Tapping into Beer’s Potential

Ramping up craft selection and adding beer caves can help brew success

As the convenience store industry continues to transform into a retail destination hotspot, there are a few constants that remain, and one of those is undoubtedly beer.

It is not enough just to stock beer, however. Inventory mix and how that inventory is featured in the store are main ingredients in this category’s success.

Industry data shared recently at the 2013 NACS Show put beer’s inside sales contribution at 7.2 percent. That number jumps to 12.8 percent when looking at beer-only stores.

“Beer sales are getting strong again,” PCATS Program Manager Carl Bayer commented as he led the “Getting Crafty With Beer Sales” educational session at the NACS Show in Atlanta.

Right now is an especially exciting time for the craft segment of the beer category. “What used to be a fad has evolved into a revolution,” said Joe Kaczynski, national channel manager for convenience at The Boston Beer Co., brewer of the Samuel Adams brand.

A key indicator of craft beer’s potential in the cold vault is the projection that craft, domestic/specialty, will more than double from 8 percent to 17 percent in total beer sales within the next 10 years. The growth, Kaczynski explained, is being fueled by consumers looking to trade up to “something better.”

Looking at the convenience channel specifically, craft, domestic/specialty, continues to gain share. In fact, the segment has experienced a prolonged period of sustained double-digit growth and “as of today, there are no real signs that will stop,” he said.

But crucial to craft beer’s success in c-stores is letting the consumer know you have dipped your toe — or for some retailers, jumped — into the water. “Let your customers know you are in the craft beer game,” Kaczynski said. “Regularly promote craft to drive trade-ups.”

When it comes to winning new customers, seven out of 10 new craft-beer drinkers start with one of the top five brands. If the lead brands are not represented, he advised, convenience store operators will get trial business, but not the repeat customer. In addition, retailers should have well-placed signage and also showcase warm displays of its craft selection.

In the convenience channel, craft beer is being driven by both national and local brands, according to CJ Watson, vice president of category management at Anheuser-Busch Cos.

“Craft is growing in convenience stores, but it needs to grow the right way,” he said, cautioning against hurting the base business — notably, the premium and value beer segments. “The winning strategy is a balanced approach. Segments are not people; craft beer is not a person. Craft customers spend 32 percent of their dollars on craft, but also spend money on lower brands.”

According to Anheuser-Busch’s research, the average convenience store has five doors in its cold vault stocked with beer and dedicates 5 percent, or two doors, to craft. Top-quartile retailers have 6 percent of their beer SKUs dedicated to craft, noted Watson.

He encouraged c-store retailers to create an environment that makes the customer comfortable paying more. “The craft customer is looking for value but for them, value isn’t pricing,” Watson explained. “They are looking for trial and experience.”

Retailers can enhance the experience by kicking their cold vaults up a notch and transforming them into beer caves. Two sought-after customer groups, Boomers and Millennials, have a passion for beer and a passion for convenience stores. Tapping into that passion will help c-store operators win over both demographics, said Jeff Schouten, director of channel marketing at MillerCoors.

“Are you a beer destination or is beer just a commodity?” Schouten posed at the “Breaking Into Beer Vaults” panel at the 2013 NACS Show. Becoming a destination drives traffic, which in turn increases profits, he explained. Beer caves are one way to do that.

Beer drinkers “really like” beer caves because they are very cold, never out of stock and offer variety. They also provide space to display larger pack sizes and a better assortment, he said.

One believer in beer caves is Steve Boomershine, director of category management for Thorntons Inc. He knows the benefits of beer caves as the Louisville, Ky.-based chain has 174 convenience stores, 125 of which are beer locations and 97 that have beer caves.

Boomershine pointed out several positive points of beer caves: favorite brands, great prices, always on, and always cold. Beer caves give retailers the opportunity to capitalize on trends because the space is available, he added. For example, Thorntons’ locations with beer caves average 217 beer SKUs compared to 112 SKUs for stores with cooler doors only.

“If you have a beer cave, not only is the beer cold, but it’s become utopia for the consumer,” Boomershine said.