The Wine Consumer Cometh

A new generation of consumers is discovering wine, and looking for value.

By  Steve Holtz, Online News Director & Beverage Editor

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Most retailers have been hearing it for years: The convenience- store consumer is discovering wine. The grab-and-go nature of c-stores makes them perfect for the consumer in need of a quick bottle of wine for dinner at home or at a bring-your-own restaurant. There is an opportunity to increase the customer spend by selling wine with price points from $2.99 to $20.

And, in varying degrees, retailers have indulged, developing small racks for wine on the store floor or making space in the cooler for a few facings. Some have had success, growing the section as needed; others have seen a lukewarm response, drawing a few dedicated customers, perhaps enough to maintain the small space devoted to the grape. But as 2011 dawned, new data is pretty convincing that, indeed, there’s reason to believe more c-store customers will be seeking a bottle of vino from their favorite store’s shelves.

The Next Generation

Wine accounts for 20% of all alcohol drinks consumed by millennials, the coming-of-age demographic of consumers born between 1980 and 1999, according to Nielsen data cited by AdAge. That’s well advanced of Generation X, which, at the same age 10 years ago, chose wine for only 13% of its alcohol drinks.

If that trend holds, wine will account for 26% of all alcohol drinks in the United States, up from 24% today, according to the AdAge report.

 “The two fastest-growth wineconsumption categories: No. 1 is millennials, No. 2 is baby boomers,” says Tony Gaines, national director of trade development for E&J Gallo Winery, Modesto, Calif. “Roughly 7 million new wine consumers each year come in the millennial category. It’s big.”

This very fact—that younger adult consumers are getting a taste for the grape earlier—is driving retail wine success in one of Meiners Market’s stores in Lee’s Summit, Mo. A nearby apartment complex of 280 units made the store ripe for an expanded wine section.

“That’s why this store [exists]; it’s the apartments behind the store,” says Jerry Meiners, a partner in the sixstore chain based in Kansas City, Mo. “The people who live there are probably between 23 and 35 years old, and a lot of them have fairly good jobs. It’s an upscale apartment complex. That’s why, even though some of our other stores do more inside sales, they just don’t sell as much wine as this particular store.”

The 3,800-square-foot store sports about 20 feet of linear space dedicated to wine, plus space in the cold vault—double the space allowed for wine in Meiners’ other stores. In 2010, wine sales at the store grew 16.5% compared to the previous year, hitting about $26,000.

Connecting With Customers

Knowing the demographic of that neighborhood and the trends of that demographic made all the difference for Meiners, much as they did for the Candler Park Market in Atlanta.

Situated in a former grocery store in the gentrifi ed, hip neighborhood of Candler Park, the store’s owners, including Greg Hutchens, initially planned to develop a small-scale neighborhood convenience store that would focus on local favorites and a deli. Five years later, an unsuspecting consumer visiting the site might think he’s entered a liquor store, and the site earned the No. 12 spot on Food & Wine’s list of “America’s 50 Most Amazing Wine Experiences.”

And, interestingly, customers urged Candler Park to get into the wine and beer business.

 “[It] came about because of an adjacent restaurant across the street,” says Hutchens. “When they first opened, they didn’t have a license to sell alcohol. So their customers requested from us to bring in beer and wine so they could bring it over there. It just evolved from there.” Evolved into aisles and endcaps fi lled with nearly 700 globe-spanning wines, from California to Romania— and a quick education for Hutchens, whom more than one customer has dubbed “my wine guy.”

“That’s been a learning process,” Hutchens says. “I can’t say my knowledge was extensive prior to that, but it’s something I really enjoy doing.” Candler Park now encourages customers to ask about the wines it stocks; employees share their knowledge as an added way to connect with customers.

Not Averse To Advice

One of the channel’s biggest success stories with wine is found in the 110- store Huck’s chain, based in Carmi, Ill. The company’s private-label Five Buck Huck, the most popular wine the stores sell, brings in a margin of about 24% (CSP—July ’09, p. 65).

But a retailer needn’t be a small or mid-sized independent to drive wine sales. Large chains, from Sunoco and Kum & Go to The Pantry and 7-Eleven, have made concerted efforts in recent months to drive wine sales.

Louisville, Ky.-based Thorntons Inc. is setting its 165 stores in five states based on local regulations and neighborhood demographics.

“We’ve enhanced our wine program in Indiana. We’ve put a larger rack in the stores,” says John Zikias, vice president of sales and marketing. “You might see anywhere from a 4-foot rack, single-sided, to a 4-foot rack, double-sided. So you might have as much as 8 feet of wine in the store, depending on the location.

“And we’re putting cue cards on the display so that people understand how a wine is rated and what it might go well with. … We’re working with our wholesalers to give consumers tips.” Experts say millennials, as opposed to other generations, have no problem asking for wine advice. Thus, a simple shelf card citing the characteristics of a wine and food pairings may go a long way.

Meanwhile, 7-Eleven’s latest wine initiative—the introduction of its proprietary Cherrywood Cellars wine—is targeted directly at millennials as they come of legal drinking age.

“We are targeting millennials because they like convenience and want to try new products, especially if we offer them a quality product at a great price,” said Jesus Delgado-Jenkins, 7-Eleven’s senior vice president of merchandising and logistics, in a press release when Cherrywood Cellars— developed with E&J Gallo Winery— was introduced in November.

Seeking Value

The price element is another huge reason c-stores are ripe for wine sales. Nielsen data shows that in 2010, the fastest-growing price segment in wine was the $9-to-$11.99 range, leading the Wall Street Journal to say, “After switching to less-expensive wines in the downturn, many consumers are staying at those lower prices because they liked what they found.”

That’s one of the trends 7-Eleven is counting on to drive the sale of its wines, which range from $3.99 (Yosemite Road) to $7.99 (Cherrywood Cellars) to $9.99 (Sonoma Crest, a premium wine 7-Eleven says is “comparable to a $15 bottle”).

 “Millennial consumers may watch their spending more closely than both Gen-Xers and baby boomers because of the recent economic downturn and resulting high unemployment rate,” the company said in a release about its wine offering. “Gen-Y members appreciate quality; however, they are seeking the best value for their dollar.” 7-Eleven offi cials declined to comment specifi cally for this story beyond a spokesperson saying, “We are pleased with how well our private-label varietals are selling.”

Price has become key for Meiners Market’s wine-sales growth as well. In 2010, the chain established monthly wine discounts to drive traffi c.

“Every month we have six to 10 different kinds of wine that we put on sale. … The regular price might be $8.99 and the sale price is $6.99,” says Meiners. “That’s driving our sales increases. It also has an effect on our gross profi t. So we’re averaging probably about 28% gross profi t [on wine] at that particular store.”

Most of Meiners’ wines are in the range of $6 to $8, he says, though he does carry some wines that cost $12 to $13. Again, it’s a matter of knowing your market and your primary demographics, says Tom Fox, a partner in beverage marketing consultancy CM Profi t Group, Troy, Mich.

“There are a lot of good wines under $10, and if you get a little courageous and have a couple offerings up to $15, you might have a market for it,” he says. “The reality is, wine has seen growth across a lot of different price points. So you can do more than the $4.99 wines and still be successful. You want to be in that [$4.99] business, but there’s no reason you can’t offer $9.99 price points that are still manageable and double the profitability for you.” 


By the Numbers

60% Percentage of wine bought cold in a c-store, according to E&J Gallo

20% Percent of alcohol drinks consumed by millennials that are wine, according to Nielsen data

12% Percent growth of wines in the $9-$11.99 range in 2010 in all channels, the largest growth of all price ranges, according to Nielsen data

1% Percent wine sales grew in c-stores in 2010, according to SymphonyIRI data.

 


Pinot This

Tips for getting into the wine category from Tony Gaines, national director of trade development for e&J Gallo Winery, Modesto, Calif.:

Cold Vault

  • If you have four beer doors in the cold vault, maintain one wine shelf cold; fi ve beer doors, two wine shelves; six beer doors, three wine shelves; seven or more beer doors, a full door of wine.
  • Suggested selection for cold vault: 60% 750ml, 20% 1.5L and 20% four-pack and/or 187ml single-serve bottles.

On Floor (Warm)

  • A 1,700- to 2,200-square-foot store should dedicate a 2-foot to 3-foot section; 2,300-3,000 square feet, 3-foot to 4-foot sections; 3,000 or more, 4-foot section or more depending on store volume.
  • Suggested selection for warm section: 55% 750ml, 25% 1.5L and 20% four-packs. 

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