Another complex category that has entered dollar stores’ retail equation is alcohol. At Dollar General, beer has been rolled out to 3,900 stores or about 40% of the chain, with a goal of reaching 5,000 by the end of the year. The company has also launched a private-brand wine and plans to begin sales of spirits.
Joe Vonder Haar, beverage industry consultant and managing partner in iSEE Store Innovations LLC, St. Louis, said beer is a natural way for dollar stores to build the basket.
“They’ve looked at their core consumer; it’s not a matter of bringing new consumers in, but just converting existing consumers in their stores who are already there,” he told CSP Daily News. “It’s a pretty simple equation in terms of the overall opportunity given the size of the category.”
After visits to St. Louis-area Family Dollar stores, Vonder Haar describes the beer offer—two cooler doors and two shelves of warm packs—as a “very limited assortment,” composed mainly of premium and subpremium beer. Smaller packs are also the focus, with 12-packs the maximum pack size. Based on the assortment, he suspects that the 12-pack of Bud Light cans is the No. 1 SKU. This compares to c-stores, where Bud Light 12-, 18- or 24-packs are typically the top selling SKU, depending on the current promotional strategy of the brewer.
The dollar stores sell no single-serve beer, from which c-stores generate nearly one-half of their beer sales, and which also provides the highest margin. “The sweet spot for convenience is the ‘for me, for now’ occasion,” Vonder Haar said. “There’s only a small piece that dollar stores are going after. It is fill-in, not necessarily for immediate consumption.” The prices on multipacks are competitive, he added, although not the lowest in town.
In the short term, Vonder Haar says dollar stores pose a greater competitive threat to drug stores, whose beer sales also tend to be fill-in, impulse-type occasions: “In the longer term, if they go after better merchandising … and go after smaller single-serve pack sizes, because of their consumer profile, I think the biggest threat is in a convenience store.”
Vonder Haar recommends c-stores focus on their strengths: variety, price competitiveness, and promotions from beer wholesalers, such as tickets off a local baseball game or a sweepstakes. “That’s an area that the dollar category is just not used to participating in,” he said. (Samantha Oller, CSP Daily News: www.cspnet.com)