6 minute read

Tapping Opportunities in Today’s Tough Retail Climate

Economic challenges are driving many consumers to socialize and celebrate at home

By Kathleen Furore

THERE AREN’T MANY positives to the labor shortages, supply chain issues and rising prices plaguing convenience store retailers and their customers today. But there is at least one bright spot: these challenges are driving many consumers to socialize and celebrate at home, presenting the opportunity for c-stores to capture a larger slice of the alcoholic beverage pie.

"Consumption trends continue to fluctuate with the impact of supply chain challenges and rising inflation, but opportunities for growth remain,” Scott Scanlon, executive vice president of the beverage alcohol vertical at IRI, noted in the company’s 2022 Midyear Alcohol Update. “Consumers are looking to indulge and create entertaining experiences at home, and retailers should emphasize premium products and products with unique attributes in this space.”

Keeping abreast of the latest trends, optimizing their product mix, and merchandising and marketing popular alcoholic beverages can enable convenience store operators to tap the current opportunities and boost their sales in this category.

Spotlighting Trends

While beer continues to dominate the total alcohol landscape in convenience stores — accounting for more than 87 percent of total alcohol dollars, while wine and spirits have 4 percent and 9 percent share, respectively — hard beverages are “the hottest trend in c-store at the moment,” Craig Koehler, director of category development at Anheuser-Busch, told Convenience Store News.

“This is a category that consumers define as not quite beer, not quite wine and not quite spirits. [It is] essentially where seltzers, ciders, FMWBs [flavored malt/wine-based beverages] and RTD [ready-to-drink] cocktails play,” he explained. “It’s a $4.6 million category in c-stores, currently growing at 4.7 percent vs. year ago. In other words, it makes up only 19 percent of category dollar share, but [is] contributing to over 37 percent of total category growth.”

FMWBs, as well as spirit-based seltzers and cocktails, are leading the growth in hard beverages, creating opportunities that all c-store retailers should be aware of, Koehler advised.

Jay Hornback, manager of convenience channel sales at Beam Suntory, echoed that spirit-based prepared cocktails are showing significant growth so far this year. He predicts the momentum will continue in 2023, pointing to Nielsen year-to-date trends that show the segment up 80 percent. “In recent weeks, trends have been even stronger,” he added.

In the liquor category, tequila in particular is showing strong growth in the convenience channel when compared to total spirits. According to Hornback, Nielsen year-to-date data shows tequila in convenience growing 24 percent, while total spirits growth in the channel is 9 percent.

“The opportunity we find within tequila is that many convenience stores carry a limited assortment. Typically, a customer can find a midtier brand and an ultra brand, but little to no premium brand selection,” Hornback explained, noting that the company’s Hornitos tequila brand can provide a trade-up over a mid-tier brand.

Better-for-you options and alternative alcohol products are also doing well, the IRI Midyear Alcohol Update pointed out. “As consumers adopt healthier habits, better-for-you beverage alcohol options are gaining traction,” the report stated. Attributes such as no- and low-alcohol, lower calorie, lower sugar, added benefits and options that support lifestyle diets are among the products seeing dramatic sales gains, according to the report.

Hornback also pointed out that there are two trends happening on different ends of the price point spectrum. “Due to inflation and price increases, some consumers are trading down to stretch their disposable income. On the other hand, we are seeing an increase in super-premium and ultra segments with consumers buying more premium brands but less often,” he reported. “At Beam Suntory, we are experiencing a 10 percent increase in sales with our super premium segments vs. our premium and below segment items.”

Managing Merchandising & Marketing

No matter the product mix c-store retailers decide to carry, how those products are merchandised and marketed will also determine how successful their alcoholic beverage sales will be.

“Merchandising is key, specifically with spirits, as letting the consumers know you are carrying them is important,” Hornback stressed. “As the consumer enters the store, they generally have a good idea that beer is available from looking at the cooler section. In some stores, without asking if they sell spirits, the consumer wouldn’t know. In these situations, the retailer could be missing out on numerous purchase opportunities, and causing the consumer to make another stop elsewhere.”

Hornback and Koehler shared several tips that can support convenience store operators in creating a sales-generating merchandising and marketing strategy:

Stock leading brands. Well-known, established brands typically are strong sellers in the convenience channel. “With limited space in many stores, offering lead brands within each segment, and then having brands that represent each price tier, will allow for a more diverse selection for customers,” Hornback said.

“C-store retailers should focus on carrying well-known, trusted brands that shoppers rely on,” Koehler echoed. “It’s important to stay in stock on shoppers’ favorite products, and then leverage innovation for incremental sales.”

Offer a variety of spirits, with trade-up options. Hornback cited On The Rocks Premium Cocktails, a RTD brand, as one example that shows the bottom-line benefit that taking this approach can deliver. “The average 375-milliliter single retails for $12.99 vs. the average 355-milliliter single can [retails for] below $5,” he noted.

Merchandise high-performing hard beverages in one place. “Given the limited cold space in c-stores, retailers need to be more choiceful and only leverage cold space for high-performing spirits-based seltzers and cocktails,” Koehler advised. “Lower performing SKU wine-based hard beverages should be placed in a warm section if available.”

Carve out a small amount of space for flex or seasonal items. This is key, according to Hornback, who explained that by doing so, retailers can react to quickly changing trends and support seasonal sales during key holidays. “For example, this space could be for innovation items or supporting a VAP package for Cinco, Father’s Day or holiday gifting,” he said.

Stressing the importance of merchandising, Hornback said it is the all-important link between product selection and sales in the alcoholic beverages category.

“As convenience stores continue to evolve as a one-stop shop destination for food, beverage and snack, they need to ensure they are merchandising all segments within their stores,” he concluded. CSN

“C-store retailers should focus on carrying well-known, trusted brands that shoppers rely on. It’s important to stay in stock on shoppers’ favorite products, and then leverage innovation for incremental sales.”

— Craig Koehler, Anheuser-Busch

This article is from: