Tapping into Craft Beer

growlerWith customer demand growing for upscale brews, a growler program is one way to expand your craft beer segment.

By Erin Rigik, Associate Editor.

As the craft beer trend grows, convenience stores are capitalizing on consumer demand for emerging local and seasonal brews by growing their craft beer sections and, in some cases, adding a growler program where customers can get draft beers to go.

While the total beer market declined 2.4% in the first half of 2013, the specialty segment—which includes craft beers—is up slightly more than 3%, said Gary Hemphill, managing director of research for Beverage Marketing Corp.

According to a May 2013 Mintel report, consumers of legal drinking age in 2012 were most likely to report increased consumption of beer (14%), which includes 7% of respondents who are drinking more craft beer in 2013 compared to 2012. Craft  beer also has a multigenerational appeal, with an estimated 49% of Millennials, 40% of Gen Xers, 29% of Baby Boomers and 22% of Swing Generation/World War II all loyal to the craft beer segment.

Thomas Glowienke, beer, beverage and snacks category manager at Rockford, Ill-based  Road Ranger stores, said craft beer success at his chain currently varies according to state, but he sees the opportunity for growth across the board.

While Road Ranger’s Wisconsin stores do a strong business with local craft beers, its units in other locations are just getting into the game. The chain has stores in six states—Wisconsin, Illinois, Indiana, Iowa, Kentucky and Missouri.

“A lot of our stores are in blue collar markets, so what we would typically consider craft beer hasn’t done particularly well historically. But over the last 6-8 months we have done really well with transitional crafts, particularly the Leinenkugel’s Seasonal Summer Shandy, which was our top performing craft beer,” Glowienke said. “Redd’s Apple Ale also did very well for us, and is certainly a giant step away of the typical premium and premium lights.”

To boost craft beer at Road Ranger, the chain is looking to identify local craft breweries within each of its markets to give the beer offering a strong local flavor on a store-by-store basis.

“Craft beer is posing so much opportunity right now,” Glowienke said. “We can see the macro brewers are scrambling to get that customer, but I don’t think they can attract the true craft beer customer like a real micro brewery. We’ve had a tough beer year this year, but the craft and flavored beers are just exploding for us. So it’s interesting to see those less traditional SKUs starting to gain some traction.”

Growing with Growlers
Bountyland, which operates 14 stores in South Carolina and North Carolina, saw an opportunity to grow sales and create a new retail format. It rebranded its Tiger Qwik Mart location to Bountyland The Wall of Beer in Clemson, S.C. to focus exclusively on beer. The store took the craft beer trend to the next level last year when it added a growler program. A “growler” is a glass, plastic or ceramic bottle, usually around 64-ounces, that can be sealed, allowing businesses to sell draft beer as a take-home product.  “We started with seven taps and now we have 20. It’s growing every day across all legal-aged demographics, from college students to professors to grandparents,” said Kale Bokalosky, general manager of Bountyland’s Wall of Beer location. The chain plans to add the growler system to a second location over the next few months.

To keep the growler program fresh and sanitary, Bountyland uses a “three sink” process that includes a wash, a rinse and a sanitizer, to ensure the bottle is sterile before refilling.

“We still do sell a lot of Budweiser, Miller and Coors, but our sales are skyrocketing on the craft beer side,” Bokalosky noted.

His advice to other chains considering a growler program is to start small and price it right. He has seen some other c-stores do a good growler business with just three taps and a limited knowledge of craft beer. “That’s fine too. Just pick the right three and start from there,” he said.

Growler 101
Depending on your location, setting up a growler program can require jumping through legal tape to gain licensing, as Rahim Budhwani, owner of Monarch Fuels, with seven stores in Alabama, found when he first embarked on his growler program. Local laws prevented him from using refillable glass bottles.

Budhwani explained during an educational session at the NACS show last month that he solved the problem by using plastic throwaway jugs with sealable tops instead of refillable glass jugs. His first growler set up cost him $8,000 with the installation of a 14-tap system and a twin motor glycol system to power the taps. The whole set up measured about the size of an ice cream case.

“Local brewers don’t have takeout packaging, so that gives growlers a niche,” Budhwani  said.

Challenges, however, include the fact that local brewers often don’t have a large product line, so keeping a backup brew on hand is key. “Don’t let a tap run dry,” he warned, and don’t let a non-selling beer take up space on a tap. While Alabama doesn’t allow sampling, if a brew isn’t selling, Budhwani will give away a packaged pint of a non-moving beer with another draft purchase.

A growler program can also prove to be labor intensive because an employee is needed to serve the beer. Local breweries, however, came in to train Budhwani’s employees in proper pouring. As for cleaning the equipment, the distributors clean the taps and lines for free every two weeks.

Budhwani noted he is often asked if his growler program cannibalized his beer sales, but that hasn’t been the case. He noted that the growler program has helped his stores become a destination in the market for beer.

Growler Pro
Sunoco was one of the first in the industry to offer a growler program, which it now features in 68 of its 650 APlus convenience stores, under the Craft Beer Exchange banner. The program first launched in June 2011.

The stores feature 6-12 taps depending on the footprint, and the beers are rotated each time a keg is empty, although beers of the month may remain for more than one keg.

“One of the hallmarks of the craft beer fever is that people find beers they like and also sample different local and seasonal brews, so you don’t have just one consistent brand, you need to rotate a variety,” said Jeff Shields, communications manager for Sunoco.

Customers can choose from an array of glass containers: 32-ounce bottles for $2.99, 64-ounce growlers for $3.99, or a two-liter special edition growler with a ceramic swing top for $13.99. Customers can also get started with a gift box for $19.99 that includes a growler, two pint glasses, coasters and a free fill-up with the craft beer of their choice. Craft beer fill-ups typically range from $7.99-$19.99.

“We rinse each container before filling it. If we see any signs that would make us question the vessel’s cleanliness—by sight or by smell—we won’t fill it,” Shields said. “The glassware and all the bottles are sealed with a special seal once they are filled.”

In addition to the growler program, APlus stores offer mix and match six packs of craft beer, where customers can fill their own six pack from a selection of seven single beers. “Customers love that. It’s been just as popular as the growler program,” Shields added. 

On Trend
Lesley Saitta, CEO of Impact 21 Group, said that for the last 10 years analysts have anticipated that craft beers would take off. That day has finally come. “We are seeing double-digit growth in the high end market in craft beer,” she said. “Before the growth had been primarily limited to imports, but in the last couple of years it’s been in these regional, flavored microbrews.”

Like Bokalosky of Bountyland, Saitta advised retailers interested in delving deeper into the craft beer market to start small. “Looking demographically at the consumer of those products, they tend to be higher income, so not every store is set up to accommodate higher-priced items,” she said. “It’s very store specific.” 

The important takeaway, according to most beer category observers, is that the beer category as a whole is changing. “It’s not just in terms of craft brews’ growth, but other flavored beers are also emerging,” Saitta said. “The shift in drinking for Millennials is toward wines and flavored liquors. Millennials are focused more on flavor, social-type drinking, sipping and foodie culture, so I think there is a big opportunity in the c-store channel to really broaden the whole category—and obviously craft and microbrews have been a big part of that.”

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