When Opportunity Taps
As a veteran of more than three decades in the suds trade, I had a backstage pass for many innovations in beer: the emergence of light beer, ice beer, dry beer, day-fresh beer, flavored beer, packaged draft, mini-kegs, aluminum bottles, beer food-pairing dinners and brewpubs. Now the craft segment and its variety of styles is all the rage, with double-digit growth for three years running, as reported at the NACS SOI Summit. Syndicated data suggests that c-stores are underdeveloped in craft, at less than 2% of category sales. In grocery, craft represents nearly four times what it does in convenience. How can the largest retail channel for beer not be the leader in this new trend?
Craft beer is about variety and selection—a lot of selection and a lot of variety. Satisfying this consumer requires a new, unique product offering that by nature has very slow turnover on an SKU-by-SKU basis. Consumer research suggests that there is significant experimentation on every shopping trip. Being a mile wide and an inch deep on styles is a critical success factor. For c-stores, more so than any other class of trade, space is your most precious resource. Conversely, c-store success in beer has been built on being 100% in stock on top sellers, which makes them a mile deep and an inch wide. This is a dilemma.
Cracking the code for this challenge is one that many retailers are attacking with proven methods. A fully balanced approach to space allocation, six-pack mix-and-match programs and the leveraging of beer vaults’ space have been critical elements in winning strategies. Retailers that have found success have done so without creating out-of-stocks on core, top-selling items. Innovation has also been key in finding what is old and making it new again.
On the Growl(er)
Back in the old days, great-grandpa used the neighborhood tavern as his stop for a cold adult beverage, a reward for a hard day’s work. That local tavern often made its draft beer available in a to-go package, poured and sealed on order, called a growler. This 64-ounce refreshment was beer at its best, fresh off the keg. In Europe, this is still the way many towns enjoy their take-home brew.
Today, c-stores play a similar role as the neighborhood daily stop for refreshment. Consider the channel’s growth in foodservice and beverages. Numbers revealed at the SOI Summit showed that in 2011, foodservice was the highest gross-profit category inside the store. Dispensed beverages provided a significant portion of this profit. C-stores know how to sell dispensed beverages. As the largest class of trade for beer, c-stores know how to sell beer.
Several national chains have begun to figure this out. Whole Foods, Duane Reade and Sunoco have all rolled out beer “growler” programs to create a whole new destination category. On a recent trip to the East Coast, I had the opportunity to visit some of these stores. As a beer lover who has long appreciated a great draft beer, it was rewarding to see this innovation. Offering a range of six to 14 “taps,” these retailers are driving new traffic with intrigue. Changing brands, styles of beer and collectible growler graphics are bringing customers back.
I am not certain that anyone is executing growlers perfectly yet, because there are many operational, legal, sourcing, merchandising, pricing and training issues that require developing best-practice models. Fresh draft is beer at its best, and consumers appear willing to pay for the opportunity to take it home. With retail prices ranging from $9.99 to $19.99 for a 64-ounce growler, there are obvious rewards to be garnered. Much like beer vaults, though, draft beer will not be for every store.
History shows that c-stores have owned the beer customer and dispensed beverages. A draft-beer growler program is merging these two core strengths. As Abe Lincoln said, “The best way to predict the future is to create it”—and the future is filled with untapped opportunity.