Times Are Right For Craft Beer

The brews are making strides in the c-store channel and the industry at large

No matter what region of the United States you are in, walk into any convenience store where malt beverages can be sold legally and you're likely to see familiar brands such as Budweiser, Miller and Coors Light. With increasing frequency, c-stores around the country are also taking a chance and stocking craft brews from smaller, local breweries, and it's starting to pay off.

Craft brewers have an annual production of six million beer barrels or less per year; have either an all-malt flagship or at least 50 percent of their volume in all-malt beers or beers that use adjuncts to enhance flavor; and are independent, according to the Brewers Association. This puts the segment in the minority in terms of volume sold, but it's leading the pack in terms of growth.

Sales of craft beer nearly doubled from $5.7 billion in 2007 to $12 billion in 2012, and Mintel predicts the segment will grow to $18 billion in sales by 2017, thereby tripling in size in just a decade.

"The craft beer industry, as a whole, is going through a renaissance right now and growing at a great pace, with industry growth up double digits in 2012 again," Jim Koch, founder and brewer of Boston Beer Co., the largest craft brewery in the nation by Brewers Association criteria, told Convenience Store News. "I don't see this growth slowing down anytime soon. Beer drinkers are choosing craft brands in greater numbers than ever before."

Mirroring this growth, the past two years also have seen an uptick in the number of c-store chains testing craft beer programs. Sunoco Inc. kickstarted its Craft Beer Exchange pilot program in 12 APlus stores in western New York State in July 2011 before expanding it elsewhere in upstate New York and South Carolina. The Parker Cos. began testing its own beer growler program in Savannah, Ga., in March 2012; and VPS Convenience Store Group opened the nation's first Growler Station Express in its Charlottesville, Va., Everyday Shop and Café in August.

"We want to be on the leading edge of trends in each category. We knew that there would be a following of craft beer drinkers," said Brandon Hofmann, marketing manager for Parker's. "We also knew we would be able to differentiate ourselves in the beer category, and be able to cater to the true beer lover. This was a very easy decision for us to make."

Beer lover appeal is just one reason the segment has seen double-digit sales volume growth since 2010, according to Brewers Association Director Paul Gatza. Other factors are the rising number of breweries doing their part by putting out high-quality beers, and wholesalers and retailers who have made more room on their shelves, improving craft's overall market access.

While Gatza noted that everybody in the supply chain has contributed to the growth of craft beer, the rise of Millennials as a consumer group may be having the biggest impact.

Members of the largest generation since the Baby Boomers are more open to new experiences and trying new drinks, according to Technomic Inc. research. Koch compared Millennials' adoption of craft beer to their parents' embrace of wine three years ago.

All this adds up to a prime opportunity for convenience stores to boost their malt beverage sales.

"When I think about c-stores, that's an area where craft is under-indexed compared to grocery and mom-and-pop liquor stores," Gatza said.

CRAFT ON DRAFT

Alongside bottled and canned craft beer, growlers are growing in popularity at c-stores. These programs appeal to customers because they offer draft beer, what Hofmann labeled as "beer in its best state."

Growler programs provide certain logistical advantages over other formats, according to Tony Lane, vice president of The Growler Station. A growler of draft beer is much more profitable than a bottle, he said, and growlers offer more options as many breweries only make their products available in kegs.

Once retailers have decided on the format they want to offer, they still need to decide what beer to stock. Craft fans tend to value variety, along with quality. "With some of our retailers, we've found that more is not necessarily better as having too many choices can create confusion and operational complexity, Boston Beer's Koch said.

Seasonal brews are the most popular category of craft beer, followed by India Pale Ale (IPA). Belgian ales have skyrocketed in popularity specifically at convenience stores.

Retailers should reach out to craft beer-drinking consumers in order to highlight their offerings and set themselves apart from stores that only carry non-craft brews. Industry insiders recommend working with local breweries to do tasting events, along with social media promotion and in-store merchandising with rail strips, cooler stickers and callouts that draw customers' attention to the craft section.

When done with careful thought and planning, adding craft beer can yield positive results for any malt beverage section. "Because craft drinkers will pay a little more money for a higher quality, fuller flavored beer, profits will go up for the retailer and customer satisfaction will increase," Koch concluded.