Alcohol Beverages: The Case for Craft
Convenience stores are the leader in beer sales, responsible for 40% of off-premise case volume. But the revenue generated from c-store cases sold can still improve, and the craft segment is a large c-store opportunity.
C-stores currently sell 2% of all craft-beer cases. Competing channels sell five times more, or 10% of the share. Why is craft beer so important to the U.S. beer market and the c-store channel? What follows are three reasons:
Absolute growth: Craft beer has grown 41 million cases over the past four years, while all of the other segments combined declined by 15 million cases.
Percent growth: Craft beer sales grew 19% annually in the past four years, while all of the other beer segments combined declined 1%.
Underdeveloped: Expressed in percent of channel volume, c-stores sell 2% of craft beer. Customers are purchasing craft beers at competing channels as c-stores are disappointing consumers with little craft-beer selection.
Meet customer demand by carrying top national and appropriate regional brands. Use grocery data for assortment decisions, because grocery sells five times more craft beer than c-stores. You can’t carry the same breadth of brands, but focusing on the top 20 to 25 SKUs will help meet consumer expectations.
The top craft-beer brands are Sam Adams, Sierra Nevada, Blue Moon and New Belgium Brewing Co. These franchises sell well across the United States. Meanwhile, regional craft brands have localized strength: SweetWater is strong in Georgia, Great Lakes Brewing Co. in Ohio. In California, Kona and Lagunitas are strong performers.
C-stores can’t carry as broad of an assortment of craft beer as competing channels, and that’s OK. On average, c-stores carry 8% of their SKUs in craft beer, competing channels 32%—or four times more. It’s time to increase c-store craft-beer SKUs to 16% of space. Place the products early in the cooler traffic flow, preferably the first door.
In five- and six-door cooler sets, devote one full door (about 16% of the space) to craft beer. In four-door sets, the first door should have at least two-thirds of space devoted to craft beer.
To gain a fair share of craft-beer sales, c-stores must be price-competitive. Encourage trade-up to a more expensive brand by lowering the margin percent on the high-dollar ring of craft beer. For example, 25% of a value case equals $3.98 of margin, while 20% of a craft case equals $7.07 of margin. Encourage trade-up to craft beer with competitive pricing, and craft beers will deliver high revenues per case.
When it comes to promotion, display craft beer monthly in high-traffic locations. Let consumers know you now carry their favorite craft beers at good prices. Use point-of-sale materials to highlight the improved assortment.
20% - Market share of craft beer by 2020 - at least according to the mission statement of The Brewer's Association.