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By Claire Pamplin
Despite modest growth throughout the total beer category, the microbrew/craft segment is exploding. Among the factors fueling this growth are changing consumer taste profiles and a new generation of adult drinkers who prefer more flavor and variety.
"Craft beers are in vogue and are achieving status in the wine industry," said Matt Paduano, vice president of information at Nice N Easy Grocery Shoppes, with 80-plus stores headquartered in Canastota, N.Y. "Beer is no longer limited to two descriptions: tastes great and less filling.
"Wine snobs are now being joined by beer snobs," he added. "These craft customers are most likely not loyal to any brand, but are trying a wide variety of offerings that keep hitting the market."
While Paduano noted the industry will always have its domestic light beer drinkers, a small percentage of these consumers has begun to explore other brands and flavors in the beer category, he said.
"Our craft beer sales are at 2.9 percent of total alcohol beverage sales, although this is a 105 percent increase over last year," Paduano said, noting drastic changes in the beer industry as of late.
"Some examples of this include manufacturer consolidation such as the Molson/Coors merger followed by [SAB]Miller picking that up, and Budweiser picking up much of InBev," he said.
Meanwhile, consumers have been trying mightily to boost beer sales. "Although last year showed an increase in beer consumption, the industry has been flat," Paduano said.
Jacksons Food Stores, based in Meridian, Idaho, has also enjoyed microbrew and import success in the past few years, said Mark Wilcox, category manager at the 93-store chain. "We feature, with a priceoff and display, one brand from each of these two categories every month. We have found that it is not necessary to run deep discounts on these brands, as price is not the driving factor in these categories. It is also important to stay on top of the new brands and flavor profiles. The wheat beers and IPAs -- such as Redhook Longhammer IPA and Coor's Blue Moon -- seem to be the hot flavors at this time, but that could change tomorrow."
During the winter, Jacksons adds a shelf of seasonal beers from the major microbreweries, a successful strategy. These brands include Deschutes Jubelale and Widmer Snowplow. The chain also added more 12-packs to the category. "[They] bring in a nice dollar ring with higher margins," Wilcox said. "We have also seen renewed interest in some of the nontraditional import brands as they are starting to do some pretty heavy advertising, such as Guinness. But don't forget about Corona and Heineken, as these are the drivers in the import category."
Miller Oil Co., in Norfolk, Va., like many retailers, has a limited amount of cooler space for craft and microbrews, but offers a small assortment of Samuel Adams, Sierra Nevada and the like. The Miller Oil leadership recognizes the subcategory's potential, said Jack Trebilcock, category manager for the chain, with 38 stores in Virginia and seven stores in Florida.
Like many c-stores around the country, Miller Oil's best sellers are the time-honored favorites: Bud Light 12-pack bottles. The traditional beers are the mainstays of the cooler, although Trebilcock said he would expand the craft beer line in the next beer reset.
"With an average of eight total doors, four are dedicated to carbonated soft drinks and noncarbonated beverages, and the other four to beer. Four shelves are merchandised with import/craft and craft only having a couple facings, depending on the store's demographics," he said.
Trebilcock summed up the analyses and sentiments of several retailers. "There is not a lot of fluff space once you place all the core brands -- Bud, Miller and Coors," he said. "However, I am hoping to get an additional shelf or two for the others. I want to do this because I have past experience that when you have a good selection of import/craft, you draw a different clientele that has a little more disposable income and might spend it elsewhere in the store.
"Import/craft beers are also popular with the younger drinking population -- they enjoy more flavor and some variety. There have also been a lot of articles about craft beers' popularity and I want to be in the game and enjoy the higher register rings and gross profit dollars."
All hope is not pinned on craft or specialty beers, however. Malternatives have performed well at Nice N Easy.
"As you know, we do not sell hard liquor in our stores but have found some success with the liquor brand names, such as Smirnoff and Bacardi, of malt beverages. Smirnoff, Mike's Lemonade, Johny Bootlegger and Sparks are malt products that have generated success for the chain," Paduano said, adding that he expects to see more entries in this arena.
"Smirnoff was the first to develop a following and is one of the few still standing," he continued. "Mike's Hard Lemonades and the Twisted Teas have both done very well as of late with new flavor introductions that keep sales increasing. Bacardi has fallen drastically and except for its Mojito flavor, will be discontinued this year."
Additionally, Nice N Easy had seen large sales increases in single-serve, 24-ounce cans, and 22- and 32-ounce bottles, Paduano reported. "This is a very profitable segment for the retailer. [Another] trend is the migration to 30-packs from 12- and 18-[packs]. This is partly due to the fact that price sensitive consumers are drawn to this package because both distributors and retailers have cut margins on these sizes and the consumer is responding. The light category continues to increase, although the 'ultra light' category has stabilized somewhat. The sole player left is the same one that started this trend -- Michelob Ultra."
Leave it to the malternative segment to use an outlaw marketing approach. One brand taps into a Prohibition-era image: Johny Bootlegger. Paduano said the product's success surprises him, and that it does well at most locations. The product comes in flavors such as Alcatraz Sour Apple, Machine Gun Melon and Sing Sing Sour Grape. The eye-catching, old-fashioned bottle is unconventional and nonconformist: "These are difficult to merchandise," Paduano said. "Door suction racks are the main means of displaying the products."
"Our malternative beverage sales are 6.5 percent of total alcohol beverage sales, and that subcategory was up 20.5 percent over last year," he said. At Miller Oil Co., malternatives make up 1 percent of beer and wine sales, according to Trebilcock. Jacksons Food Stores' Wilcox said, "We offer several malternative brands with the Mike's and Smirnoff brands leading the category. The category was up 5.32 percent over the last year, which represents 3.25 percent of the total category sales."
Paduano cited another alcohol beverage trend, the higher-alcohol, caffeine-spiked "energy beers."
"We devoted a shelf per store when they came out two years ago but now have settled with the top-selling ones -- Sparks and Steel Reserve," he said. Sparks, owned by SABMiller, has not only caffeine but also ginseng, guarana and taurine. "The Sparks 16-ounce can is by far our No. 1 selling single beer unit and the line extensions off this name are picking up steam."
For comments, contact Claire Pamplin, Consulting Editor, at firstname.lastname@example.org.