Larger, single-serve packages are increasing in popularity as customers are trading down to save money.
While some Americans hit hard by the recession are drinking less but better, others are opting for cheaper brands, while still more are selecting single beers instead of packs and taking a long look at craft beers, which some see as the next big thing in the beer category.
The message for c-store operators is clear: keep close tabs on what your customers want and be ready for anything.
According to Chicago-based market research firm SymphonyIRI Group, total U.S. beer sales among convenience stores for the 52-week period ending Oct. 3, 2010 were down by 1.52%, to just over $15 billion. Declines were reported among the domestic premium (1.70%, to just over $8 billion), import (4.95%, to $1.5 billion), domestic super premium (5.55%, to more than $788 million), and non-alcoholic (16.20%, to $8.7 million) segments. Domestic sub-premium (2.57%, to $3.5 billion), progressive adult beverages (17.49%, to over $611 million), domestic malt liquor (0.39% to $413 million) and craft (11.13%, to $234 million) all saw sales gains.
Gary Hemphill, vice president of Beverage Marketing Corp. in New York City, pointed out that budget and specialty brands performed best. For the first half of 2010, Beverage Marketing found that light beer as a subcategory saw its share of the total market dip by 3.6% over the previous year, to 48.8%.
So-called malternative beverages dropped by 3%, to 2.3%, while imports stayed relatively steady, down 0.5% to 12.7% of the market. Standard beers saw the biggest year-to-year drop, falling 9.5% to 13.2%. Gaining share were specialty beers, up 2.7% to 10.7% of the market, and budget brews, up 2.2% to 11.8%. Non-alcoholic beer was basically flat, up 1% at a miniscule 0.6% of the market.
“Packaged sales are flat market,” said Bob Staffieri, general manager for five-store Yost Family 7-Elevens in Las Vegas. “Beer as a category is up in the entire market out here in Las Vegas, but that’s all being driven by single beers. There is no specific single beer that is driving it. Typically it’s the 24-ounce cans that are making all the money. We’re seeing a huge influx in 24-ounce can sales.”
In looking at data that spans 76 Nevada 7-Eleven stores, Staffieri said he sees about a 50% year-to-year increase in single-beer sales. “Every other category is flat.” The reason? “I think it’s just the fact of the customers not having as much money to spend, so they’re purchasing in small quantities.” This is no different, he explained, than what happened with cigarettes, “where people stopped buying cartons and started buying a lot more packs. People are purchasing in smaller quantities.”
To get in line with that trend, Staffieri’s stores have made prices more competitive. For instance, a three-pack of single 24-ounce beers offers 72 ounces of beer—the same amount as in a six pack, but for less money.
“When it comes to beer, the 24-ounce size, without a doubt, accounts for 80% of all our sales,” said Amer Hawatmeh, president of St. George Oil in St. Louis, which operates Coast to Coast convenience stores. “The growing sector here is the 12%-by-volume beers. We’re having our buyer get an extra case each week.”
When it comes to imports, Hawatmeh added, Heineken and Corona are far and away the leaders.
Craft beers are also generating a ton of buzz. “If you look at each individual category—imports, premium, super premium, budget—you see some things moving around,” said Staffieri. For instance, among the super premiums he is seeing consumers seeking out more craft-style super premiums. “So the category shows movement, but the actual volume isn’t increasing at all.”
Some across the industry are speaking of craft beer as the “new wine.” Boston Beer Co.’s Jim Koch said recently that the segment’s growth parallels that of wine during the 1960s and 1970s. Twenty-somethings are adopting craft beer in the same way their parents adopted wine. The high-end is migrating from an old model, which is all about brand prestige and image status. It is possible that people are shifting that paradigm from global brands to local and craft brands based on taste.
Stay on Top
“We’re seeing consumers still buying super premiums,” said John Zikias, Thorntons’ vice president of marketing. “Premiums are taking a little bit of a hit, but we’re also seeing some growth in the super-premiums, and also the budget beers.”
What message that sends to Zikias about current trends, he added, is not all that much at all “because it seems pretty split. In some cases you see people trading to different packages, like Michelob Ultra or Sierra Nevada and things like that. So one thing we can deduce is that in some cases people are drinking less, but drinking better. It’s a situation where you have to kind of watch and see what people are doing.”
Close scrutiny, obviously, is the order of the day. “You just have to continue to look for the packages that they’re looking for, and better monitor your category,” said Zikias, who oversees 165 stores in the Midwest. “I mean, the thing is that now, with the economy changing the way it is, you’ve really got to stay on top of your business and analyze your performance regularly.”
For the year ahead, Staffieri predicted strong growth among craft beers. “I think that as those get a stronghold we’re going to start to see sales picking up.” Suppliers will probably also start marketing their products in the single-beer category, as well, due to the large increases there. “Craft beer is where we’re headed. I don’t see any of the mainstays doing anything any different than they’ve done for the last 30 years.”