Retailers Struggle With Beer Stock

Consumers embrace larger pack sizes amid COVID-19
Heineken beer
Photograph courtesy of Heineken

CHICAGO — During the second half of 2020, beer category managers generally adopted the strategy of “go big and go home.” A direct response to consumers stocking up on larger package sizes due to the COVID-19 pandemic, case packs became the go-to for many.

Convenience-store chains with smaller footprints not known for offering robust warm floor displays of 24- and 36-packs of beer attempted to boost those offerings as consumers recognized convenience as a quick buying solution compared to larger-footprint channels.

“Consumers are seeing this as a potential way to avoid a bigger-box store with a lot more traffic,” said Larry Levin, executive vice president of consumer and shopper marketing at Chicago-based market research firm IRI. “We’ve seen nice growth in both large fluid-ounce bottle sizes and pack sizes, but also package counts, and products over 24-pack have been growing in c-store as well.”

Chains armed with beer caves, open floor space and an all-around affinity for selling large-package formats have been happy to accommodate.

“We have rather large beer vaults for a convenience operator, and they’ve traditionally been wide open,” said Erick Dowling, category manager of the beer segment for Salt Lake City-based Maverik. “With the increased volume this year, we’ve had to convert this open space in the center of the vaults into holding space for our top eight to 10 brands.”

Maverik, said Dowling, aimed to assist distributors by carrying traditional on-premise-only packages—aluminum twist-top bottles of a few brands, for instance—to assist with excess inventory due to bar and restaurant closings in markets across the country.

Maverik’s large-pack volume (15-packs and larger) has grown tremendously. Dowling said he’s watched 15-packs grow dollar sales 28.4% year to date through early December across its 350-store network.

“Singles are often bought in conjunction with larger packs, and they’re also up 21.6%, whereas 6-packs are up 17.4%,” Dowling said. “It is quite obvious consumers have been pantry loading, and we can see those trends increasing now as well,”

Out-of-stock challenges  

As retailers have watched consumers stock up with larger packages during the pandemic, the backlash is fewer c-store trips and a challenge for market basket replenishment. Brewers have struggled, as well. With little beer being sold on-tap, brewers are grappling with an aluminum can shortage. The Brewers Association suggests supply will not meet demand until the end of 2021, leading some craft brewers and smaller brands to pause production or create alternative packaging.

“We’ve responded [to the shortage] by being as nimble as possible, because a package you have this week might not be available next week, and vice versa,” said Maverik’s Dowling. “Our default response is to take as much as we can get when it is available, … and when it isn’t, then double-face an adjacent item.”

Chris Long, director of category management, age verified, for Kum & Go, Des Moines, Iowa, said the can shortage produced “rolling market out-of-stocks across our footprint of 11 states on various items, including hard seltzer brands and larger supplier brands. It has all led to some store level pain as we have had to get creative to keep our shelves looking full.”

Various suppliers, including Anheuser-Busch and Molson Coors, have discontinued production on certain SKUs “in order to focus production on key items,” said Long, adding “it’s challenged all of us—retailers, distributors and suppliers—to be a little more nimble in a very dynamic year. Overall, the business results say we have done a great job.”

Dollar sales of beer in c-stores grew 15.3% from March 2 through Dec. 6, according to IRI data. And sales grew 18.5% in all retail channels during the same period.

The can shortage was not an issue for Victor, N.Y-based Constellation Brands, which packages a majority of its beers, including imported brands Corona and Modelo, in bottles.

“Constellation isn’t having the same can shortages that other suppliers are having,” said Maggie Bowman, senior director of communications for the beer division of Constellation Brands. “We source aluminum for cans outside the U.S., and it’s shipped directly to Mexico for production. Therefore, we have no shortage of cans, unlike the issues some domestic suppliers are facing. In addition, our business weights more heavily to glass.”

A retail solution

Levin of IRI said as consumers identified c-stores as a retail solution to avoiding bigger box stores, a negative outgrowth was the fact that people were prone to buy more packages, thus needing to return to stores less often to restock.

For c-store retailers, determining whether larger pack sizes are worth the space allocation is a matter of “watching the market and responding,” Levin said. “C-store retailers have a good opportunity to maximize their space, but trends should be watched closely as they develop.”

Suppliers have responded. Heineken USA, for example, released a 15-can multipack earlier this year with 12 Heineken Original Lager 12-ounce cans and three Heineken 0.0 Alcohol Free 11.2-ounce cans. In May, A-B launched the Bud Light Seltzer 24-can variety pack.

“We continue to recommend to retailers to look for opportunities to reduce assortment complexity and increase days of supply on top movers to reduce risk of out of stocks,” Steven Holden, A-B’s senior director of category of small format, said.

Smaller stores face challenges

Preliminary learnings around the sale of larger pack sizes see 15-packs and up reaching “stratospheric buying levels” at Maverik stores, said Dowling. “Interestingly, 12-pack volume experienced the greatest growth and a mix shift among all package sizes, with 24-packs [also very strong].”

“The abundance of seltzers in 12-packs has also helped keep that pack size growing very positively. But from a six-pack and singles perspective, these are still showing sales increases, but slightly lagging behind total category growth,” he said.

Smaller stores have faced challenges fulfilling larger pack size space requirements, with Maverik “needing to get more creative, such as carrying more backstock as ambient, for instance,” said Dowling.

“Smaller stores are definitely more challenging,” said Long of Kum & Go. “Probably our best practice has been focusing on what is really selling and reinforce with our store teams to work with local beer distributors and be as flexible as possible. Everyone in the system [suppliers, distributors, retailers] wants the same thing—to take care of our shared customers so that creates a good rallying point.”

Kum & Go leans on its robust internal sales reporting system—business insights and analytics team, syndicated data partners and dedicated category teams from supplier-partners—to identify and uncover key opportunities.

“We’re constantly evaluating how we go to market, within our strategic framework of course, and proactively making adjustments to improve our competitive advantage,” said Long. “We arefortunate to have customer feedback everyday through how they spend their dollars, and we leverage that to give them the best experience possible.”

The fundamentals, even in a pandemic, have not changed. “As cliche as it sounds, we still focus on having the right products at the right price, and make sure our days of supply on key packages meets local demand,” Long said.

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