The beer category is enjoying a bit of a resurgence in convenience stores these days, and retailers and marketers are feeling optimistic that the channel is well poised for continued advancement. With gains in average per-store sales and gross profits last year, beer’s rebound is being maintained so far in 2020, despite slowed store traffic during the first few months of the COVID-19 pandemic.

“Prior to 2020, beer growth in convenience was typically slow,” remarked Jayme Gough, NACS analyst, perhaps due, in part, to shifting consumer preferences. “But beer growth in 2019 was strong,” Gough said, pointing to a 2% increase in average store sales to $194,971, from $191,064 in 2018. Beer’s gross margin contribution also improved last year, posting one of the best gains of leading categories. “Flavored malt beverages, specifically hard seltzers, had a lot to do with it,” she noted, as well as solid performances from other subcategories, such as imports and craft beer.

Todd Camasar, director, category development, at Heineken USA, reported that the beer category’s improved performance in c-stores last year impacted other trade channels. “For the beer category in 2019, the convenience channel saw an increase in conversion rate and gained 51 basis points of share of trips from competitive channels,” Camasar said. He and other marketers cited the impact that growing demand for high-end brands is having on category sales. “Premiumization and the health and wellness mindset have been driving growth in all beverages and within beer for a few years now,” explained Sara Hillstrom, senior director, category development, at Anheuser-Busch. “These trends are and will continue to drive growth for the total category,” she continued, as new consumers seek out seltzers and other premium brands.

Indeed, according to the NACS State of the Industry Report of 2019 Data, average per-store gross profit dollars for the category grew 3.1% last year to $37,009. “Beer remained a top 10 in-store category and ranked seventh in gross margin contribution and third in sales, excluding cigarettes,” noted Gough.

C-store operators are increasingly stocking the craft brews that work in their markets, including craft single serves.

Beer’s share of in-store sales increased to 6.37% last year from 6.25% in 2018. Moreover, both purchase frequency and units per trip for beer in c-stores increased last year, Jenny Odom, vice president, national accounts, at Constellation Brands’ beer division, reported. Citing IRI data, Odom attributed the gains to increased sales of single-serve beers, new drinking occasions and product and packaging innovation.

Seltzers Surge

Hard seltzers are a big reason for beer’s resurgence. The flavored malt beverages, led by the White Claw and Truly brands, are seeing skyrocketing demand. Convenience retailers report that the emerging segment is helping to lift overall category sales. Maurine DesJardine, director of marketing at Pester Marketing, which operates the Alta stores, said the chain’s recent beer cooler reset devoted more space to hard seltzers. “White Claw is now our No. 3 product in the beer category,” she remarked. Meghann Eaton, category manager at VERC Enterprises, which operates 12 stores that sell beer and wine in Massachusetts and New Hampshire, commented, “Seltzer is crushing it and keeps climbing the hotter the weather gets.” Seltzer’s strong performance has lifted overall domestic beer sales at VERC’s stores from flat or declining to double-digit growth, Eaton said.

Foxtrot Markets, with 10 stores in Illinois and Texas and plans to add two locations in Washington, D.C., also is seeing strong demand for high-end products including hard seltzers, hard kombuchas and craft brews. Dylan Melvin, beverage director, noted that the chain will often work directly with self-distributing craft brewers to showcase their latest releases. “We try to remain nimble so that we can be relevant to our consumers when it comes to variety demands,” he remarked. In fact, Foxtrot has even collaborated on an exclusive brew—a hazy pale ale—with Illinois’s Narz Community Brewing, a move that’s similar to other partnerships between c-stores—such as Kwik Trip, Sheetz and Wawa—and craft brewers.

Seltzer is crushing it and keeps climbing the hotter the weather gets.

David Walker, co-founder at Firestone Walker Brewing, says c-store operators are increasingly stocking the craft brews that work in their markets, including craft single serves, and his Paso Robles, California-based company is benefiting. The brewery’s 805 Blonde Ale 24-ounce can has emerged as the top-selling craft single serve in the state, Walker reported, and he’s targeting continued growth. “Like many breweries, we’ve applied more focus on the overall channel with increased chain-call coverage,” he explained.

The COVID Factor

While the coronavirus pandemic has challenged many areas of store operations, including store traffic in the spring, the beer category, it seems, is benefitting. Gough conceded that although slowed traffic may have impacted unit sales of beer, that’s been countered by consumer movement toward larger package sizes, born of the pantry-loading phenomenon, and resulting in higher rings. “Products like tobacco, beer and wine have performed well in c-stores during the pandemic,” she said.

Vallari Ajgaonkar, senior manager, category management at Heineken USA, agreed. “We used to think of high-unit, low-spend singles as the lifeblood of convenience beer sales,” she remarked. “COVID-19 is now showing us that shoppers who go to c-stores can easily be convinced to switch to larger pack sizes.” Constellation Brands’ Odom added that recent changes in consumer shopping patterns can bode well for c-stores and the beer category. “While it’s true many shoppers are trying to make fewer in-store trips overall to reduce exposure to the virus, many have actually expanded their repertoire of retailers visited since COVID began, including c-stores.”

Convenience retailers confirm that beer sales have been strong this year as volume normally sold in bars and restaurants has shifted to off-premise channels. Beer sales at Alta were up 26% through June, DesJardine reported, thanks to pantry loading and the ability of the chain’s Colorado stores to now sell full-strength beer. At VERC Enterprises, beer sales were trending up 25% early this year, Eaton noted, but once the pandemic hit, sales really surged. “Sometimes, we were the only beer and wine store open in town,” the retailer recounted, a situation that attracted new customers. “Our beer sales grew 60% in May alone,” she said.

COVID-19 is now showing us that shoppers who go to c-stores can easily be convinced to switch to larger pack sizes.

In addition to larger pack sizes, the pandemic also has shined a light on the opportunity that beer offers in the e-commerce and customer delivery landscape. At Foxtrot, where e-commerce has been part of its fabric since its founding seven years ago, half of its beer sales are online. “Since the outbreak of COVID, delivery has increased exponentially,” Melvin remarked. “It’s impacted our overall beer sales by driving packages like multi-packs and our exclusive bundles.” Odom believes c-stores must move to e-commerce. “The need for no-contact pickup and delivery has become table-stakes for most retailers to remain relevant,” she said. “C-stores are primed to capitalize with e-commerce due to their younger and more multicultural consumer base.”

to the Metal

Effective merchandising and marketing tactics are also key to maximizing beer’s potential. “Convenience chain stores have become much more effective at delivering the right packages to the consumer,” said Colin Callahan, vice president, sales and marketing, at D.G. Yuengling & Son. “Many of our convenience channel customers have worked on strategies to achieve a balanced approach between core brands and new innovations. They’ve found ways to promote power brands and new items through suction cups, floor displays and more to drive consumer trial, especially with single-serve options.” Among the tactics employed by Foxtrot, according to Melvin, are beer release and Oktoberfest events, digital and social media support and most recently, a virtual beer tasting.

Beer marketers advise that while beer sales may have turned the corner in c-stores, it’s no time for retailers to go on autopilot when managing the category. “Although this year is truly unprecedented, it did nothing to change the long-term trend of consumer transition to the high end,” Odom said. “In fact, it accelerated it.” Heineken USA’s Todd added, “Shifting share of shelf toward larger packs and high-end segments, strategically shifting display priorities and staying tuned in to innovation and better-for-you trends are all best practices moving forward.”

The Power of CSX Data

CSX, the engine behind category metrics and NACS State of the Industry data, provides current and customizable tools for financial and operational reporting and analysis in the convenience industry. Retailers can measure their company by any of the myriad metrics generated via our live database. Contact Chris Rapanick at (703) 518–4253 or [email protected] for a complimentary executive walkthough.

The NACS Convenience Tracking Program (CTP) comprises consumer behavior analytics from more than 10,000 convenience store shoppers across 42 states, representing the most comprehensive consumer-driven metrics available to the industry.

To learn more about CTP and how to participate, contact Leroy Kelsey, director of industry analytics, at [email protected] or visit www.convenience.org/ctp.