High Spirits

By Terri Allan

As a single mother with a young child, Jennifer Stetson longed for an ultra-convenient shopping solution for those times when poor weather, illness or fatigue wreaked havoc on a much-needed visit to the grocery store. She envied the drive-up liquor stores in her native Louisville for the ease they presented customers in making purchases. And that’s when the idea for Bourbon & Belles Pantry & Libations—a drive-thru convenience and liquor store—hit her. Opened in October, Bourbon & Belles “offers a full pantry,” Stetson explained, including cigarettes, milk, snack items, pet food and diapers, as well as beer, wine and a wide assortment of distilled spirits.

“It’s completely different than any other drive-thru,” Stetson said of the 6,000-square-foot store that can service up to 15 cars at a time. Indeed, with hundreds of liquor brands offered—including 87 different bourbons, priced from $12 to $220—and its own app that makes placing an order even easier, Bourbon & Belles is a good example of a convenience store capitalizing on growing consumer demand for liquor.

Ryan McClellan, national accounts manager at Brown-Forman Corp., reported that according to IRI data, dollar sales of distilled spirits in convenience stores grew at a double-digit rate last year. Newly licensed outlets, as well as expansion of selection in existing stores, contributed to the gain, the marketer said. “Another factor is supplier and distributor investment and focus,” McClellan continued. He noted, for example, that Louisville-based Brown-Forman recently added dedicated leadership and investment in data, insights, resources and tools to help drive spirit sales in the channel.

According to Matt Deegan, vice president, customers and category management at Beam Suntory, while nearly all distilled spirits segments are showing growth in convenience stores, “whiskey is the strongest driver,” gaining at an 11% rate, and stealing share from other segments. Sales of tequila increased 10% last year, while vodka sales rose 5%, Deegan reported.

With such strong trends, more and more convenience store operators are adding spirits to their shelves, where legal. Tom Thumb, for example, recently added a drive-thru liquor store to an existing shop in Crestview, Florida. “We expect to see this continue as more states loosen restrictions,” remarked Stephan Mecklenberg, research coordinator at NACS, pointing to repeal of measures like the Sunday blue laws. In fact, changes in several states in recent years to allow for off-premise sales of liquor on Sunday may be a significant contributor to the rise in the number of convenience stores offering spirits, he continued, noting, “If you can’t sell a product one day out of seven, it loses its appeal.”

‘On the Up and Up’
Liquor is a hot category these days. “The spirits industry is on the up and up,” Mecklenberg said. “It gained share of total alcoholic beverages in 2014,” outperforming both the beer and wine categories. Innovation has become the category’s biggest calling card, he continued, particularly when it comes to flavors. “Cinnamon-flavored whiskies have exploded,” Mecklenberg noted, citing brands like Fireball and Jack Daniel’s Tennessee Fire. Craft distilleries are also starting to emerge, he said. “Local is part of the story of the brand. Small batch appeals to premium drinks consumers.”

Emerging demographical groups provide good opportunity for continued growth of spirits, marketers say, and convenience stores are positioned as an ideal channel. “Millennials have money to spend, and spirits are a strong preference,” Deegan remarked. “Spirits as an adult beverage rank higher with legal-purchase-age Millennials than with Gen X, Boomers or the Silent generation.” McClellan noted that while demographics vary from market to market, Millennials are among the most frequent visitors to convenience stores. “For Millennials and their key spirit consumption occasions, the c-store channel fits the bill as a destination,” he said. The Brown-Forman executive described some of those occasions as “small social gatherings, casual parties, being outdoors, playing and watching sports and getting ready to go out.”

Deegan also pointed to the growing Hispanic population in the United States, and the appeal that spirits hold. “Hispanic consumers have demonstrated substantial interest in key spirits segments, such as vodka, rum, Tequila and whiskies,” he said.

He added that females shouldn’t be overlooked when it comes to the spirits category. “Whiskey consumption among women is rapidly growing, driven by cultural trends, flavors and cocktail trends. Women make up 37% of whiskey customers in the United States, up 7% from two years ago.” As recently as the 1990s, Deegan said, females accounted for only about 15% of all whiskey drinkers.

Changing with the Times
While consumer demographics have changed over the years, Deegan remarked that in some cases, shelf and merchandising tactics for liquor in convenience stores have remained the same. Following a recent “coast-to-coast analysis looking at merchandising best practices,” Beam Suntory has created programming to help build the category in convenience stores, he reported, and is partnering with distributors and retailers to share insights.

McClellan, meanwhile, said Brown-Forman is seeing “increased display activities with the right size and package.” Noting that Millennials love to try new products, he said, “the c-store presents a new path for recruitment,” and small packages of products like Jack Daniel’s Honey and Tennessee Fire are perfect for generating trial. Overall, he added, it’s important for retailers to create awareness that they carry spirits.

Stetson of Bourbon & Belles is a big promoter of the category. The store offers free in-store tastings every day. (Store staff can pour guests a half-ounce of spirits per hour, and up to three pours per day.) Pointing to the big “shop local” sentiment in Louisville, Stetson said she also creates gift baskets during the holidays featuring all-local ingredients, including pancake mix, pickles, honey, bourbon jelly and, of course, bourbon.

But stocking spirits also comes with its challenges. Stetson points to competition. “Most consumers shop for liquor in the same store, and aren’t even aware that there are more options,” the retailer said. Tracy Shaw, manager of Kozy Korner Finish Line in Milan, Missouri, said the biggest problem she has with the liquor category at her store is the high-ticket nature of the products. “The high price can be a drawback to some customers,” she remarked. In addition to varying state and local laws concerning the sale of distilled spirits and the space needed to stock the brands, McClellan noted that “higher priced inventory and high licensing costs can also be big barriers.”

Distilled spirits marketers note that they and their distributors can aid retailers looking to expand their presence in the category. Beam Suntory, for example, offers tools that help operators understand “the difference between variety and duplication,” as well as displays tailored for the convenience channel, Deegan reported. Brown-Forman has merchandising tools to fit all format types, McClellan said, including counter bins, floor displays, window clings and shelf talkers.

Brent Wunder, vice president, spirits sales at Constellation Brands, noted that his company has worked with its convenience store partners to “provide merchandising support and promotional activity that is geared toward smaller footprint accounts where merchandising space is at a premium,” as well as promotional support that is “relevant to the consumer frequenting the c-store channel.”

Opportunities Abound
Liquor suppliers advise that with the right product assortment and attention to merchandising, convenience stores can truly benefit from growing consumer interest in spirits. Mecklenberg cautioned that retailers should “keep an eye out on the trends. Evaluate the category based on the target audience and ask, ‘Is it worth it?’” For those who decide it is, “spirits are one way to differentiate,” he added.

Marketers are clearly bullish on the opportunity for growth of the spirits category in convenience stores. McClellan pointed to the potential spirits offer in driving trips and basket size. “There is enormous untapped potential,” Deegan agreed. “This is an exciting time for spirits within convenience stores.”

Terri Allan is a New Jersey-based freelance writer, specializing in the beverage industry. She can be reached at terri4beer@aol.com, and on Twitter @terriallan.