C-store Retailers Getting Crafty With Microbrews

NATIONAL REPORT -- Nearly 80 percent of convenience stores fortify their bottom line by selling suds. Household brands such as Budweiser and Coors dominate market share and shelf space, but craft beers and microbrews are popping up in coolers with greater frequency across the nation, satiating the pallets of aficionados looking to elevate their taste experiences.

"More and more consumers are turning their attention to microbrews and craft beers; as a result, we are seeing continued growth month to month," said Bob Pulley, senior category manager for Cary, N.C.-based The Pantry Inc., which operates 1,650 locations in the Southeast.

According to the Brewer's Association, the retail dollar value for craft brews in 2010 was an estimated $7.6 billion, up from $7 billion in 2009. Sales share was 4.9 percent by volume and 7.6 percent by dollars, while domestic beer and imported beer showed some weakness.

"In an overall beer category that is flat to slightly down, craft beer is the only category that is growing in volume and dollars," said Jim Koch, founder, brewer and chairman of the Boston Beer Co., which produces Samuel Adams. "It's on everyone's radar screen. Retailers, particularly convenience stores, are saying: 'How can I take advantage of this?'"

Beer Business Daily reported that Coors Light and Budweiser are in an almost dead heat with sales at 8.5 percent and 8.7 percent, respectively. Miller Lite follows at 7.5 percent while Bud Light leads the pack at 19.1 percent. While these numbers are solid, America's big brew houses recognize the value specialty beers offer, explained Craig Morris, director of chain and customer solutions for Tenth & Blake, a subsidiary of MillerCoors Inc.

"Despite some significant economic conditions, the craft segment has actually continued its acceleration. There is currently an exploration mindset with consumers, and more varieties being offered by brewers so by default the numbers will rise," Morris said, adding that the company's flagship craft beer is Blue Moon. "We continue to see very positive trends."

Kent Raphael, director of category management for Road Ranger, noted that customer interest in craft beers is driving this category in the 80-store chain serving the Midwest. As a result, cooler planograms have changed. "We have expanded what we carry because there is a definite consumer demand for these products and while it is still a small category, it's on the rise" said Raphael. "People are either buying better or they are buying cheap."

Striking the right balance of product and placement in this category is a new skill set. Premium light beers still draw the biggest crowd, but well-placed craft beers and microbrews, which might only occupy two shelves or one cooler door in a bank of four, are becoming more common.

"The role of the convenience store remains the same to the core beer shopper: it is their primary beer destination. For the craft segment, you have to understand which national brands are the strongest and complement that with local craft beers where appropriate," said Morris of Tenth & Blake. "This is absolutely about having the right selection."

He further believes a c-store's merchandising philosophy and in-store execution should match up with the amount of time a beer consumer will spend in front of the cooler. "In this segment, you cannot be everything to everybody," he stressed.

The Pantry has been on an accelerated path to take advantage of this segment and is getting specific in the ways it approaches it. Pulley said sales increases in specialty beer have been across the board with higher rates for those stores located in tourist destinations.

As is the case with all products, there is a learning curve for both the retailer and the consumer. "The bigger companies like Sam Adams have sales forces and marketing that can help educate retailers and consumers, but the smaller brands do not have the marketing forces in place like these bigger companies," said Pulley. "[However], consumers are savvier today and can tell the difference between a lager and a pale ale, for example."

For more on the craft beer/microbrew segment, particularly how convenience store retailers are localizing their assortment and educating consumers, check out the October 3 issue of Convenience Store News.