2013 Beverage Report, Part 1: Beer & Wine

"Upscale" driving beer sales; wine gets sweet

Steve Holtz, Editor in Chief, CSP Daily News

OAK BROOK, Ill. -- With the total volume of beer sold in convenience stores up just shy of 4%, the 2012 volume growth of three of the most-popular import beers in convenience stores tells a significant story: Corona Extra up 8.3%, Heineken up 8.0% and Modelo Especial up an impressive 27.6%.

"We expect continued solid performance at the high end of the beer category," Gary Hemphill, senior vice president of information servicesat Beverage Marketing Group in New York, told CSP Daily News. "Specialty beers continue to outperform the market and gain share."

That's because consumers are continuing on a trend "toward higher-value beers: craft and import," said Jeff Schouten, director, channel marketing at MillerCoors, Chicago. But there remains strength in the "core" premium beers in the industry--Bud Light, Coors Light and Miller Lite, which is growing again.

For beer brewers, this means investing in high-profile promotions, extending their most popular brands and investing in specialty beers as never before.

"We are providing product and merchandising expertise on craft beers through our craft division, Tenth & Blake," said Schouten of the MillerCoors arm started in 2010. "You'll see product innovation, including Third Shift Amber Lager, Redd's Apple Ale and Batch 19, as well as new offerings from the Blue Moon and Leinenkugel's brewing companies."

Heineken USA, meanwhile, is focused on building its major import brands to drive continued sales.

"Wherever beer is growing, 'upscale' is driving that growth," said Nick Lake, senior director, category management, national accounts for Heineken USA Inc., White Plains, N.Y., "Winning in the upscale segment is about building long-term consumer brands that appeal to beer lovers, delivering smart innovations that change the game and providing real value to our retail partners."

For retailers, this focus on new products and brand building requires knowing what your customer wants.

"Convenience-store operators must win the upscale consumer by optimizing assortment by focusing on variety versus duplication," Lake said. "The key is to understand which packs actually drive incremental volume and which are substitutable."

More fundamentally, Schouten said, "Retailers should consider beer as a destination traffic driver, as they do with other categories such as coffee and foodservice. [They] should take a hard look at the space they devote to beer, especially as they enter into the craft category. Beer inventory turns are already among the highest in the store, making out-of-stocks a risk."

Tony Gaines, vice president of small format at Anheuser-Busch, agreed, saying, "Most retailers use weekly supply as the metric to make sure they have enough coverage in their sets, but more than 60% of beer is purchased Thursday night through Sunday afternoon.

"Winning retailers need to be on top of available cold beer for the weekend, while managing selection. The driver for a convenience store is premium beer. If the store is out of premiums, the consumer will move to another store."

Sweet Flavors

Meanwhile, another trend in alcoholic beverages, arguably started by sweet-flavored vodkas and other spirits, is taking root throughout the category.

"Consumers continue to look for slightly sweeter options," said Gaines. "A key consumer is the Millennial who may not be in the beer category. Since only 20% of the [convenience-store] channel can sell spirits, brands such as Bud Light Platinum and Bud Light Lime-A-Rita can target a traditionally hard liquor-buying consumer and are strategic items to focus on in these stores."

A-B has made a concerted push toward these sweet tastes, extending its Budweiser and Michelob brands, Bud as mentioned above and Michelob with fruit-flavored extensions.

It's also introduced Michelob Ultra Light Cider, which capitalizes on recent growth in hard ciders, a trend also recognized via recent purchases by MillerCoors and Heineken USA and a brand rollout by Boston Beer Co.

This swing toward sweet has also hit the wine category, where traditional vintners have introduced sweeter vino, inspired by the strength of moscato.

"You're starting to see a bunch of moscato-flavored items coming out, such as a pink moscato, red moscato, not just from Gallo, but from competition. It's basically going after what we believe the consumer wants," said George Ubing, director of the convenience channel at E&J Gallo Winery, Modesto, Calif.

Gallo's recent output includes a Chocolate Rouge Wine, as well as a new malt-based line of sweet alcohol drinks under the name Delicia.

CSP's complete 2013 Beverage Report.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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