COVID-19 has had a dramatic impact on the U.S. retail landscape, transforming shopping in 2020 and likely for years to come. These shifts have retailers reconsidering the selection and layout of their stores as they seek to stay relevant and match evolving shopping behavior.
While there are likely many possible tweaks retailers could make in the beer aisle, this article seeks to lay out why craft is still a critical part of any beer retailer’s assortment as a profit driver, basket builder, and source of retailtainment for most retailers.
As always, any assortment reviews should be done based on real profit thresholds, retailer goals, and strategy for the beer segment, and in doing so, it will be clear the critical role craft plays. In addition, the craft segment’s increased profitability means that it requires lower volume thresholds than mass domestic, sub-premium, and lower priced imports in order to meet profit thresholds.
Craft Delivers Dollar Sales and Is Growing Share*
- Craft is 14.6% of dollar share of total beer (excluding FMB, seltzer, and cider) in the last 52 weeks, but is 16.8% of growth in the last 52 weeks. Craft is growing share.
- Other segments are losing share. Compared to a year ago, over the last 13 weeks in dollar share terms:
- Imports have lost 74 basis points of share.
- Domestic sub-premium has lost 189 basis points of share.
- Domestic premium has lost 341 basis points of share.
- Independent craft has had stronger dollar sales growth than the total beer category (excluding FMB, seltzer, and cider), both over the last 52 weeks and in the COVID-19 period. Independent craft has had stronger dollar sales growth than overall craft, growing overall in the high single digits during the pandemic shutdown and reopening phases, spiking into double digits.
*Sources: Nielsen and IRI Group.
Many national, regional, and local craft brands have experienced double digit growth during the pandemic, showing they are considered a priority to beer shoppers and their home consumption. And because of its pricing, craft is still delivering dollar growth for retailers.
Craft average weekly dollars per store selling has jumped from $451 to $620 (source: IRI Group).
Craft Critical to Keep Key Shoppers
Many retailers are likely looking for more space to accommodate the growth of hard seltzers. As noted above, craft’s dollar sales growth should be a strong case to protect its space versus segments that are losing share, but there are additional retailers to preserve craft space.
- Craft has long been an item that not only gets shoppers into the store, but the shoppers you want. Craft drinkers are on average younger, better educated, and have higher incomes (Source: Nielsen).
- Retailers see the largest basket ring when craft is in the basket (versus other beer categories) and the largest jump in basket size (Source: Nielsen).
- Surveys show that even in during the COVID-19 pandemic, local is still important to shoppers. And an assortment of the local craft beer is important for attracting craft shoppers.
Craft Differentiates and Keeps Foot Traffic
Finally, a wide selection of independent craft beer increases customer engagement, foot traffic, and excitement as they seek out the innovative local craft brands.
- While other beer categories also sell well, they are rarely a point of differentiation between your store and your competitors. Other than winning on price (i.e. lower margin),it’s tough to stand out on your light lager or seltzer selection.
- Differentiation is more critical than ever as e-commerce grows in importance across all retail channels, including beverage alcohol. “Nonstore retailers” were up 19.8% over the first 7 months of 2020 versus 2019, compared to a decline of 2.1% for all retail and food services (source: U.S. Census monthly retail trade summary).
- Craft is the reason people call the store asking if you have “X” in stock. If you don’t, they may consider shopping with an online competitor.
- To compete in an online era, retailers need to increase the reasons for customers to come in store, as well as find a strategy that allows them to compete for customers buying via online platforms. If price is your only differentiator, they now have multiple options to search and find better deals. Selection gives customers a reason to choose your platform.