NEW YORK -- $1 billion! That’s what the convenience store industry is missing by not raising higher revenue beer sales to competitor-channel levels.
Convenience retailing is the undisputed leader in off-premise beer, owning 40% of volume, 18 points bigger than No. 2 liquor stores. However, when it comes to retailing imports, craft beers, flavored malt beverages (FMBs) and cider, convenience falls short, selling less than half the percentage of higher-revenue beer as the food, liquor, club, mass and drug channels.
The good news is convenience stores sell the same percent of FMB and cider as other channels. Well done! But the import and craft segments continue to hold the channel back. So how does convenience grow its share of higher-revenue beers?
Import Segment
Competitor channels average 16% of their cases in import beer, while convenience averages only 8%*. This is a direct result of poor availability. Convenience stores shelve 12% of beer SKUs in import, while competitor channels shelve 24%.
Although convenience carries a wide selection of import singles and 6-packs, there is less availability of import 12-packs. The first step to maximizing convenience import sales is to improve 12-pack availability. The top three 12-packs—Corona, Heineken and Modelo—average just 55% distribution. Once those 12-pack distribution holes are closed, growing distribution of Corona, Heineken and Modelo 18-packs—trending up 25%—will keep convenience store retailers competitive with other channels.
Craft Segment
Since 2009, craft-beer sales grew 75% while total beer was down 1%.
Convenience stores sell 2% of its volume in craft beers, while competitive channels sell five times more, or 10%. Convenience sells little craft because they offer little craft, shelving only one-quarter the percent of craft SKUs as competitors.
Twelve-packs are the highest volume pack for craft beers and must be part of the mix to stimulate sales. Convenience retailers looking to maximize craft sales will shelve key 6- and 12-packs. The leading craft franchises are Sam Adams, New Belgium and Sierra Nevada.
Where to find the space?
The question that remains is: Where does it all go? My simple answer: the value segment.
Convenience stores are 6 points more developed than other channels in value beers. Convenience shelves over double the percentage of value SKUs as other channels. Value has a low dollar ring and is in decline.
Reduce value facings and package selection to make room for import and craft beers.
Next Steps
The sheer size of beer sales in convenience stores is a staggering 880 million cases annually! However, when you compare across channels, convenience has the lowest percentage of sales in higher-revenue beers. That puts the convenience channel at a disadvantage, as dollars generated from higher-revenue beers are 60% larger than premium/value segments.
Closing the higher-revenue-beer gap is the convenience channel’s $1-billion opportunity. In convenience stores, import and craft beers are at a 16-point deficit to competitive channel sales. The primary reason is that c-stores shelve half the percent of import SKUs and one-quarter the percent of craft SKUs as competitor channels. Adjusting convenience store cooler sets to gain import and craft SKUs is the first step to closing the higher-revenue beer gap to other channels. The value segment is a great place to make space. Let’s get started!
*Data sources: Nielsen channels ending Jan. 4, 2014, in cases, the Beer Institute 2013, “craft beer” as defined by Brewers Association definition.
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