Beer Opportunity for C-Stores

Flavored malt beverages bring growth to the category.

December 18, 2017

This interview was brought to you by support from NACS Hunter Club member, Anheuser-Busch, and appears in the December issue of NACS Magazine.

Q: As a global beer industry leader, how do you recommend retailers approach their cold vault to get the best variety and profit out of the space they have?
David Vartanian, Senior Director, National Category Management–Convenience, Package Liquor & Military, Anheuser-Busch: The premium segment is the largest segment within the beer category so it is absolutely critical that retailers allocate the appropriate space to sales when setting the planogram for the largest beer segment within the cold vault. With an average of 12% of all c-store revenue coming from the beer category, paying close attention to the assortment and days of supply for top-selling items will pay dividends.

The average grocery store stocks 266 SKUs, while the average c-store stocks only 112 SKUs (according to the Anheuser-Busch Category Leadership Study–2016). More staggering is that, on average, the top 23 SKUs produce 50% of sales within the c-store channel, according to IRI. Though additional beer segments have made their way into the cold vault with increased assortment for the customer, the premium beer category has the most loyal customers. Top quartile stores have more density on their top selling items to allow for more days of supply to properly meet the customer velocity demands.

Q: What beer trends are you seeing these days?
DV: One of the biggest trends that Anheuser-Busch is seeing today in the beer space is the growth of FMBs (Flavored Malt Beverages). The value/high alcoholic FMB segment has been growing at a 14.2% CAGR from 2013 through 2016, with no signs of slowing down, largely due to continued growth in distribution points across the convenience channel.

The Top 5 brands in the FMB space make up more than $240 million in sales within the c-store channel, according to IRI data. Consumers are looking for value within the FMB space and products that provide them different offerings, such as the ability to “mix and match” different flavors through “2-for” or “3-for” special pricing offers. The FMB segment is designed specifically for the convenience store channel where 48% of the “for me, for now” shoppers are purchasing in c-stores.

Q: Why are flavored malt beverages (FMBs) such a good opportunity for the convenience store channel?
DV: Primarily sold in c-stores and package liquor stores, FMBs are a great opportunity for the convenience channel as the beverage specifically targets one of their core consumers: males between the ages of 21 to 34 years old. In addition, as a sub-premium offer, FMBs provide value to consumers on both a single purchase and multiple bundled units. The segment is growing +9.7% and driving the high ABV sub-premium segment to 26% market share within the c-store channel.

The growth of the value/high alcoholic FMB segment has been growing at a 14.2% CAGR from 2013 through 2016, with no signs of slowing down.”

The FMB shopper is typically also the consumer; they over index on being both the shopper and consumer when compared to other alcohol segments. In looking at segment loyalty from a consumer perspective, they are the lowest across all alcohol segments. Within the FMB segment, consumers are looking for new innovation and variety to a very high degree.

In California, for example, premium shoppers buy premium beer 56.5% of the time, value shoppers buy value 28.7% of the time, import shoppers buy import beer 44.2% of the time, craft shoppers buy craft 29.4% of the time, premium plus shoppers buy premium plus 15.3% of the time, and finally FMB shoppers buy FMB products 8.5% of the time. As you can see, the FMB shopper is the least loyal to the overall category they identify with. It’s interesting that the individual who identifies most with the FMB segment is only buying the product 8.5% of the time, while they buy premium more than any other segment at 34.2%.

Q: How is Anheuser Busch diving into the FMB space?
DV: Anheuser-Busch is launching Natty RUSH+ to help continue the growth of this FMB segment for retailers in the future with a unique offering that is available in both a 25-ounce can with 8% ABV and an 8-ounce can with 12% ABV. Natty RUSH+ will be available in three flavors: Hurricane Punch, Watermelon Smash and Blue Frostbite. With flavors that are proven consumer favorites, a unique pack size and a brand name that consumers know, trust and love, Natty RUSH+ can help retailers capture their fair share of the sub-premium FMB market.

Q: How can FMB be best merchandised in convenience stores?
DV: Merchandising FMB in the singles door in the sub-premium FMB section provides incremental sales next to other FMB products. There is an opportunity to place larger cans vertically on the shelf, while also merchandising smaller cans in the same set through an under-the-shelf horizontal rolling rack. Having both large and small can sizes available to consumers will allow for the retailer to continue to see significant growth within the FMB space.