Beyond Beer

New innovations continue to pour into the alcoholic beverages space

By Kathleen Furore

HARD SELTZERS, ready-to-drink (RTD) cocktails and flavored malt beverages have all had their moment in the spotlight. And while trends wax and wane, industry data projects that these drinks will continue driving consumers’ alcohol consumption and purchase patterns for several years to come — and that means convenience store retailers must embrace the “Beyond Beer” category to capture the sales buzz these beverages deliver.

“The past few years have seen a significant rise in the popularity of alcoholic beverage segments together referred to as ‘Ready to Drink’ or ‘Beyond Beer,’” according to the 2021 RTD/Beyond Beer Path to Purchase Study from VideoMining, a provider of in-store behavior analytics for CPG retail. “Numerous competitive products have entered the market with a multitude of flavors, functional benefits, package formats, and alcohol bases.”

IWSR, an authority on the global beverage alcohol market, reported that the RTD category posted double-digit global growth in 2020 — up 26.4 percent. “It was the only beverage alcohol category to grow at all during the COVID crisis, resonating with consumers across all demographics, and driven by the trend for convenience, refreshment and flavor,” said the company’s Drinks Market Analysis released in June 2021.

IWSR projects that RTD volume will increase by 26.6 percent in 2021, driven by growth in the United States, which held 44 percent share of the global RTD volume in 2020.

Managing the Mix

George Ward, national director of off-premise for The Boston Beer Co., maker of Truly Hard Seltzer and Twisted Tea, notes that “every major distillery, plus breweries, wineries and entrepreneurs are diving into the [Beyond Beer] space.”

The category’s varied segments include hard seltzers, ready-to-drink cocktails, flavored malt beverages (FMBs), hard kombucha, hard water, hard coffee, cheladas, and more.

So, how can c-stores pick products that make the most sense to stock in their limited amount of shelf space considering the tremendous influx of new products hitting the market?

Looking at what’s driving growth in the space is a good place to start. According to the VideoMining study, the most impressive growth has come from hard seltzers, led by brands such as White Claw and Truly, as well as from new RTD cocktail drinks.

IRI data also shows hard seltzers and RTD cocktails leading the pack.

Todd Bollig, senior director of category management and shopper insights at The Boston Beer Co., pointed to IRI data that shows hard seltzer had 33.6 percent c-store dollar growth and represented 49.9 percent of Beyond Beer c-store dollars year to date through Sept. 19, 2021.

As for RTD cocktails, this segment has emerged as the fastest growing in alcohol, up 119 percent vs. a year ago, according to IRI data cited by Tracy Nguyen, senior director of category development at Anheuser-Busch, whose portfolio includes Cutwater Spirits canned cocktails, Bud Light Seltzer, and NÜTRL Vodka Seltzer.

“Success has been driven by the segment’s ability to capitalize on key occasions, such as relax and social, while attracting new 21-plus consumers into alcohol, with 64 percent of sales incremental to the category,” Nguyen explained.

Over the past year, seltzers’ share of shelf has grown significantly, but given the trends, she said it is important for retailers to focus on SKU mix while maintaining current shelf space.

Noting that a slowdown in hard seltzer growth is something to watch, Nguyen predicts that the future growth within seltzers will be driven by “differentiated brands with unique consumer propositions and an ability to drive trade-up.”

Convenience channel shoppers’ hesitance to embrace innovative products, compared to other retail channels, is

“We see the c-store shopper slower to move toward innovation, so focus on lead brands and proven winners, then take calculated bets on what’s new and innovative. Stores have limited space, so placing the wrong bet will make inefficient use of the cooler space.”

— Todd Bollig, The Boston Beer Co.

BEYOND BEER +21.4%

Dollar Growth

18%

of Beer Category Dollars

Hard Seltzer +33.6%

Dollar Growth

49.9%

of Beyond Beer Dollars

Traditional FMBs +9.5%

Dollar Growth 44.4%

of Beyond Beer Dollars

All Other

The remaining 5.7% of Beyond Beer Dollars are made up of cider and emerging RTD spirits

Source: YTD IRI Performance in C-Stores thru 9-19-21

another factor operators should consider when picking product, Bollig said.

“We see the c-store shopper slower to move toward innovation, so focus on lead brands and proven winners, then take calculated bets on what’s new and innovative,” the Boston Beer executive suggests. “Stores have limited space, so placing the wrong bet will make inefficient use of the cooler space.”

With c-stores typically slow to reset — often just once a year — this approach is especially important, Bollig notes. “If an item is not doing well for a whole year, it will set you behind,” he said. His recommendation is to take three to six months to see what’s doing well in other channels, then bring in the top performers. “Wait and see, then take the winners,” he advises.

Nguyen agrees that retailers should focus on the top brands across their top SKUs to ensure the right mix, while also differentiating the assortment with limited SKUs across a broader set of brands that can offer unique propositions like organic, high ABV, or unique flavors.

Sales data supports this approach as well. “Top brands are driving this segment, with the top five light cocktail brands delivering 84 percent of sales, while the top five mixed cocktail brands drive 70 percent of sales,” Nguyen reports.

Basket-Building Benefits

Products that comprise the Beyond Beer category are an important component of c-stores’ alcohol inventory — especially given what experts say the future holds. Because of both their volume and variety of choices, RTDs will likely continue to chip away at the shares of traditional beverage alcohol segments, according to the VideoMining study.

“As the segments expand and introduce new twists on non-alcoholic beverages and convenience of RTD cocktails, the share of the category will continue to grow,” the study predicts.

The reasons for focusing on Beyond Beer products also extend beyond capturing sales in just that category. While RTD is chipping away at traditional beer, wine and spirit sales, shoppers who buy RTD beverages frequently buy other alcoholic drinks, too.

“Buyers of RTD also purchase a traditional beer product 20 percent of the time, traditional wine 15 percent of the time,

“Success has been driven by the segment’s ability to capitalize on key occasions, such as relax and social, while attracting new 21plus consumers into alcohol, with 64 percent of sales incremental to the category.”

— Tracy Nguyen, Anheuser-Busch

and traditional spirits 4 percent of the time,” VideoMining found.

Merchandising Tips

For many c-store retailers, the sheer scope of new alcoholic beverages hitting the market is almost too much to grasp, and it’s creating some merchandising headaches.

As the VideoMining study notes: “With the breathtaking speed of innovation and growth in RTD alcoholic beverages, stores have simply not kept up with the changes needed to minimize shopper confusion. One of the biggest pressing questions is whether it is better to combine many of these emerging segments and treat it as a separate RTD category.”

While that decision has yet to be made, there are ways to merchandise these products that will drive traffic, whatever retailers decide to carry in the limited space they have.

“From a RTD cocktail perspective, the primary location should be warm with the parent category, and adjacent to the beer set to drive shopper traffic,” Nguyen said. “A shopper-centric shelf flow should be organized by ABV with light cocktails at the bottom and higher ABV mixed cocktails at the top of the shelf.”

The Boston Beer team offers stores a list of five steps they can take to elevate the hard seltzer segment (several of which could apply to the overall Beyond Beer category, too):

1. Ensure proper space allocation incorporating growth rates; 2. Build assortment on lead brands first; 3. Monitor SKU performance to identify slow movers; 4. Keep pace with innovation — swap slow movers outside of standard reset process; and 5. Increase visibility to attract new shoppers through shelf position, blocking, signage and display.

Ultimately, c-stores will succeed in this fast-evolving category by being open and flexible, choosing products wisely, and making the most of available space — not by taking on every product because “they don’t want to miss anything that’s hot,” Bollig concluded. CSN