Chateau Ste. Michelle in Washington stores, to name a couple.

Despite its variety, 5 percent of the retailer's wine SKUs generate 50 percent of total wine sales. The average store probably has about 80 different SKUs, Faw said, and within the Top 20, there is a wide variety. For example, No. 1 is Sutter Home White Zinfandel; No. 2 is Cook's Brut Champagne; No. 4 is a four-pack of Sutter Home Chardonnay 187s; No. 6 is Vendange Tetra Pack (ideal for outdoor activities like camping); No. 9 is a $14 Kendall-Jackson's Chardonnay; No. 15 is a $4.49 Tisdale Chardonnay; and No. 20 is a five-liter box of Franzia.

"Even in a small section, diversity in prices, size and flavor profile is important," he stressed.

Like Jacksons, Fresh & Easy Neighborhood Market takes a look in its own backyard for its wine selection. The El Segundo, Calif.-based company's California wines are sourced from the state's premium wine growing regions like Napa Valley, Sonoma, Monterey and Santa Barbara.

Fresh & Easy, the U.S. division of Great Britain-based Tesco, began selling wine right when the doors opened to its first store in 2007. All locations carry the beverage, with the exception of the Van Nuys and Sylmar stores, which do not have liquor licenses, according to Richard Wherry, manager of Fresh & Easy's wine range.

Offering wine is a winning move for the company. "Wine sales are exceptionally strong at Fresh & Easy, the best-selling wines being our exclusive Big Kahuna Chardonnay and Cabernet Shiraz, and Montcadi Cava," he explained.

Like other retailers, Fresh & Easy found that mixing it up on the wine rack is a key to success. The company's selection covers all the major wine varietals, as well as international offerings, Wherry said. Most of the wines retail for less than $10, with the lowest-cost one carrying a price tag of $1.99 and the highest at $19.99.

"Our customers like our California wine offering and also enjoy a fantastic French, Italian or other imported wines at a great value," he said.

All told, Fresh & Easy carries more than 180 wines and half are exclusive to its stores. The rest are leading national brands. "Exclusive Fresh & Easy wines are blended specifically for us in collaboration with our partner wineries. We personally try all of our wines and consult on the blends and styles," Wherry explained. "Our exclusive wines have received more than 370 wine medals to date from such prestigious competitions as the San Francisco International Wine Competition, L.A. International Wine Competition and the Critics Challenge International Wine Competition."

To highlight that the retailer is doing something right with its proprietary wines, its exclusive California wine range won 18 medals in this spring's 72nd annual Los Angeles International Wine & Spirits Competition.

But what works for one c-store operator may not work for another. "The mix and SKU count in the channel depends heavily on demographics and store size," according to Tony Gaines, national director of trade development for E.&J. Gallo Winery.

A store should begin with a basic assortment of cold and warm wines at a variety of price points, he explained. Of that, cold wines should make up no less than nine items and warm wines should account for at least 20. Drilling down even further, Gaines said premium-priced wines ($8 and up) should make up 15 percent of the mix; popular ($5 to $7.99) should make up 60 percent; and the remaining 25 percent should be dedicated to an open price point ($2.99 to $4.99).

"If you have four beer doors, maintain one wine shelf cold. Five beer doors, [have] two wine shelves. Six beer doors, three wine [shelves]. And seven or more equals a full wine door," Gaines recommended. Also, he said the selection should be 60 percent 750-milliliter, 20 percent 1.5-liter and 20 percent four-pack and/or 187mk single-serve bottles.

Furthermore, his recommended assortment would consist of 40 percent chardonnay, 10 percent pinot grigio, 10 percent moscato, 30 percent white zinfandel and 10 percent sparkling wine. He added that a convenience store needs to carry top brands at key price points.