Building a Beer Strategy

Beer sales have held relatively steady despite the economic maelstrom of the past several months, and one reason is that c-stores are asking for help.

Operators are seeking and getting assistance of various sorts from their suppliers in an effort to make up for lost dollars. Help is coming in the form of promotional programs and advertising, discount pricing where legal, merchandising assistance and industry intelligence.

Charles Newman, director of marketing for PrimaMarketing LLC in Fairmont, W.Va., a licensed operator of 86 7-Eleven convenience stores in West Virginia, Pennsylvania, Ohio and Kentucky, said he is looking for his vendors “to either do more for us or at least make doing business easier.” One long-standing complaint has been the number of package sizes offered. “There is no reason in the world to offer me a 6-, 12-, 18-, 20-, 24- and 30-pack with the same package. Decide what two you want to package and go with that.”

Some suppliers have tried to “force us into this,” Newman said. “You have to be competitive, so they’ll just keep switching around which (package size) is going to have the promotion. All of a sudden you end up with five different size packages of one brand. It’s very difficult to manage the SKUs because they’re also trying to bring in new and different brands, which is a good thing. But we’re at the point where you feel like saying, ‘OK, if you’re going to bring in a new product, which one are you going to take out?’”

Because of state laws, just 58 of PrimaMarketing’s 7-Eleven units carry beer. They are all located in West Virginia, where vendors are also limited by the law. “They can’t offer me anything different than a guy who owns one store,” Newman said. “On the other hand, they can’t offer me anything different than they do somebody who owns 500 stores, so it’s a pretty level playing field.”

What his suppliers can do, Newman said, “is to continue to lend me their sales expertise.” For example, if we pull all our numbers together they’ll design an individual layout for a store, which is a good thing,” he said.

A vendor that can make sense of sales data and plot trends is always an asset. “You always need a good supplier or two to be a category captain for you, and who really cares about the entire business,” Newman said. “Take Anheuser-Busch. They know that even if they could talk me into carrying only Anheuser-Busch products in my store it really wouldn’t be good for them in the long run because I would lose a certain percentage of customers. It would create a lose-lose situation for both of us.”

Hands Are Tied
Overall, beer manufacturers are trying to bring in more promotional packages than they have in the past, said Larry Hauck, director of marketing for Garb-Ko Inc. in Saginaw, Mich., which operates 7-Eleven locations throughout Michigan, Indiana and Ohio. “And we’re asking for more.”

Hauck’s request is being heard, but distributors can only go so far. In Michigan for example, a wholesaler who wants to put a product on sale has to make that reduced price available for all of its customers and keep the pricing in place for at least six months. “As is the case in most states, our vendors’ hands are sometimes tied with the kind of support they’re allowed to give us versus companies that sell things that aren’t alcohol related,” he said.

For the most part, suppliers also are not allowed to give discounts or provide equipment. The rules also say that they’re not allowed to stock shelves, although they can rotate product.

While suppliers can provide point-of-purchase [P-O-P]materials, however, Hauck prefers to have a 7-Eleven category manager look to his stores. “They will be a little more critical and careful not to create a generic look with the same beer signs and banners that are provided to everybody,” Hauck said. “Most of the time we end up not using what they are providing.”

The real value, Hauck said, is local market data and sales trends. “What I really seek from (beer distributors) is to keep me abreast of the promotional packages that are available in the market,” he said. “I also want to make sure that they go to the stores, solicit orders prior to the start of the promotion and, where possible, assist the stores in building displays. I ask them to also report to me stores that are reluctant to display or procrastinate on buying in on a promotional product and that type of stuff.”

As for sales trends, Hauck said he relies for the most part on his contacts among the various breweries rather than independent distributors. “I deal with 14 Anheuser-Busch and Miller distributors. Rather than trying to contact all 14 of them, I push my contacts with the breweries to provide that data.”

Benefits for Customers
Instantly Redeemable Coupons (IRCs) are available, Hauck said, and he asks vendors to provide as many as they can, depending on the state. There are also mail-in rebates from time to time on some products. If he decides to use a mail-in rebate on a particular product, he asks that the supplier send those to him to distribute to the stores, rather than to his 14 distributors. “They do a pretty good job of that.” Garb-Ko stores typically carry about 120 beer SKUs and an average of four doors consisting of six shelves and five items per shelf.

Getting suppliers to tailor delivery times around his operations is another challenge that could affect customer service. Peak times for beer sales are Fridays and Saturdays and, during the summer, Sundays. “I would like to get weekend deliveries, which to be honest I do not have because union rules state that drivers work primarily Monday through Friday,” Hauck said.

At issue is more than just convenience and staffing. “In the states we operate in you have to pay cash for beer,” Hauck explained. “Alcohol is the only thing I have to pay cash for, so when it comes to everything else—for all practical purposes—when I run my inventory, I get to sell it before I have to pay for it.” During peak summer or holiday seasons, however, getting deliveries on Monday means he has to pay for that immediately, but not sell it until the weekend. “To be honest with you, it’s a waste of my cash,” he said.

Tobacco and Taxes
The April 1, 2009 increase in tobacco taxes means many convenience-store customers are spending more on tobacco products than ever before—often at the expense of beer, said Terry Taylor, director of marketing for The Spinx Cos. in Greenville, S.C., which operates 66 convenience stores, as well as fast-food restaurants in the Carolinas.

“Customers have a finite amount of money and how they allocate those funds is going to be affected by the amount they’re spending on tobacco products,” Taylor said. “They may cut out a trip to the convenience store and instead focus on pantry loading from grocery stores running specials or cherry picking specials on beer.”

Some grocery operators are using beer as a loss leader or to build traffic. “That is a relatively new phenomenon over the last three to five years, but those are our core customers they’re targeting,” Taylor said.

Unlike a supermarket a c-store can’t afford to sell beer at cost. “We have fewer products to sell to make that money back,” Taylor said. “In a grocery store they may have 200,000 to 300,000 SKUs, where we have maybe 10,000, so there is a lot more risk in that for us than there is for a grocery store. They can get them in, buy the be
er, and then sell them a whole grocery basket full.” 

Like Garb-Ko, Spinx averages five beer doors per store.

One area Taylor is asking for help on—and receiving it—is on receiving vendors’ analysis. “I’m getting more benchmarking information. In other words, data that allows me to measure how my company compares to grocery stores, other convenience stores and the market at large,” he said. “But data also allows us to evaluate how each trade segment is doing and where the business is going. With this information, I can better adjust my strategy. There are things we learn that we simply can’t afford to do, such as selling at cost. On the other hand, there is some business that I can go after, such as promoting two-for singles or the 18-pack instead of the suitcase.”

Taylor also wants more information on variety. “We can be a little bit more nimble sometimes when it comes to introducing new products,” he pointed out. “For example, we’re doing more imports now than we did in the past. We had to be really smart with it. We’re still maintaining favorites in the cooler while taking the hottest new brands and offering them, as well.”

In addition to information from suppliers, Taylor said his own company is turning some solid information. “We’re more intelligent ourselves now when it comes to scan data. Since we’re scanning, now we’ve got more capabilities,” he said. “By taking care of our own information instead of relying solely on theirs, we can benchmark our scan data and combine it with what they’re telling us.”

Going forward, Taylor intends to ask vendors for more retail tags for the front of his shelves. “We’re not pricing the actual packages now, we’re actually tagging the front of the shelves,” he said. Oftentimes distributors can give you assistance making products and prices stand out a little more.” CSD

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