As the summer months approach and beer promotions get under way, retailers should continue to hone in more on consumer shopping trends in order to clean up the beer aisle, maximize profits and weed out brands that perform poorly, industry insiders told SN.
While the category is dominated by three major brands -- Miller, Budweiser and Coors -- the abundance of specialty and imported varieties has left some retailers in a quandary over what to do in terms of shelf presentation, and the constant introduction of new packaging and larger pack sizes are also factors needing consideration.
"Beer is a real important category for the stores in terms of significant revenues and high profitability. But, it's pretty chaotic right now. There are a lot of stockkeeping units and retailers aren't quite sure which ones they need and which they don't," said Bob Hilarides, a partner with research firm Cannondale Associates, Evanston, Ill.
"What is real variety in this category? That's a hard question. Is it sizes? It takes a lot of consumer studies to figure out what to do. It makes it hard to set it. They can leave that in the distributor's hands, but are the distributor's views the same as theirs -- sometimes no," Hilarides continued. "There is a variety-seeking nature to the category.
"From a shelf management perspective, retailers have to make sure they've got the most important options available, like pack size, in addition to brand variety."
According to Andrea Sato, director of retail sales for Heineken, White Plains, N.Y., defining the best practices for imported and specialty beers and getting more information on consumers and how they shop, which brands they focus on, etc., helps both manufacturers and retailers in managing the segment.
"It helps the retailer think about the imported and specialty sections, and gives them a new way of looking at variety -- the opportunity in terms of package variety, not necessarily brand variety," Sato said. "It gives them a new point of view on assortment and how to organize their shelves.
"Imported and specialty beers are twice as impulse-driven as premium and regular beers, so it's important to put them on display. You can't just expect that the consumer will find them," she added.
Studies conducted by Heineken have shown that consumer choice is driven by brands, and when a customer couldn't find the brand they were looking for in a particular size, they would just choose a different size of the same brand rather than switch. This, Sato said, is a fact that should not be ignored by retailers, who, based on the results, could increase sales by merchandising all the packages of one brand together (6 packs, 12 packs, etc.) on the shelves.
"They should anchor the segment around the brands that are really driving the business and maximize what's really pulling it through. That's not to say that we don't believe in variety, because we do. But, consumers are using fewer brands -- we've been tracking this for two years. If the shelves focus on those brands, retailers can make higher profits," Sato said.
Hilarides agreed. "Beer is a pretty heavy image profile for consumers and there are definite valued images that have been created by these brands. That's the most important variable after price segment," he said.
As far as promotions go, certain retailers are bound by regional laws that limit the type of beer-related point-of-service material they can use, as is the case for the Norfolk, Va.-based Camellia Foods, which can somewhat put a damper on advertising for the aisle, according to sales manager Rick Hagan. For example, although car racing is a popular sport in the region, NASCAR displays created by beer manufacturers featuring facsimiles of drivers cannot be used per the regulations.
However, since beer sales are pretty consistent year round at Camellia, constituting a sizeable percentage of the store's total grocery sales, the retailer focuses its promotions more around variety and consumer patterns.
Promotions at Camellia have been featuring full cases and the 24- and 30-pack promotional packages, and even though the store is located near the beach, Hagan said he has seen a move from cans to bottles, therefore he has pushed more bottle promotions. Also, he has noticed that customers have different preferences based on store location, with some being stronger malt fans than others, for example, making it beneficial to customize promotions, Hagan said.
Camellia operates 37 stores and two, in Virginia and North Carolina, are restricted with respect to beer promotions.
"Historically promotions have been a stand-alone thing. Now cross promotions have helped, and several snack companies have partnered with beer manufacturers," Hagan added. Coronas are hot items now, as is Icehouse and Steel -- a high-density beer. One of the chain's smaller stores buys about 50 cases of Corona per week, Hagan said.
Working together with manufacturers, whether it be on in-store merchandising ideas or on promotional strategies, seems to benefit both players, and more relationships seem to be brewing every day.
Bashas' Markets, Chandler, Ariz., works closely with Anheuser-Busch, Inc., in the Bashas' stores and Miller Brewing in the Food City Stores on beer category management programs, according to Bryon Roberts, vice president, liquor. Bashas' has 93 stores, all but two of which are in Arizona. Of them, 67 bear the Bashas' name and are traditional neighborhood supermarkets; five are AJ's Fine Foods store, gourmet specialty stores; 20 are Food City/Bashas' Mercado stores, a Hispanic format; and one store operates as an Eddie's Country Store.
Bashas' works on cross promotions with snack food manufacturers with respect to both its beer inventory and its wine stock. Usually, these promotions are in conjunction with tie-in coupons. Promotions don't vary much from store to store due to the company's media formats. Sales, however, vary dramatically based on demographics, Roberts told SN.
The retailer uses weekly ads and television and radio to promote. While several versions of an ad go out, due to price differences in different areas of the state, it is impossible to have a different promotion from store to store, unless one store is a Bashas' and the other a Food City or AJ's.
The same general strategy is used in every store, which is to make sure you stock what customers want at a competitive price, Roberts added.
Other ways to increase sales in the beer aisle, Hilarides said, is to take advantage of occasion-based opportunities to promote.
"Beer is an occasion-driven category. For different occasions there are different pack-types and some are more appropriate than others. We've been seeing more of specialty packaging," he said, pointing out Budweiser's millennium can and last summer's Heineken keg can as examples. "That shows that people are willing to drink specialty and imported out of a can, and I think it's a trend we'll see continuing."
He also said placing the best-selling brands in the cold cases boosts sales, because the belief is the majority of beer shoppers are looking to consume at least some of the product that same day.
"If it's cold, it's sold," Hilarides said. "Retailers can sell more unique beer warm because they don't need the slower-turning items to be cold."