innovation driving adult beverages

Summer is quiCkly approaChing, bringing withit relaxed nights on the porch, trips to the beach andweather hotter than the grill at a Fourth of July barbeque.To complement their fun in the sun, customers want to wrap their hands around a couple of cold ones, and they will becounting on their local convenience store to satisfy their cold beerneeds.

But is a simple brown-tinted bottle of suds enough to keepsummer c-store shoppers happy this year? With suppliers bringing new innovations to the beer and malt beverage market,customers are developing new tastes and are looking for quickpurchasing access, opening a profitable opportunity for retailerssavvy enough to ride this trend.

“For the last three years, the above-premium segment has beencontinuing to grow and grow,” said Dan Roane, Circle K’s category manager for alcohol beverages, Southeastern division.”Because of all the growth in this category, a lot of our stores’ planograms are focusing space more on these beverages as opposedto domestic beers.”

The Evolution of Alcohol Sales
The above-premium segment, which represents import beers(i.e., Corona, Heineken), craft and seasonal beers (i.e., SamuelAdams, Sierra Nevada Pale Ale) and malt beverages (i.e., Mike’sHard Lemonade, Smirnoff Ice), has developed a lot of momentum in recent years thanks to aggressive advertising and a younger,hipper, more lucrative customer base. Though traditionally purchased only in specialty stores and bars, the demand for theseproducts has reached new heights, allowing the suppliers to findsuccess in new sales venues, such as c-stores. This surge in popularity has launched the segment into a new sales echelon, makingit profitable—and less risky—for c-stores to break the mold ofsolely carrying standard domestic beers.

“We’ve been seeing double-digit growth in this segment inalmost all of our stores,” said Roane. “Some of the products, particularly the import beers, have seen year-on-year growth as highas 25%.”

Not only are the sales of these products increasing, so is thepopularity.

“A lot more people are becoming aware of the products that areout there, and those products are working their ways into people’s regular lives,” said Pete Doherty, national accounts managerfor Sierra Nevada. “Craft beers traditionally appealed to just beerconnoisseurs. Now a lot more consumers recognize and enjoy thedifferences that craft and seasonal beers have to offer.”

Playing the Niche Game
Beer has always been a big draw for the c-store industry.According to the NACS 2007 State of the Industry report, releasedlast month in New Orleans, beer is the third-largest in-store category accounting for 12.2% of in store sales.With the exception of stores in states likePennsylvania and Oregon that do not permit the sale of beer in the stores, c-storeshave always been a speedy alternative tobeer distributors for “Bubba” to pick up acold six-pack. However, Bubba is hardlythe only one drinking beer and malt beverages anymore, and, as customers andtheir tastes change, so do the offerings.

A lot of the increase in import and craftbeverage sales can be accredited to thechanging population of both the countryand the c-store.

“We’ve seen a lot of growth in regionsthat are more heavily populated withcustomers of Mexican decent,” notedRoane. “In stores like that, products likeCorona and Modello have been seeingincredible growth.”

That trend is found both in urbanand suburban markets, said MarkCarter, director of operation forGordy Fuels, which operates fourTigerMart Stores in Maryland.

“There are a lot of permanent Mexicancitizens living in our area and they oftengravitate towards Mexican beer,” saidCarter. “Beers like Corona, Modello andDos Equis have been selling in tremendous amounts.”

Gordy Fuels has become something of a powerhouse in the beercategory after building its trademark “Beer Caves” in its stores. A typical Beer Cave consists of massive, walk-in coolers designed to providea haven for the beer lover. Because of the girth of its beer and malt beverageprogram, stores are able to experimentwith new beverages as they becomeavailable, but are still prudent with itsapproach.

“When we’re deciding whether to stocka new beer product, we look heavily onthe marketing that’s backing it,” saidCarter. “We usually favor products thathave national marketing campaigns. Ifthey have that, we’ll try it out with sixpack units, and if they sell, we’ll beginstocking bigger packs.”

The reason for this decision comes from the stores’ main audience for craftand premium beers, which have also beenenjoying high sales. Carter credits thesuccess of this segment to the youthful,image-oriented, casual beer drinkers.

“Typically, domestics still sell wellamong the crowds who are just looking for a big case of beer to throw back,”Carter said. “The more premium beers westock, like Samuel Adams and Guinness,are typically purchased by younger,trendier customers who have a littlemore money to spend. They’re alsomuch more casual about their consumption, usually buying the smallerpackages.”

The image that goes along withthe above-premium segment is also animportant sales driver.

“A lot of the customers pick up thesebeverages because it gives off a certainimpression,” said Roane. “They may buyit for taste, but they also buy it for thatstatus or perception associated with purchasing a premium product.”

‘Tis The season
Seasonal beers are another part of thesegment to have enjoyed a sales boom.Experts theorize that the exclusive natureof the brews has a lot to do with theirpopularity.

“Seasonal beers are only around for ashort time and offer a taste that isn’t likeyear-round craft beers,” said Doherty,whose company releases Bigfoot Alefor the spring, Summerfest during thewarmer months and Celebration Ale tocustomers in the winter.

Carter also attributes a lot of success ofthis segment to the changing of the seasons. He noted that a lot of the heavier,darker beers make up most of the wintersales, while the lighter beers and malt alcohol beverages make up the lion’s share ofthe summer stock in the Beer Caves.

“A lot of our stock fluxuates with theseasons,” said Carter. “The summer timeis when the malts really take off. We usually begin carrying a lot more of Mike’sHard beverages, Smirnoff drinks and thelike since that’s the type of drink that people are looking for that time of year.”

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