Imported beer is the saving grace of the beer category right now, Joe Sepka, co-founder of 3Tier Beverages, said May 6 at CSP’s 2024 Cold Vault Forum in Schaumburg, Illinois.
3Tier Beverages is a Chicago-based data management consultancy.
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In first-quarter 2024, Sepka said, sales of off-premise beer, wine and spirits remained flat, at a dollar gain of 0.2% versus a year ago. Breaking it down, beer is down 1.2%, wine is down 0.3%, and spirits are up 3.8%.
“These are dollar sales and, actually, when we look at the volume sales, the picture is just a little bit worse,” said Sepka, using NielsenIQ (NIQ) data. Volume is down 2.9% versus a year ago, with beer down 3.5%, wine down 2.6%, and spirits up 4.5%.
Beer is being helped by imports, up 5.6% and doing “fantastically,” Sepka said, while domestic and premium beers are down 9.1%. Meanwhile, in spirits, the subcategory of ready-to-drink cocktails is up substantially, at 27.8%.
Imports are flexing dominance as beer’s No. 1 bright spot, he said. Mexican import sales, he added, are up 7.1% in the 13 weeks ended March 23 at c-stores, while total beer is down 2.8%.
“Hispanics are the fastest-growing population in the U.S., truly an economic force to pay attention to and understand,” Sepka said. There are 62.1 million Hispanics in the U.S., representing 19% of the U.S. population. They spent $7.8 billion in the beverage-alcohol space in the 52 weeks that ended July 2023, he said.
It’s All a Blur
Offerings have fragmented from the once-traditional beer, spirits and wine into today’s array of hard seltzers, flavored-malt beverages, hard teas and more, Sepka said.
“Everything is sort of blurred together in a lot of different ways, and it’s really hard to tell the difference between any of these that don’t look like traditional beer and wine,” he said.
This blurring also is occurring in nonalcohol beverages, he said.
“What is a functional beverage? What’s a sports drink? What’s a water?” Sepka asked. “Everything’s sort of blurring, and this is one of the reasons why data is so incredibly important right now to keep track of all of these things.”
Retailers no longer can rely on a gut feeling, he added.
“You really have to dive into these different categories and create your own in some ways, as you look at these different movements among these different products,” he said.
C-Store Sales Plateau
Convenience-store dollar sales have grown 8% since 2020 but began to plateau in 2023, Sepka said. Meanwhile, the number of UPCs has grown 3% in that same period.
Also in this time, there has been a significant growth in ready-to-drink (RTD) beverages as a percentage of total sales, he said. RTDs were 13% of total c-store sales in 2020 but are now 17%. Meanwhile:
- Beer/malt dropped from 73% to 67%
- Spirits grew from 9% to 11%
- Wine held steady at 5%
“We’ve added close to 1,000 new prepared cocktail SKUs across all convenience stores,” Sepka said. “One thousand new SKUs is a lot.”
However, volume sales of beer, wine and spirits is down 11% since 2020, he added.
An interesting aspect to this, Sepka said, is that consumers are shifting into higher-dollar beer categories, with sales of more expensive products—imports and flavored-malt beverages—rising while less-expensive products—below premium and domestic premium—falling.
Meanwhile, in the 52 weeks ended March 23, 2024, 50 brands drove 80% of c-store sales, about $24 million, in all types of beverage alcohol categories; there are 8,233 brands in c-stores
Looking closer at c-store sales:
- About 15 brands across the beer category drove 80% of convenience-store sales, or $20 billion; there are 2,271 brands.
- Eight RTD brands drove 80% of dollar sales; there are about 300 active-scanning brands
- Two hard seltzer brands drove 80% of dollar sales; there are about 189 active-scanning brands
- Craft beer, however, is much more diversified, with 80% of dollar sales driven by 70 brands; there are 1,546 brands
“Domestic premium declines are offset by imports, FMBs [flavored-malt beverages], whiskey and prepared cocktails,” Sepka said.
Looking ahead, Sepka said:
- Continue to lean into the flavor-forward components of the packaged beverage business because consumers are signaling their approval for innovation in this area.
- Recruiting is pivotal, but Gen Z cannot be the only focus. “That generation may come into bev alc in unique ways and could take time,” he said.
- Consider a product “end of life” strategy for retail if not already in place. Pre-negotiating space and having a long-term SKU rationalization plan is key.
- Be cautious on retail frontline price increases in the next 18 months because consumers are inflation-weary.
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