Beer Bounces Back

It’s always nice when a general statistical look at an industry can be confirmed locally, and that is the case with convenience store beer sales as 2011 closes.

The Beer Institute confirms that the convenience channel is one of the most important for beer. The category accounts for 30% of total U.S. industry volume. A down economy has impacted sales mostly through the unemployment rate for beer’s core demographic—21 to 27 year-old males–but two retailers reported their beer business has bounced back nicely.

“The beer category was a little tough in 2008 and 2009 for everyone, but it seems to have come back this year,” said Wendell Funk, directory of category management for Corpus Christi, Texas-based Susser Petroleum, parent company of the 528-store Stripes convenience store chain.

“Beer is equally as important as tobacco,” said Wade Hollis, category manager for Love’s Travel Stops and Country Stores, a 280-location chain based in Oklahoma City. “Sales have been great.”

Funk can attest to what seems to be counterintuitive: though most agree there is still a recession, beer consumers are buying more expensive product.

“There are a couple things that are really hot, and one is Michelob Ultra,” Funk said. “Blue Moon’s doing well and Dos Equis is huge. They’re really driving that business for us. Higher-end beers are doing well. Overall, people are trading up thinking, ‘If I’m going to spend the money I’m going to get the good stuff.’”

Hollis said he doesn’t quite understand the phenomenon, but he is enjoying it. The higher ring comes with lower volume, and managing more expensive beer keeps him on his toes.

“There are many brands in between the top and bottom that do nothing or continue to decline,” Hollis said. “It’s easy to check off the box on the budget brand and the below-premium brand, but it’s the premium and the super-premium brands that I’m having growth with that still amazes me.”

Customer Focused
Hollis has to manage and buy for two very different types of locations: the travel stops are trucker-focused, while 85 Country Stores are more typical convenience stores catering to non-trucking customers in rural areas. In either case, Hollis is driven by concern for margin first, then volume.

The truckstop competition is other truck stops, Hollis said, because of the unique customer. With Country Stores, any convenience store, drug store, mass merchandiser, dollar or grocery store within 200 yards is considered a rival.

“The retails we are setting in our stores reflect what those competitors are doing,” Hollis said. “Price is definitely the way to compete there. We allow each store to set their retails based upon what the distributor recommends. The distributors bring their pricing profiles to the stores and review their costs with store managers. We give managers the store guidelines on how to compete. We coach them by teaching them what they need to do to be competitive.”

There are six beer caves in the Love’s chain, in stores that need cold bulk product near tourist areas like lakes and national parks, or in a border location: one state sells beer with 6% alcohol and its neighbor does not. The average Love’s location offers two to three cooler doors of beer.

Anheuser-Busch is the category captain for Stripes. Funk said beer gives up cooler space to nonalcoholic drinks at the travel stops, and beer caves are not in the chain’s plans for new stores. Instead, in all new stores of the past several years and going forward, drink shelves are four feet deep, twice the standard. In effect, said Funk, the increased holding capacity of the deeper shelves is similar to a beer cave.

Getting Crafty with Beer

Nielsen ScanTrack numbers through Nov. 12, 2011 show that some subcategories of beer are fueling success. Craft and microbrew beer volumes are up almost 15% with brands from a variety of large and small brewers doing extremely well (includes Shock Top, Blue Moon, Samuel Adams, Shiner, New Belgium and Sierra Nevada). Imports are up around 1.5%, with Stella, Modelo Especial, Beck’s, New Castle, and Dos Equis all doing well.

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