Retailers Ask, "Wine Not?" | NACS Online – Magazine – Past Issues – 2009 – November 2009
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Retailers Ask, "Wine Not?"

By Terri allan

With slowing convenience store traffic and consumers ever mindful of discretionary spending, retailers everywhere are on the lookout for higher sales and profit opportunities. Increasingly, operators are discovering the high basket ring of wine, an under-indexed category and one that matches up well with efforts to drive sales of other in-store categories.

"Interest has grown even more these days as operators look for more ways to improve their bottom line," remarked Tony Gaines, national director of trade development at E. & J. Gallo Winery, marketer of labels like Barefoot, Ecco Domani, Tisdale and Mirassou. "Wine continues to grow in popularity with convenience consumers. With all the wine department additions in the channel, if you are not in it, you are losing op¬portunity dollars."

Leading convenience store chains like 7-Eleven, Circle K, Speedway Su-perAmerica and Hess Corporation have recently expanded their efforts in the wine category, and in many cases have enlarged their wine departments. Dallas-based 7-Eleven’s average wine-selling store, for example, now carries between 40 and 50 wine SKUs. And, according to Gaines, some Circle K stores now feature wine caves and alcoves.

"C-stores are providing a better selection than ever before," said Marc Gallo, senior director, national accounts, at Trinchero Family Estates, marketer of Sutter Home wine. "We’re seeing selections that have moved past White Zin-fandel, Chardonnay, Merlot and Cabernet Sauvignon, and now feature Pinot Grigio, blended reds and whites, private labels and regional offerings." Convenience retailers, Gallo continued, "want to know how to grow their wine category business, where wine fits and what brands to carry."

According to NACS State of the Industry data, average gross margin dollars for wine per store increased last year to $2,604 from $2,385 in 2007. Average store sales of wine were $9,252 in 2008, a 4 percent increase from $8,880 in the year prior. The gross margin on wine rose to 28.15 percent last year, outperforming categories like beer and cigarettes.

Sales volume continues to grow, Gaines reported, albeit at a slightly slower rate than the double-digit increases the category enjoyed in recent years. "At E. & J. Gallo, the convenience channel remains one of our top areas of growth," he said.

Trading Down
While the still small wine segment outperforms other in-store categories in convenience stores, as with other products these days, consumers are trading down in price. "We’ve seen a gradual trading down in price points as shoppers look for value," noted Trinchero’s Gallo. "If they were buying a $10 bottle of wine, they’re exploring options at $6 to $8."

As a result, Sutter Home, generally priced at $3.99 to $6.99 per 750 ml bottle, is performing well, Gallo added, as "consumers have rediscovered the value the brand delivers." Similarly, Gaines reported that Gallo value labels like Tis-dale and Livingston Cellars have benefited from the trading down trend.

The Trinchero executive described typical convenience-store wine shop-pers as "more male than female, 25 to 49 years old, and working middle-class, but with a reasonable percentage mak-ing more than $50,000 annually." He also noted that while most of the wine shoppers are white, they also include a "growing number of Hispanic, Spanish-only speaking patrons."

"The great thing for a c-store operator is that the wine consumer can be anyone," remarked Gaines. "It can be anyone who wants to pick up a bottle while heading to a friend’s home for dinner; a person on his way home after a long day and does not want the hassle of grocery lines; or a simple fill-in trip between club or stock-up shopping. The c-store wine shopper is anyone who drinks wine that walks in your door."

Out Of the Box
With wine drinkers in general increasingly consuming more red wine — largely due to its reported health benefits — convenience retailers are be-ginning to feature more wine out of the cold box. Some 7-Eleven stores, for example, have expanded their warm wine sections from three feet to six feet.

"Warm wine is the fastest growing department trend for c-stores," reported Gaines. "Red wine makes up 40 percent of c-store sales, while in grocery, it is over 50 percent. Convenience stores are recognizing this opportunity and adding warm wine wherever they can find room."

In addition to permanent displays for warm wine, Trinchero’s Gallo recom-mends moveable shelf displays. "I like the idea of a warm moveable display adjacent to the cold box wine offerings or on the end cap across the aisle from the cold box," he suggested. "Since most cold purchased wine is consumed within an hour of purchase, it would make sense to have the red wine more visible. Wine is one of the best impulse items in any store format. The more visible and accessible it is, the better the sales opportunity."

Gallo and Gaines also pointed to emerging packaging as providing growth opportunity for convenience and petroleum retailers. Singles of 187 ml bottles are ideal packages for convenience stores, they said. "There is a much better assortment available than ever before," explained Gallo. "From Malbec to Moscato, you can find it in a single-serve option." He added that some convenience store operators are looking into bringing in Tetra packaging and premium bag-in-the-box items, "which would seem a natural for a convenience format."

Wine Pairings
Beyond warm displays and expanded packaging offerings, marketers believe that cross-merchandising wine with other in-store items can drive sales. Gaines reported that E. & J. Gallo has been working with MillerCoors on a "total alcohol beverage solution, where we create a beer and wine department based on flavor profile. The message is simple," he explained. "If you like this beer, you will enjoy this wine." Results have been impressive, Gaines reported, with big increases in both wine and beer sales.

Fresh foods are also a "great category to tie into wine," Gaines noted, pointing to a couponing promotion the winery offered last summer on fresh baked pizza, tied to Bella Sera wine.

"I do believe tying wine more closely to foods sections, fresh or oth¬erwise, in a convenience store makes all the sense in the world," agreed Marc Gallo. "That’s the way shoppers see wine in other channel formats, why not convenience?"

The Trinchero executive also advised retailers to "be competitive on key national brands. Consumers love con-venience but they know when they’re being taken advantage of." He recom-mended that convenience store opera-tors "showcase wine in a more active, colorful and aggressive way — more beer-like."

With a little bit of attention and sup-port, the tiny wine category can ex-plode. "There are fewer and fewer categories where you can really drive growth," Gallo said, "and wine in convenience stores is one of them. Done right, it’s a big ring item that can really drive the bottom line."

Terri Allan is a New Jersey-based freelance writer, specializing in the beverage industry. She can be reached at terri4beer@aol.com.