Wal-Mart's Beer Blitzkrieg

Mass retailer seeking to double alcohol sales

BENTONVILLE, Ark. -- Last September, 500 representatives from the alcohol industry gathered at the Sam's Club auditorium in Bentonville, Ark., for an "adult beverage summit." Attendees learned how serious Wal-Mart Stores Inc. was about selling more alcohol. Executives, who included chief merchandising officer Duncan Mac Naughton, told the gathering they wanted to double sales by 2016.

In the year since, the world's largest retailer has focused as never before on beer--a U.S. category worth about $45 billion--and has moved aggressively to grab market share, according to a Bloomberg report. The company has doubled the number of alcohol buyers to 12 and offered discounts on a range of traditional and craft beer brands. It ditched slow-selling products to make way for beer and is even selling it in garden centers. New stores are designed to put the suds front and center.

"We're seeing dramatic increases in sales," Steve Bailey, who attended the summit as vice president of chain accounts for Columbia Distributing, which supplies beer to about 90 Walmart stores in Washington and Oregon, told the news agency. That "has pushed us to pay more attention to Wal-Mart."

Wal-Mart has said little publicly about its latest ambitions. Unlike initiatives to expand produce or steak sales, the beer push has been so discreet that some analysts who cover Wal-Mart haven't even heard about it, said the report.

And inside the company, attitudes are changing. Wal-Mart now promotes alcohol in its circulars, reversing a previous ban.

"Focusing on adult beverage is a decision we made this year," Deisha Barnett, a Wal-Mart spokesperson, told Bloomberg. "Feedback has been very positive" and the relationship with distributors "has been very collaborative."

Historically, Wal-Mart's business model has involved buying massive quantities of products directly from suppliers. With alcohol, because of state and local laws, the company must buy from a network of third-party distributors.

Beer is a good fit for Wal-Mart. Most states allow it in grocery stores. Shoppers buy it regularly and often purchase other products at the same time.

Beer is "a traffic-driving category," Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, told Bloomberg. "High-frequency consumables can help them with their traffic problem. Beer fits that."

Wal-Mart's push into alcohol will put pressure on entrenched players, from Costco Wholesale Corp. and the dollar-store chains to convenience and grocery stores, said the report. Three months before Wal-Mart's summit, a Dollar General Corp. executive told investors the chain would boost the number of stores selling alcohol to more than 5,000 from about 3,700. This year the company plans to sell alcohol as many as 6,600 of its almost 11,000 locations. Family Dollar Stores Inc. also has touted plans to expand in the wine and beer market.

Watch the embedded video, and click here to view the full Bloomberg report.