BP America’s Ed Hobson spends a lot of time trying to figure out what millennials want to drink.
He analyzes internal scan data and outside vendor data. He looks at competitors’ offers and other retail channels and pores over trade publications.
He has taken surveys straight to millennial customers and asked, “Do you mind us shopping with you?”
While understanding millennials isn’t always easy, it is critical to Hobson and ampm, BP’s national c-store brand.
“If you’re going to grow in this economy, you are going to have to understand and be able to offer what the millennials want,” says Hobson, category manager for beer, progressive adult beverages and wine for the La Palma, Calif.-based chain.
Crafting a Strategy
In ampm’s eff orts to target millennials, most of the chain’s 970 stores in Arizona, California, Nevada, Oregon and Washington will expand their craft-beer offering in 2015. Craft sales have grown about 20% for the chain, Hobson says.
“If it was a store that had half a door, it will probably have a full door now. If it is a store with a full door of craft, it will have a full door as well as two more shelves adjacent,” he says. To put this in perspective: “Two or three years ago, we didn’t have any craft in the stores.”
Customization is also a big deal for millennials, many who came to adulthood refining their coffee order at Starbucks and handpicking their favorite music online.
When Kroger grocery stores started giving customers the chance to customize their beer purchase by offering a mix-and-match six-pack carrier, Hobson took note. His stores already had success with “two-for” offers. Why not combine that success with customization of the beer vault through a mix-and-match offer featuring 16-ounce cans of craft beer and malt beverages?
“We developed our own four-pack carrier. You can buy a Blue Moon, a Shock Top and two Mike’s Hard Lemonades, for example, and get it for $5.99,” he says. “It’s not going to work for every single store, but it has been very well received.”
Sustainable Innovation
BP America’s stores average 1,000 to 2,500 square feet and typically feature 10 or 12 beverage doors. Alcohol beverages occupy about 40% of that space, with nonalcohol beverages taking up the rest. Hobson looks to the grocery channel and specialty shops for inspiration, but he knows that managing the limited space in the c-store requires greater vigilance.
“We have to be very selective on what we bring in. If something is slow-moving, it’s out,” he says.
Trying to appeal to the millennial quest for flavor brings the challenge of keeping up with innovation and the turnover of products that comes with it.
“Innovation is great and it surges, but it isn’t sustainable,” Hobson says, pointing to products such as Bud Light’s Lime-A-Rita and its successors. “They’re constantly changing those flavors. Lime-A-Rita did great and that tailed off. Straw-Ber-Rita did better than Lime-A-Rita but it’s falling faster than Lime-A-Rita.”
He plans sets to adjust for the introduction of new products. He points to Bud Light’s new beer hybrid, MixxTails, as an example.
“We’re adding a couple in the set because we want to capitalize on the trial. You’ll have some repeat but you’re not going to have this long-term sustainability with those flavors,” he says. “Something else next year will come in and replace it.”
Seasonal offerings are a great way to keep innovation exciting, he says, particularly in craft beer and malt beverages.
Imported beers also are top performers for ampm, especially Mexican imports. One of the chain’s most successful products last year was Modelo Especial Chelada, which blends Modelo Especial with tomato, salt and lime flavors.
Trading Up
In the cold vault, Hobson is seeing less innovation and new flavors from energy-drink makers this year. But he expects “big things” from two new semi-exclusive flavors of Monster and Rockstar that will be introduced in ampm stores in the spring and fall. The chain was able to have the special flavors developed through a partnership with another retailer outside of ampm’s market area.
His expectations for carbonated soft drinks (CSDs) are far lower. Hobson expects sales to remain flat as health concerns drive folks away from the big cola brands. “Millennials just have so many other options. They want healthy options,” he says, “not low-cal or low-fat. They want more natural items.”
Lower gas prices appear to be prompting customers to trade up, particularly in beer and water, where they’re going for more premium products. Millennials in particular seem willing to pay more for something perceived to be higher quality or offer something extra, such as Glacéau smartwater or vitaminwater, he says.
Through shopper insights, Hobson has learned about another challenge in reaching out to millennials and other customers: awareness. “They didn’t realize what kind of variety we had,” he says.
Shopper surveys found that they expected to find Budweiser and Coors but that they weren’t fully aware of high-end imports and craft offerings. They also didn’t realize that ampm’s pricing on energy drinks was better than grocery-store pricing, he says. So last fall, ampm changed its outdoor posters and window displays on packaged beverages to promote the chain’s prices on energy drinks. It promoted craft beer in window space normally reserved for major brewers.
“So far, looking at our sales month to month, it continues to grow,” Hobson says. “Customers now know, ‘I can go anywhere and get Budweiser and Coors. But wow! I didn’t know ampm also had this other stuff.’ ”
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