Leaning hard on consumer insights and innovations, beer brewers see opportunities for more shelf space and higher sales in the coming year. But does that sentiment translate into sales at convenience stores?
C-store retailers are cautiously optimistic about the outlook for beer in 2024, anticipating 3% to 4% growth in sales dollars, according to Goldman Sachs’ Beverage Bytes convenience retailer survey conducted in October. “That would be flat or down slightly” in units, wrote analyst Bonnie Herzog of the New York investment bank. The third-quarter Beverage Bytes survey represents about 36,000 retail locations or about 24% of the c-store channel.
Reason for Success
Kirk Jornlin, category manager at CEFCO, told CSP that “despite economic and industry headwinds,” the Temple, Texas-based chain saw same-store sales increase in 2023.
“Our success is due to a mix of price increases, assortment of package sizes and an increased focus on imports,” he said. “Imports are driving the growth in the category.”
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Core customers at CEFCO’s nearly 200 stores in Texas, Alabama, Mississippi and Florida are Hispanics and blue-collar, he said.
Constellation Brands Executive Vice President Mallika Monteiro said during the company’s investor day in November that innovation has driven about 30% of Constellation’s beer growth in the past five years. Next in that effort, the brewer’s Modelo Aguas Frescas is stretching beyond its Las Vegas test market to a larger footprint in 2024. Modelo—now the top-selling beer brand in the United States—is under the Constellation umbrella.
Monteiro said the Hispanic consumer has a strong affinity for beer. “Our beer,” she added. “They drive almost half of total dollar contribution to our beer portfolio and a third of Constellation’s beer dollar growth today.”
“Our success is due to a mix of price increases, assortment of package sizes and an increased focus on imports.”
Meanwhile, Beverage Marketing Corp. consultant Nathan Greene said total beer sales continued to decline across all channels in 2023, but c-store performance was stronger than other channels. Beer retail dollar spending in 2023, he said, is estimated to be about $116 billion, down from about $117 billion in 2022. This includes traditional retail as well as on-premise sales. “Total sales are still down from their 2019 pre-pandemic peak of $122 billion,” Greene said, and he expects declines to continue in the very low single digits in the coming years unless major market shifts occur.
Based in Wintersville, Ohio, BMC is a consulting, research and advisory services firm dedicated to the global beverage industry.
Survey Shows...
Import sales—particularly the strong sales of Modelo Especial—continued to be a bright spot, with retailers expecting that to hold in 2024, according to the Beverage Bytes survey.
Mary Sonatore of Victoria, Texas-based C.L. Thomas, with more than 20 Speedy Stop stores in South, Central and East Texas, said she focuses on single cans and six- and 12-packs of beer rather than larger-size packs. Craft beer sales are sliding, she said, but products with higher alcohol content, such as Voodoo Ranger IPA, flavored malt beverages, and brands like Cayman Jack and Four Loko, are growing. “That’s likely a direct response to the higher alcohol content,” Sonatore said.
Other than some temporary price reductions, she hasn’t seen much in the way of promotions offered by suppliers.
Sonatore is optimistic about beer sales this year, anticipating an increase of 2% to 3%. She plans to adjust pack sizes and assortments during a spring reset to maximize the cooler doors and beer caves in her stores.
“Total sales are still down from their 2019 pre-pandemic peak of $122 billion.”
Across the country, retailers juggle space to meet the desires of their customers, and there is no single answer as to what makes the best beer set.
Erie, Pennsylvania-based Country Fair, with 72 stores in New York, Ohio and Pennsylvania, faces challenges in each state, especially Pennsylvania, where beer sales in convenience stores were only approved in 2016 and hurdles for licenses remain high. Of its 60 stores in Pennsylvania, only 33 sell beer.
To qualify for a license, stores must have 30 seats and 400 square feet of floor space dedicated to that seating, said Jaime Pukylo, sales manager at Country Fair. “Then you have to lay out the stores so that the beer area is separate from the unlicensed area … We can sell 20-ounce sodas in the beer area, but we’re not allowed to sell 2-liter bottles of soda because that's considered take home. Take-home products have to be separate from the beer category.”
For Country Fair, adding seating to meet the requirements to sell beer requires a deep look at the return on investment. “Beer really needs to be a home run,” Pukylo said. Fortunately for Country Fair, it is. “We’ve been adding stores in Pennsylvania, so we are up 14% year over year.”
19.2 Ounces
Besides adding new stores, Pukylo said beer success this year has been driven by three things: the addition of the 19.2-ounce craft beer package, malt beverages and Modelo. “In this part of the country, Modelo was always strong, but it wasn’t as strong as it was since the Bud Light controversy. We’re up 45% on Modelo in the last year and a half,” he said.
Bud Light, which held the top spot as the most-sold beer in 2022 and in the first four months of 2023, suffered a backlash from conservatives over a social media promotion with transgender influencer Dylan Mulvaney. Sales of Anheuser-Busch InBev brands Bud Light and Budweiser dropped dramatically from a year earlier, while competitor Modelo Especial saw sales rise.
BMC’s Greene said the effects of the ABI controversy and media coverage have been calcified. “While overall ABI performance has improved in recent months, it is off a new base of size and reality. The risk remains that the controversy could reemerge as a political football anytime. Modelo Especial will be cemented as the largest beer brand in dollars in the U.S. for the foreseeable future,” he said.
“In this part of the country, Modelo was always strong, but it wasn’t as strong as it was since the Bud Light controversy.”
Greene also noted retailer success of the 19.2-ounce craft beers. “[It’s] consistently lauded as the strongest opportunity in c-stores for the category, along with single-serve product formats overall,” he said.
A bigger threat to beer sales this year is the rise in popularity of canned cocktails and hard tea. “The shift to these flavor-forward products is a macro trend that shows no sign of going away,” Greene said.
These trends have Pukylo at Country Fair creating a variety of sets as spirits and ready-to-drink cocktails can’t be sold at convenience stores in New York and Pennsylvania. Meanwhile in Ohio, where they can be sold, RTD cocktail sales are trending. “At the same time, increase in cocktails has led to a direct decrease in beer sales,” he said.
The balancing act continues.
Stocking Up for Election Day
With a presidential election year upon the nation, there’s reason to expect an increase in beer sales in early November 2024.
Drizly, a Boston-based alcohol delivery company, looked at election-night 2020 sales and noted a jump in alcohol sales in all states it does business, regardless of political leaning, from a high of 75% in blue states to 33% in red states and 55% in swing states. Overall, the company said, its sales were up about 68%, compared with the previous four Tuesdays. That’s about the same increase it saw in the 2016 election.
DeeDon Bates, alcohol category manager at Fort Worth, Texas-based Yesway/Allsup’s for nearly 12 years, said he never studied sales on election days but isn’t surprised to hear sales jump. “Hey, that might be a good promotion!” he said. Yesway operates more than 400 stores in nine states. More than 380 of them sell beer and other alcohol.
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