After a pandemic-driven demand surge in 2020, the liquor category appears to be settling down. But emerging products and packages, along with trading-up trends by consumers, are encouraging distilled spirits marketers and convenience store operators that the category—while a small contributor to overall sales—is primed for continued growth.

Eight of our top 10 sellers as measured by units in the liquor category are of the 50-ml. variety. 

“Liquor sales increased tremendously from 2019 to 2020, primarily as a result of COVID-19 lockdowns and bar and restaurant closures,” remarked Jayme Gough, NACS research manager. “Not only were customers unable to go out to purchase liquor in the form of cocktails from a restaurant, but they were confined to their homes in many cases, giving ample opportunity to consume more than their typical amount,” Gough said. Indeed, according to the NACS State of the Industry Report of 2020 Data, average sales at c-stores that sell liquor jumped 15% to $44,348. C-store liquor sales, like other in-store categories, benefited from the channel’s small-footprint and convenience-focused stores at the height of the pandemic. The category reached peaks in monthly sales in April and May 2020, Gough reported.

By the spring of 2021, however, sales trends for liquor in c-stores began to moderate. According to monthly CSX data, sales for the second quarter of 2021 slipped below that of the year-ago period. While calendar year data for 2021 will be released in April at the NACS State of the Industry Summit, Gough noted that c-store liquor sales overall were up versus 2019 but lagging 2020.
 

Source: NACS State of the Industry Report of 2020 Data

The Hub convenience store chain in North Dakota is among those experiencing healthy demand for distilled spirits. The chain—which only added alcoholic beverages in 2020—saw a 14% increase in liquor sales last year, Jared Scheeler, CEO of The Hub and current NACS chairman, said. “The pandemic altered habits of the average liquor consumer,” he remarked. “The more time we spend at home—whether we’re working or skipping vacations or visits to restaurants—the more liquor will be consumed.” Two of The Hub locations feature liquor sections branded “The Cellar,” offering about 120 SKUs and bottles priced up to $100. “Our objective is to provide a product mix that gives consumers enough reason not to go to a competing liquor store,” Scheeler explained of the stores’ spirits selection. 

TRADING UP

While liquor only comprises 1.3% of total in-store sales and less than one third of all c-stores carry the products, the category provides for high ticket averages and is experiencing a movement toward premiumization. “In 2021, we saw premiumization occurring as c-store assortment started to include higher-end spirit selections,” remarked Tara Epps, vice president- national accounts, off premise, at Beam Suntory, marketer of brands including Jim Beam and Maker’s Mark bourbons, Courvoisier cognac and On the Rocks ready-to-drink (RTD) cocktails.

“We believe this is going to continue as consumers look for a faster outlet to do their spirits shopping for core name brands.” Carl Carlson, president at Skrewball Spirits, marketer of the popular Skrewball peanut butter whiskey brand, added, “Authenticity and quality make a difference with today’s consumer, and we see a premiumization movement in the c-store channel.”

Whiskies, such as bourbons, are seeing a renaissance. “Millennials and Gen Z are bringing back whiskey,” said Gough, adding that new flavors, such as cinnamon, peanut butter, apple, honey and peach, are helping to drive the interest. Skrewball is available in stores including Circle K and 7-Eleven, and according to Carlson, “the impulsive nature of c-store outlets is the perfect fit for trying Skrewball for the first time.” Scheeler said that while vodka is the top-selling spirits type at The Hub, “whiskey is certainly closing in, with innovative flavors like peach, peanut butter, salted caramel and pickle.”

While demand for large liquor bottles rose during the first wave of the pandemic, more recently, smaller packages are trending. Herb Smith, vice president, customer development, at E&J Gallo Winery, which markets New Amsterdam Vodka and High Noon Sun Sips RTDs, pointed to “tremendous movement in small, 50-, 200- and 375-ml. sizes for spirits.”

That’s the case at Pinnacle Peak General Store in Scottsdale, Arizona, where general manager Chris Sanders reported a recent “uptick in 50- and 200-ml. bottles.” He surmised that’s because bars have reopened and “people aren’t keeping the large bottles on hand at home as they did during lockdown.” Pinnacle Peak has expanded its selection of small-sized liquor bottles, while at The Hub, a large display of 50-ml. bottles is featured. “Eight of our top 10 sellers as measured by units in the liquor category are of the 50-ml. variety,” Scheeler said. 

One of the biggest trends within liquor today could be a boon for c-stores. RTD spirits-based cocktails are surging. Smith cited IRI data for the 26 weeks ended November 28, 2021, indicating that dollar sales of RTD cocktails in c-stores jumped 82%. “Canned cocktails are a huge opportunity for c-stores,” remarked Gough, due to their convenience and year-round versatility. Tia Wines, director of marketing at BuzzBallz/ Southern-Champion LLC, marketers of spirits-based RTD cocktails, said the drinks “provide an easy solution for retailers seeking to expand their shelf offerings and clientele.” Where permitted, the beverages “have the opportunity to drive consumers’ trip mission, making it a one-stop shop for their needs,” she noted. (NACS category definitions were recently revised to include RTDs as a liquor subcategory.) At Pinnacle Peak, sales of RTDs, which are merchandised both in the cold vault and ambient, are strong. “We’re doubling our cooler space to allow for RTDs,” Sanders said.

SEEKING BALANCE

Despite the recent strong trends and prospects for continued growth, liquor can be a challenging category for c-stores. For many, due to state and local laws, sales of the products are prohibited. For those licensed to sell spirits, turnover and inventory can be concerns. “Liquor’s turnover isn’t like milk,” which turns over 26 times a year, remarked Gough. And it’s below that of beer and wine, at 16 times a year. Moreover, inventory investment can be expensive and long to recover.

Delma Borg, owner of Southside Mini Mart in Stuart, Nebraska, noted that while the store likes to order products upon customer request, when it comes to liquor, “a customer might only buy one bottle out of the case, leaving the remainder of the order for us to sell.” Scheeler added that it can be difficult for c-stores to balance the need to stock top-selling spirits with emerging innovations and craft spirits. “Wrestling with that retail philosophy can be tough,” he said.

Spirits marketers say that good attention to the category and effective merchandising can go a long way in ensuring that liquor growth continues in c-stores. Smith advised that stocking the best-selling spirits and RTDs “will cover over 70% of the share of the business.” Beyond that, he recommends offering brands that are “trending with momentum,” and featuring a diverse selection of 50-, 200- and 375-ml. sizes. Those packages yield powerful merchandising options, “from high visibility behind the counter to impulse sales from a counter unit display,” the Gallo executive remarked. And Epps suggested that when it comes to spirits selection, “expand assortment to include trade-up opportunities to support the path to premiumization.”

In 2021, we saw premiumization occurring as c-store assortment started to include higher-end spirit selections.

The Beam Suntory executive believes that cross-merchandising tactics also can help drive c-store liquor sales. Placing necessary cocktail ingredients such as ginger beer, orange juice or soda adjacent to spirits can be beneficial, she said, as well as “cross merchandising spirit features with beer to increase the average transaction at the register.” And liquor should be included in any e-commerce or on-demand activations, where legal, she said, including delivery app partnerships, in-store and curbside pickup orders.

With liquor gaining overall market share from the beer and wine categories, marketers like Smith and Epps see vast opportunity ahead for c-stores. Smith said more c-stores are likely to apply for licenses to sell spirits where they can, which “will drive penetration and conversion moving forward.” And for retailers who are already selling the products, enthusiasm is high. “I’m excited to watch this category continue to grow in my stores,” said Scheeler. “I’m happy to ride the wave as long as it’s around.”

The Power of CSX Data

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