Diamond in the Rough

C-stores buck the trend of soft beer sales as the category drives trips for retailers.

Diamond in the Rough

April 2024   minute read

By: Terri Allan

Despite all the media reports of the recent demise in beer sales, the category remains a steady one for convenience retailers. And while c-store operators and marketers don’t dispute the challenges beer faces—competition from other alcoholic beverages and an increasingly moderating consumer—they’re optimistic that the category will remain a top driver for in-store sales and traffic.

“The headlines of declining beer do not apply to convenience,” remarked David Garcia, national accounts vice president, convenience stores, at Molson Coors Beverage Co., citing a 5% increase in dollar sales in the channel last year. Greg Merlo, vice president, category leadership, at Anheuser-Busch, pointed to beer’s “resiliency” in the trade channel last year, and its key contributions to overall c-store sales. “Beer continues to be a huge trip driver, with unit sales up 3%, outperforming the total store,” Merlo said.

NACS’s data also paints a stable picture for beer. According to Emma Tainter, research analyst, with the exception of a dip in February, average sales per store, per month through October closely modeled that of the same timeframe in 2022. While 2023 year-end data wasn’t available at press time, Tainter noted that average sales per store, per month for beer in 2022 were $18,063, accounting for 7.03% of in-store sales.

Singles Rule

Single serves are the workhorse for beer in the cold box. “Singles continue to be a significant driver of growth for the category,” said Merlo, surging nearly 13% last year and accounting for 30% of total dollar sales and most of beer’s growth. The strong performance was likely due to shoppers trading down to lower-priced options, the A-B executive said, as well as the growing popularity of brands known for flavor and ABV. With singles accounting for more than 50% of all category trips, Merlo encouraged retailers to ensure they have the appropriate space, days of supply and variety in the singles door that shoppers expect.

Garcia added that with singles—driven by domestic premiums and imports—representing two out of every three beer units purchased in c-stores, they serve multiple need states. He recommends retailers promote a “clear value proposition” for the products, such as two-for offers. At Casey’s, singles sales are “very healthy,” Chris Stewart, vice president, merchandising, reported, and are popular with weekday customers who purchase a slice of pizza. “That same customer will come in on a Friday and purchase a 12-pack for the weekend,” he said.

Another growth engine for beer these days is imports, particularly Mexican brews. Constellation Brands’ Modelo Especial has been soaring for a number of years, and 2023 was no exception. When it comes to imports, “it’s all Modelo at our store,” remarked Lynette Stoudt, owner of Tramway Market in Stateline, Nevada. Craft brews, another higher-priced subcategory, are generally slowing, retailers said, but continue to hold opportunity for the channel. At Rusty Lantern Markets in New England, in fact, a heavy focus on local and craft brews helped the chain achieve a 23% increase in beer sales last year, according to John Koch, manager and CEO. He also credits Keri Weekley and Shelly Blanchette, Rusty Lantern’s category managers, for their oversight in beer’s strong performance.

Craft singles, particularly 19.2-ounce cans that boast high gravity and flavors, have been notably strong in c-stores in recent years. For that reason, Leo Basile, vice president of sales at Louisiana’s Abita Brewing Co.—producer of brands like AndyGator lager—recommends that c-stores “give opportunities to local brands that have consumer loyalty and buying power.”

FMBs and NABs

Two of the fastest-growing subcategories in beer are flavored malt beverages (FMBs) and nascent non-alcoholic beers. At Plaid Pantry, with more than 100 stores in Oregon and Washington, “2023 was the year for FMBs,” as well as imperial ciders and imported brews, Jon Manuyag, director of marketing, reported. He points to products like hard teas and the emergence of established beverage brands into the subcategory via the likes of Hard Mtn Dew, Simply Spiked lemonade and Monster’s The Beast Unleashed for helping to drive a 22% gain in FMB sales at the chain last year. Casey’s Stewart said the popular FMBs are just the latest development in alternatives to beer. “Three or four years ago, everybody was creating a hard seltzer,” he noted. “Today, it’s an FMB or ready-to-drink cocktail.”

According to Tainter, non-alcoholic beers registered a big gain year to date through October, albeit on a very small base. “The sales dollars are still pretty low, and it’s a small percentage of the category,” at just 0.2% of sales, she explained. Still, c-store operators report growing interest from their customers, particularly young legal-drinking-age consumers, in the offerings. “We only sell three brands, but customers seem interested in them,” remarked Stoudt in Nevada.

“60% of alcohol occasions are centered around a meal.”

Pair With Food

One of the best ways for c-stores to maximize growth in the beer category is to cross promote with meals where doing so is legal, Merlo said. According to the Anheuser-Busch executive, 49% of households purchased a meal at a c-store within the last year and their items per basket were 40% greater than non-meal baskets. “Beer is a great partner for the meal pairings, as 60% of alcohol occasions are centered around a meal,” he noted. Casey’s is a big believer in cross promoting beer with meals and coined itself the “Official Pizza and Beer Headquarters” last year while hiring its first-ever “chief pizza and beer officer” this year. Noting that Casey’s is the fifth-largest pizza chain in the country and that most of its competitors don’t sell beer, Stewart said, “We see pizza and beer as a point of differentiation versus the rest of the market.” Where it legally can, Casey’s promotes offers like $5 off a 12-pack with a pizza purchase.

While overall sales of beer have been soft, marketers like Anheuser-Busch and Molson Coors expect the category to register a low single-digit increase in c-stores this year. Still, retailers must monitor the buying patterns and requests of their customers, particularly if some of them are cutting back on alcohol consumption. “Gen Z consumers are definitely not drinking as much as previous generations,” Tainter remarked. “This is something retailers need to pay attention to.”

“Gen Z consumers are definitely not drinking as much.”

Whatever beer products c-store shoppers are searching for these days, Garcia said retailers must understand that “balance is key.” He recommends having the right allocation for high-growth singles and popular brands, as well as “making smart bets on innovation that are communicated clearly.” The Molson Coors executive also advises that category sets be well organized, promotions are communicated at the shelf, and because the majority of beer purchased in c-stores is consumed within a few hours of purchasing, the cold box is well stocked. With the right tactics in place, Garcia said, beer will “play a role in total store growth in 2024.”

Wine and Liquor Pack a Punch While beer remains a key sales and traffic driver for c-stores, retailers are increasingly focusing on wine and liquor in an effort to market their stores as total alcoholic beverage destinations. Following sales spikes during the pandemic, per-store per-month sales of wine and liquor for the first 10 months of 2023 “fell in the middle of the pack,” Tainter said. “Like a lot of categories, they’re seeing a slower growth post pandemic.”

Still, retailers and marketers are enthused about the opportunity for the categories, and particularly for wine- and spirits-based ready-to-drink (RTD) offerings. “While wine continues to grow in popularity, we’re seeing tremendous growth in wine-based RTDs, which has really penetrated the c-store channel with multiple formats,” said Herb Smith, vice president, customer development, at E. & J. Gallo Winery.

At Rusty Lantern, wine-based cocktails and bottled and boxed wines combined for a 42% increase in sales last year, Koch reported. He attributed the strong performance to set maintenance, SKU rationalization by region and the offering of both chilled and ambient wines. At Plaid Pantry, meanwhile, wine growth is “due to our ongoing investment in the category,” which includes constantly evaluating the amount of dedicated wine space in the store, as well as strategically crafting its assortment of 750 ml wines to tailor to local offerings, Manuyag said.

Within the liquor category, Smith and retailers point to canned cocktails and small-format bottles as driving much of the excitement lately. Gallo’s High Noon alone generated $124 million in c-store sales last year, Smith noted. Casey’s Stewart said he’s seeing migration from malt-based seltzers to spirits-based seltzers and canned cocktails. As a result, the stores now sell brands like High Noon, Nütrl and Cutwater cold, including in the singles door. “We also have unique displays and activities throughout the course of the year, such as endcaps showcasing new products,” Stewart noted.

According to Smith, sales of 50ml bottles are growing at a double-digit rate and represent 16% of c-store liquor sales. “Make room for small formats,” he said, such as behind the counter. At Casey’s—which, Stewart said, is the fourth-largest off-premise liquor permit holder in the country, after Walmart, CVS and Walgreen’s, with 1,500 licenses—50 ml bottles of brands like Fireball are merchandised in a self-service on-counter display. “We’re seeing strong growth on 50 ml,” the retailer said.

Indeed, Casey’s is making a big investment in alcoholic beverages in general. “As we look ahead, the ability for Casey’s to sell liquor, beer and wine puts us in a position to adjust to the changing consumer,” Stewart said. “We expect the alcohol category in general to perform well at Casey’s into the foreseeable future.”

Terri Allan

Terri Allan

Terri Allan is a New Jersey-based freelance writer. She can be reached at [email protected].

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