Amid shifting consumer trends, the modest convenience store — the biggest class of trade for beer sales, accounting for more than $18 billion in annual sales — is under pressure.
Store traffic is down, as grocery stores, dollar stores and even quick-serve restaurants siphon away consumers with expanded offerings and competitive deals. Labor costs are on the rise amid a tight employment market. And Generation Z, the new wave of consumers entering legal drinking age, are spending more time at home, buying a bigger percentage of their alcohol from online retailers or grocery stores.
As a result, beer sales fell in 2018, representing the first time both revenue and case sales declined since 2013. And this year, trends have deteriorated further, down 1.9% year-to-date in the channel, trailing the overall retail trend for beer by two and a half points, per Nielsen all-outlet and convenience data through Nov. 12.
“C-stores are definitely facing serious headwinds right now, but they are taking the right steps. They are investing. They are remodeling. They are closing unproductive stores,” says Robin Behre, director of customer solutions for MillerCoors. “They’re also making moves to remain competitive, developing stronger coffee and food programs and upscaling their offerings across the board to remain relevant to a changing consumer.”
Evolving and optimizing the beer cooler can play a leading role in bringing the channel back to growth. Beer is the third-largest category in c-stores nationally, behind only cigarettes and non-alcohol packaged beverages. And it’s the second-largest trip driver, meaning it’s a top reason customers shop c-stores, per Nielsen data. And, perhaps most importantly, the average shopper who purchases beer in the channel spends almost twice as much as the non-beer shopper, according to a MillerCoors analysis of Nielsen data.
C-stores remain the largest channel for beer, accounting for about 30.6% of total sales, a percentage that continues to grow, Behre says.
And as these stores reconfigure, renovate and expand their offerings, MillerCoors is helping ensure they keep beer front and center in their plans, noting that beer plays a substantial role driving traffic inside stores. The average beer shopper visits c-stores 3.1 times per week, compared with the average c-store shopper, who makes 2.5 trips. And the amount they spend inside stores is higher, making beer a key contributor to both revenue and margin, Behre says.
Keeping those customers in the fold is crucial, particularly as c-store shoppers make fewer visits inside stores. While fuel sales at c-stores are up double digits over the last 52 weeks, sales inside stores are growing at roughly 2%.
MillerCoors has identified four key pillars to building a successful beer program inside c-stores: Every c-store shopper needs cold beer, clear pricing, plenty of stock and a balanced assortment.
“C-stores have to give consumers more reasons to come inside,” Behre says. Aside from updating their offerings and sprucing up stores, operators also can engage shoppers with pre-shop marketing, loyalty programs and promotions. With beer, that means more singles two-for-one deals and having dedicated singles coolers, preferably near prepared foods so that customers looking for quick food solutions can also pick up a beer or two on their way home from work.
On top of that, most beer shoppers funnel into c-stores in the after-work hours, with 60% of beer purchases taking place between 3 p.m. and 8 p.m., a MillerCoors analysis of third-party data shows. That means keeping enough beer in stock during high-traffic periods is key. But many c-stores still don’t have enough beer in stock to meet customer needs. Compared with non-alcohol drinks, beer is under-spaced in c-store coolers with just 4.7 days of stock on hand, on average. That compares with seven days for water, nine days for soda and 10 days for energy drinks.
“Every time they get a consumer in the store represents an opportunity to increase basket size,” she says. “Beer already plays an important role here, and it can play an even bigger one.”
But like with any channel, it’s not as simple as throwing a bunch of beer in the cooler and counting on it to sell. The c-store shopper is different than a typical grocery or liquor store shopper. Singles, for instance, play an outsized role, representing some 64% of transactions. Singles buyers purchase beer in-store up to 20 times per month, while visiting c-stores almost daily, Behre says.
“If those stores don’t have a well-stocked cold beer cooler, their trips would be far more infrequent,” Behre says. “And it’s important that it’s cold; most beer is consumed within an hour of purchase.”
Generational differences also are becoming more distinct, making curating the right assortment critical. C-stores should ensure they have craft beer on hand for millennials, while Generation Z’s legal-age drinkers are more attuned to lighter-tasting offerings, such as premium light lagers, Mexican imports and seltzers.
As always, every segment matters, particularly the core of the beer industry – American light lagers, premium lagers, Mexican imports and economy beers – which continue to account for the vast majority of volume, data show.
Having the right pack sizes to meet different consumer occasions also is critical. More than 9 in 10 transactions are small packs (12-packs or smaller), Behre says. But large packs also play a role.
“Our research shows that you just can’t get rid of certain packs. If you do, you’ll risk losing the transaction,” she says. “If you don’t have the right pack, consumers will potentially walk.”
At the same time, c-stores must also evolve their selection to appeal to consumers chasing the better-for-you trend, which includes hard seltzers, hard sparkling cocktails and other drinks with lower calories and carbs. Since many c-stores are already are moving in this direction with their food and non-alcohol beverage selection by adding refrigerated sections filled with fresh produce, yogurts, hummus and other nutritious foods, the move in alcohol beverages is natural.
“Just like c-store consumers don’t just want chips and cigarettes anymore, they also want better selections in beer,” Behre says. And that doesn’t just apply to assortment. Sometimes it’s as simple as making sure beer is merchandised cold, in stock and priced clearly.
In a retail environment where c-stores are getting squeezed on all sides, Behre says, “You’ve got to make sure you have what your customers came into the store for to keep them loyal.”