Sales of craft beer at The Convenience Group stores posted incredible growth last year, driven not only by pandemic-induced pantry loading but also due to the outlets’ locations in the Pacific Northwest—a hotbed for microbrews—and management’s commitment to the products.
With dozens of cooler doors and beer caves devoted to craft beer, sales surged 26% in 2020, according to Don Rhoads, president and CEO of the company, which operates Washington’s Minit Mart stores. “We want our customers to find value in a three-minute visit,” Rhoads said of the stores’ vast selection and competitive prices. To get out in front of emerging trends, “we lean on our distributors by holding regular meetings,” he noted, “and my staff and I visit local breweries.”
In Oklahoma, Kim Cuellar, category manager for beer and wine at OnCue c-stores, is equally committed to craft beer. OnCue has partnered in recent months with Sooner State breweries on exclusive beer collaborations as part of the chain’s emphasis on local brews, a move that resulted in a near 20% lift in microbeer sales last year, with the large majority of those sales coming from Oklahoma-brewed labels. Indeed, in just one year, craft’s share of OnCue’s beer sales jumped from 6% to 9%, Cuellar reported. Oklahoma craft brewers are particularly impressed with the results. “Craft beer consumers now head to OnCue, rather than the liquor store, for local craft beers,” said Sean Mossman, president of Oklahoma City’s COOP Ale Works.
Convenience retailers around the country are tapping in to increased demand for craft beer, and 2020 was a banner year for sales of the product. “As with the total beer category, craft beer in c-stores during the pandemic has seen positive growth, moving from single-digit growth in 2019 to double-digit growth in 2020,” remarked Joy Young, senior director, category development, at Anheuser-Busch InBev.
NACS’s CSX monthly retail sales data bear that out. According to Jayme Gough, NACS research manager, the growth in craft beer in c-stores last summer outperformed the overall beer category.
Among c-stores, Oregon’s FastBreak chain has seen a jump in sales of the high-end brews for the past year. “Craft beer has been performing better during the pandemic than in the past,” said Oliver Herting, category manager and buyer. With limited service from bars and restaurants, “consumers are at home more and are looking for higher-ABV beers,” he explained.
Diving In
India pale ales (IPAs), including the super-hot hazy variant, dominate the craft beer segment. According to Mark Hegedus, chief sales officer at Michigan’s Founders Brewing Co., IPAs accounted for about 53% of craft beer sales in c-stores last year. Cans are also coming on strong. “We’ve seen the shift from bottles to cans, and we’re diving in head first,” remarked Eric Patterson, merchandising manager at the Beacon & Bridge Market chain in the Wolverine State. “Cans are more portable for transient customers, such as those going to the lakes and out on boats,” the retailer noted. A-B’s Young added that cans already account for more than half of craft beer sales in convenience stores and are “growing at nearly three times the total craft category in c-stores, significantly outpacing bottle growth.”
The typical c-store craft beer shopper is a coveted one—typically millennial and disproportionately male.
With beer singles playing such a vital role in c-store cold boxes, it’s no surprise that craft singles are generating a lot of attention. Earlier this year, Pennsylvania’s D.G. Yuengling & Son premiered Raging Eagle Mango beer in 22-ounce cans in c-stores in 22 states. “Single-serve beer accounts for 20-25% of c-store beer dollar sales,” said Charlie Trepcos, executive sales director, noting that the package is the brewery’s first dedicated single-serve product for the channel.
Yuengling and other brewers point to the opportunity two-for merchandising of craft singles provides c-store retailers. “The c-store consumer wants a good deal, hence the emergence of two-fors,” said Eric Clark, national account manager, convenience, at New Belgium Brewing, whose Voodoo Ranger IPA, Imperial IPA and Juicy Haze IPA are thriving in c-store singles doors.
With the craft brewery count in the thousands, retailers like Rhoads, Cuellar and Patterson are increasingly leaning in to local brews. Both OnCue and Beacon & Bridge have reduced facings of national craft beers in favor of those produced nearby. At a number of OnCue stores, “nine-foot open-air coolers dedicated to Oklahoma crafts” were added last year, according to Cuellar, but the space soon doubled to 18-foot coolers. Rhoads reported that 70% of his stores’ craft beer sales come from Northwestern breweries, including “new-to-market breweries.” In fact, the stores even receive deliveries direct from local breweries that aren’t yet partnered with distributors.
Coveted Consumer
The typical c-store craft beer shopper is a coveted one. Retailers and brewers describe them as typically millennial and disproportionately male. “They’re looking for a package that’s new or trendy,” remarked Rhoads. “It’s a higher ring, but they have more money in their pockets.” Young agreed that the craft consumer is an affluent one. “This craft beer shopper is very important to the channel as they drive more traffic and larger basket spend in-store than the general beer shopper,” Rhoads noted. That’s the case at OnCue, where Cuellar said craft beer customers often tack on another purchase, such as a hard seltzer multipack.
Despite the upside craft beer provides convenience retailers, there are challenges. Space is the biggest concern, retailers and brewers concede. Pointing to the endless array of craft options in Oregon, Herting said, “with limited space, the biggest challenge is picking the right ones.” Colin Callahan, vice president, sales and marketing at Yuengling, offered that “it’s important for c-stores to find the right balance between core and innovative beers,” and that their distributors can provide insights. A-B’s Young added, “With thousands of craft brands in the country to choose from, c-store retailers have to select the brands that make the most sense for their customers and their markets.”
High costs and attaining margins can also be issues. According to Michael Corrigan, vice president of sales at New Belgium, hitting the right price point can be challenging for c-stores. “Working on slim margins is difficult when competing with much larger players in the beer business today,” he noted. Rhoads, meanwhile, pointed to inventory costs. “The carrying cost is high. We want to keep as much inventory cold as possible, yet eliminate as much labor as we can,” he said. Distributor assistance with merchandising, therefore, is an asset, the retailer noted.
Enormous Opportunity
While microbrews in c-stores may face challenges, there’s no mistaking that retailers and craft brewers see enormous opportunity for the products. Yuengling’s Trepcos acknowledged that while the products may require an investment, “the return is worth it. Craft consumers are higher income than regular domestic beer consumers. They’ll spend more time and money in store. Don’t be afraid of the segment.”
Hegedus and Young urge convenience retailers to carry the right assortment for their craft beer customers. “It’s important to have the right brands and styles,” said Young. The Founders executive, meanwhile, points to the space opportunity beer caves provide, as well as the benefit of promoting an expanded assortment to shoppers, including at the fuel pump.
Craft brewers and c-store operators alike agree that the future for craft beer in the channel is bright. Due to today’s low share, “convenience will be the fastest growing channel for the next 10 years,” predicted COOP Ale Works’ Mossman. “Consumers are looking to convenience for more things. If convenience leans in, it’s a great thing.”
Washington’s Convenience Group stores are a testament to what’s achievable in the space. “Our stores aren’t an anomaly when it comes to craft beer,” said Rhoads. “There’s a huge opportunity for the c-store industry to take advantage and also see double-digit growth.”