Getting Crafty in the Cold Vault

Beer sales are hot right now and driving the push are specialty brews and imports.

By Howard Riell, Associate Editor.

Consumer interest in more flavorful food and beverages has led, among other things, to the rise of craft beers. Retailers: Start your engines.

Craft beers offer more challenging tastes, authenticity and often even a quirkiness not found in mass-market brews, giving c-store owners an opportunity to build a new profit center. “They are the future,” predicted Tom Pirko, president of  Bevmark LLC, a food and beverage advisory firm in Buellton, Calif. “There will be more of them, and they will be better. As time goes by, prices will modify so that they are a little bit more affordable. You’ll have great variety, with the category of beer once again becoming exciting. These are all good things.”

Pirko identified craft brews and imported brands as the growth part of the beer business. “We’ve done this for over 30 years, and I can tell you that when we started working way back when with specialty coffee and Starbucks, for instance, it changed the coffee business.”

While craft beers probably don’t represent that same sort of seismic shift, Pirko added, their rise is significant. “I’m not anticipating that it’s going to change the whole nature of the enterprise,” Pirko said. “But I do think that it is going to change the personality of the business. Even the beer powerhouses like Anheuser-Busch and MillerCoors are beginning to rethink how they advertise their light beers. They’re moving more toward a position of responding to the craft segment because the interest is in the flavor. The crafts are about the flavor.”

Moving Upward
Rick Yost, president of Dead River Cos. in Portland, Maine, which operates 19 convenience stores across the state, said he has been making a concerted effort to grow his craft beer business for the last three years. It was the commonsense step in a category whose unit volume was trending downward. “The typical beers, your premium beers, had flattened in our markets and, quite frankly, had remained flat for a while. The truth is that the craft had flattened for a while, too.”

The downward trend reversed as brewers began to push seasonal craft brews—a move that reinvigorated the category. “Today, if you look at the Sam Adams, Shipyards and Harpoon, their seasonals outsell their core beers. The excitement that these products are generating is forcing them to get more shelf space and that has really helped drive the category.”

To truly spark customer interest, microbrews need to be local products. “They don’t necessarily have to be from the same state,” Yost emphasized, “But at least in the same region.”

Dead River, which at presstime reached a deal to sell its stores to Alimentation Couche-Tard Inc., allocates about two-thirds of its cooler space to what it calls standard beers and imports, and about a third to craft items. The company has set aside a couple of its stores’ standard beer endcaps and displays, specifically for its craft selections.

“It’s worked out really well,” Yost said. “For example, when we offered a pumpkin ale in September and October it became our top-selling craft beer. The same thing applies to the summer.”

The Dead River shoppers who have been drawn to the craft displays have tended to be more upscale, which also helps upsell other categories like foodservice and snacks.

“The big thing you find in the crafts and the reason you carry such a variety is that the craft beer drinker doesn’t have loyalty to old-time brands,” Yost said. “People who drink the craft beers are much more willing to experiment with other brands and other flavors.”

Maintaining repeat sales, then, becomes a challenge. “Any good retailer sees to it that his retail mix varies from store to store based on demographic and customer preference,” Yost said, adding that each of Dead River’s 19 convenience stores carries an extensive craft beer selection. “Maine is almost craft beer central for this country with a number of craft brewers located across the state.”

As with so many product categories  prone to trends, c-store operators can expect to make money with craft beer, but not necessarily a fortune.

Finding Your Niche
Tim Grossi, category manager for 48-store Dash-In Food Stores in Maryland, is under no illusions about craft beers proving a revolution in the cold case. He does, however, respect them every bit as much as he respects his customers in the seven of his 48 stores that carry beer.

“We’re a little different,” Grossi explained. “I have three corporate stores right now, and the rest of our stores are in Maryland and are franchised. I do run their pricebook for them, but when it comes to the beer business the guys are really on their own. I do give them some industry information, but it ultimately comes down to what they think they can sell in their areas.”

Other considerations aside, for Dash-In and other c-store operators the number of craft beers stocked often comes down to something as basic as the number of inches available.

“We don’t have beer caves and we don’t have big beer displays,” said Grossi. “We basically have three or four doors of beer per store, and you’re stuck with the core top-sellers from the Miller, Budweiser and Coors families. So when it comes to the craft beers we might have one or two shelves in our set. We are not doing a lot in that sense simply because there is just not enough room.”

Bevmark’s Pirko said he sees parallels between the craft beer and yet another c-store growth category.

“We have another client, Five-Hour Energy. They made a sensational splash in the c-store channel and they now have 83% of that rapidly growing business. They did it by convincing, essentially, c-store owners to position a product that was new, interesting, exciting, and that consumers wanted in a way that it would increase their business and the profits,” Pirko said. “I think right now c-store operators can benefit financially. They can make more money and please  customers in new ways by offering new and exciting products, and that’s part of the verve of the business. You don’t ever want to be boring.”

Pirko finds c-stores to be interesting. “We’ve worked with them for a long time. They’re showcases. They are places of theater in the way you walk in and you want to be excited. So consequently you want to not only please your customers but sell them new, interesting—sometimes provocative—products,” he said. “You don’t want anybody to be bored in your stores and end up selling simply on price. You want to always sell premium products with their better margins, and things that people want to try. Right now, if you drink beer, you’re pretty much somebody who wants to experiment and try these new products.”

Though he stopped short of calling craft beers a bandwagon, Pirko nonetheless insisted that they constitute a trend that retailers should jump on. “This is simply a way to reinvigorate your business and make more profit,” he said. “I think we’ll see a lot more of them; they’ll be featured more. You try and get staff to recommend them, you put them in more prominent places, and it’s a good thing for the overall business.”

 

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