Perhaps you’ve heard the American craft brewing industry is having a tough time lately. It’s true! We’re not talking about “Bud Light” levels of bed-sh*tting calamity, but the once-surging segment has been flat to slightly down in growth for the past few years, for reasons we have discussed at length here, here, and here.
The upshot is that the craft brewing industry needs a rally point, a redoubt to catch its breath, lick its wounds, and gird itself for the ever-more-fierce fight for American hearts, minds, and throats. And as dedicated beer bars and bottle shops shutter, and draft beer nosedives, your humble Hop Take columnist is getting the vibe that convenience stores are going to be it, particularly for those regional and national beer brands that depend on high-volume distributed sales.
But takes cannot live on vibes alone. (Or at least, they shouldn’t.) The data show c-stores are a shining beacon on the segment’s otherwise gloomy horizon. “Craft is down in all other channels except convenience, which is why I keep talking about [the channel] as a bright spot,” Stephanie Roatis, an insights consultant with 3Tier Beverages, tells Hop Take. Her channel analysis of NielsenIQ (NIQ) scan data indicates that craft beer is up a very solid $97 million in c-stores year-over-year. That growth isn’t solely coming from the price increases that craft (like other segments) rolled out to offset higher input costs and inflation, either: Volume increases are trailing dollars, but holding to trend. “We’re hopefully finally seeing craft come out of the slump it was up against with the [strong] Covid comps that we saw the last year, year and a half,” says Roatis. And the c-store is leading the way.
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This is not where anybody, including me, saw the segment going last decade. When the going was good, brewers used to crow about craft beer’s debut on planes, trains, and stadium tap towers, but rarely did you hear such celebration about placement in c-store coolers. The channel wasn’t considered shameful, per se, but it was definitely downmarket from where the high-flying segment was then aiming.
And, like… you can see the argument, right? C-stores — gas stations, bodegas, mini-marts, and other small-bore, non-specialty retailers — after all, are everything that craft brewing was meant to stand against. They sell mass-market junk made by some of the biggest corporations in the world. Depending on the marque, they be owned by some of the biggest corporations in the world. The channel’s value proposition is baked right into its name, and it doesn’t match with craft brewing’s own ethos: Provenance, ownership status, and even price of goods sold in convenience stores are less important than the fact that they’re available on the quick.
What’s more, it’s a terrible venue for the type of narrative education that craft brewing has long relied on to win converts in its adolescence. Try striking up a conversation about the merits of Citra hops with the guy in front of you just trying to buy his Bugles and get back in his F-150. See how that goes.
Was there some arrogance dictating craft brewing’s disinterest in the convenience channel? Some classism, maybe even racism? Sure, probably, to some extent, on a brewery-to-brewery basis. But at the industry level, I think it’s mostly an abundance of opportunity elsewhere (at first) and lack of imagination (in more recent years) that has kept America’s 7-Elevens in the segment’s blindspot.
Now, factors including the hard seltzer boom, the Covid-19 pandemic, and a surging spirits business have conspired to turn the tables in the American beverage-alcohol industry. Draft beer — on which craft brewing’s collective brand was built, in part — is taking a beating, and the American drinking public is still mostly drinking in private. The market’s gravity is still pulling volume off-premise, where the same supermarkets that were once clearing shelf space for a bajillion craft beers are now redrawing those plan-o-grams to push Modelo, Twisted Tea, and (where they can) spirits-based canned cocktails, too. Distributed craft breweries are at risk of getting lost in the sauce, or swept out with seasonal resets entirely. That fate is even scarier when you can’t rely on owned-and-operated taproom sales to anchor your balance sheet; only the smallest breweries can.
Which brings us back to convenience. Craft brewing has changed since the days of large-format bottles and beer-pairing dinners. And convenience stores have changed, too, introducing higher-price-point goods (truffle popcorn, keto protein bars…) to enlarge the basket sizes of their spendy, on-the-go customers. Craft beer has entrée here — and maybe even cachet. “With gas station owners, you want to do anything you can to get people in the door,” Shibli Haddad, the owner of a market attached to a Shell Station in Pasadena, told Good Beer Hunting earlier this year. “If you have craft beer and the guy down the street doesn’t, the craft beer shopper is going to choose you.”
Of course, c-stores are small by definition, and their cooler space is hotly contested, so craft brewers hoping to capitalize on the channel’s promise can expect competition. And to be clear, craft is a small part of the channel — roughly 4 percent of overall beer volume share, per NIQ — and its trends are currently driven by a few big brands. “Most of the volume growth [is coming from] from New Belgium, largely Juice Force and Fruit Force, and then Kona, Bells, and Goose Island,” says Roatis.
Still, from where I’m sitting, the segment writ large has a few things going for it. For one, it can command premium price points for 19.2-, 22-, and 24.5-ounce cans, and these single-serve packages are most definitely where it’s at in convenience. “Singles are driving the largest growth by pack size by a hefty margin,” Roatis says, noting that that package style is up 1.2 million cases in the channel this year. The next-best growth by package in the channel belongs to 12-packs, which are up a collective 187,000 cases.
Stylistically, hazy IPA and hazy imperial IPA continue to dominate the channel, which isn’t surprising because a) they also dominate the entire segment across all channels, and b) New Belgium Brewing’s Voodoo Ranger brand family is widely credited with cracking the c-store code at scale. Those fruity, juicy flavors are in demand across the American beverage-alcohol landscape right now, and craft brewers are very capable of supplying strong, colorful offerings at high levels of alcohol by volume. (Whether they want to, or should, are separate questions.)
Speaking of the wallop factor: Fruity beers make higher ABVs palatable, and more booze reads as more value in the c-store. “Those higher-gravity beers have a much higher scan price,” says Roatis, and they offer an attainable trade-up for customers seeking a bang for their buck. This is key. Something like Voodoo Ranger Fruit Force hazy IPA (9.5 percent ABV) may not compare well to less extreme iterations of the style; personally, I think it’s teeth-rattling hooch. But those aren’t the terms of c-store engagement! Even in-your-face hazies taste like ambrosia of the gods compared to, say, Steel Reserve Tiki Series Island Punch (8 percent ABV), and they cost just a buck or two more. In the jargon, the channel’s customer base and context are distinct from other off-premise retailers, yielding distinct “competitive sets” in the cooler that offer craft brewers an edge.
Convenience stores are also something of a haven from the wolf at beer’s door: spirits-based ready-to-drinks and canned cocktails. In states where these products can legally be sold alongside fermentables, they offer retailers higher price point alternative to most beers, making them contenders for coveted cooler space. Craft beers match up more favorably, and they’re already coming in on the trucks of beer wholesalers with established c-store routes and know-how. And in states where spirits-based stuff is restricted to liquor stores, well, craft beer has an even better shot at the fridge.
So rally ‘round the c-store, craft brewers! The night is always darkest before the dawn, but the fluorescents are bright, the coolers are cold, and the customers are trading up in this nation’s Kwik-E-Marts. There are worse places to weather a storm.
🤯 Hop-ocalypse Now
We talk a lot around here about how spirits are carving into beer’s territory, but the constant repetition of that basic fact may have dulled you to its significance. Please believe; it’s significant, man! Particularly when you zoom out over the past couple decades. At Good Beer Hunting, reporter Kate Bernot and Excel-empowered editor Bryan Roth pulled data from the National Institutes of Health dating back to 2001, finding that in the intervening years, servings of beer have decreased 0.6 percent, while servings of spirits have skyrocketed 92 percent.
📈 Ups…
Non-alcoholic beer now trails only craft and imports in sales at Whole Foods, which… what took so long?… The Chicago Brewseum is rebranding as the “Beer Culture Center” to reflect a broader mandate… Not to get all “dream job” on here, but the Brewers Association is hiring a research analyst to work with chief economist Bart Watson… Lawmakers in Ohio will debate revisions to the state’s aging franchise law…
📉 …and downs
In a long-delayed election, Creature Comforts Brewing Co. defeated the Brewing Union of Georgia organizing drive it has aggressively challenged all year… The National Basketball League’s attendance costs are up 17 percent year-over-year, with the Boston Celtics leading the league in beer prices at $19.87 per 16-ounce beer… Boston Beer Co. alleges in a new lawsuit that a former employee took trade secrets to a new gig at Downeast Cider…
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