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    Mixing Up the Cocktails

    As craft beer draws sales from other segments, retailers are making changes to what they stock

    By Angela Hanson, Convenience Store News
    C-stores can develop a reputation for catering to craft beer enthusiasts.

    Beer remains a staple of the cold vault at convenience stores and other retail outlets, but times are changing. American consumers are increasingly turning to different kinds of alcohol, including wine and hard liquor, and craving more flavors and variety, according to research.

    Another major shift is the rise of craft beer, sales of which are expected to grow to 17 percent of total beer sales within the next 10 years. But can this segment comprised of many microbreweries really pose a threat to longtime favorites like domestic and light beer?

    To a degree, the answer is yes, according to some experts.

    ?There [are] just so many beers you can put anywhere,? said Eric Shepherd, vice president and executive editor of Beer Marketer?s Insights. ?I think there?s no question that craft has cut into more mainstream beers in space and sales.?

    With competition for cooler space especially intense, mainstream domestic and light brands have been hit the hardest. While craft beer is more developed as a segment in supermarkets than in c-stores, the story is the same: ?Craft is growing faster than virtually any other segment,? Shepherd noted.

    The increase in craft beer sales represents a change in priorities for today?s beer drinkers, according to Matt Paduano, vice president of category management at Canastota, N.Y.-based Nice N Easy Grocery Shoppes Inc. ?We?re seeing a lot of the losses in the popular priced ones? as consumers choose to trade up in quality and price, or ?down to the bottom feeders? to save, he explained.

    One sign of the changing beer market is the lack of package variation available at c-stores today. Five years ago, retailers might have carried Budweiser in cans, bottles and numerous pack sizes, but now many are consolidating in order to make room for craft brews and items with higher profit margin. At the same time that c-stores are offering fewer large-size packs, ?one of the saviors out there is the growth in singles,? Paduano said.

    Along with craft beer, flavored malt beverages and ciders have done well over the last year, with Shepherd noting a ?pop? in this area. In particular, Anheuser-Busch?s Lime-A-Rita and Straw-Ber-Rita have done surprisingly well, with Lime-A-Rita earning a spot on Information Resources Inc.?s top 10 New Products Pacesetters list for the convenience store market in 2013.


    C-store retailers that want to maximize their beer revenue are obligated to change up their mix of offerings ? but only to a degree, as the traditional top beers still occupy considerable market share, and consumers tend to be loyal to their chosen brand.

    ?They have to know their consumer base,? said Shepherd. Like any other product category, a successful operator knows what kind of customer traffic they see and what brands those customers prefer.

    Stores can develop a reputation for catering to craft enthusiasts, which has its benefits as well as its drawbacks. ?That?s where you start getting into more micromanaging,? Paduano said. ?Do I want to sacrifice cold space for something that might move less than a six-pack per week??

    For c-store operators, it can be a tricky balancing act between craft beer, which offers higher margins per package, and those brands that sell in higher volumes.

    More choice is always better, but unlike supermarkets, which tend to have more square feet to work with, c-stores have to be more efficient with what they offer, making knowledge of one?s customer preferences that much more critical.

    Temperature is also an important consideration. ?Offering the product cold is the No. 1 advantage that you have,? with pricing second, Paduano said. At the same time, offering new brews warm on the shelf can serve as a trial period for the latest beers, rather than immediately sacrificing cold vault space occupied by existing sellers in favor of a product with no history.

    ?I?d rather have a craft brand earn its keep on the warm shelf before it works its way into the cooler,? Paduano said.

    As retailers scramble to adjust to these changes in the market, they must also look ahead at changes yet to come. After facing struggles caused by severe weather incidents last year, Paduano is cautiously optimistic about 2014. ?If the weather cooperates, I expect the whole beer category to be up a couple percentage points,? he said, noting that while this is a small figure, it?s ?very healthy growth? when taking into account that it?s a reversal from a previous downward trend.

    When considering a similar bounce-back for struggling mainstream brands, though, Shepherd is skeptical. ?History has been that when a big brand starts to decline, it?s very difficult to reverse that direction,? he said.

    Still, the biggest breweries are devoting a great deal of time and effort to doing just that ? and in the meantime, they?re purchasing promising craft breweries as well, with Anheuser-Busch?s February purchase of Patchogue, N.Y.-based Blue Point Brewing Co. serving as a prime example.

    For now, there?s nothing but good news for craft beer. The ?endless stream of new brands ? seems to be unsustainable,? Shepherd said. ?But every time you think that, more brands come out.?

    By Angela Hanson, Convenience Store News
    • About Angela Hanson Angela Hanson is associate editor for EnsembleIQ's Convenience Store News, where she is responsible for primary coverage of the candy, snacks and packaged beverages categories. Since joining CSNews as assistant editor in early 2011, she has played a key role in helping CSNews.com maintain its position as the No. 1 news source for the convenience store industry. Prior to joining CSNews, Hanson served as junior editor at Creative Homeowner book press and as managing editor of Anime Insider magazine. She has degrees in creative writing and visual communication technology from Bowling Green State University.

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