CSNC EXCLUSIVE: Beverage alcohol Q&A with Gabriel Moreau, VP, NielsenIQ
NielsenIQ has long collected valuable category data for the convenience channel. For instance, its data shows beer is the number one and top growing category in the country in terms of overall dollar value, despite the data only reflecting sales in the Province of Quebec. Now, those numbers are poised for further growth, with advent of beverage sales at convenience stores in Ontario.
CSNC caught up with Gabriel Moreau, vice-president, NielsenIQ, to talk about the category and its potential.
MW: I know it’s early days and we only have anecdotal information about beverage alcohol sales in convenience stores; The retail sales data will take a few months. In the meantime, however, what do you think retailers can learn from your current data on beverage alcohol consumption habits in Ontario and across Canada?
GM: Well, I'm in Quebec, where the convenience retail environment for beverage alcohol is already well-established. Retailers could look to that for inspiration. Overall, we’re seeing interesting trends in both beverage alcohol and the convenience space.
MW: Such as?
GM: One trend that that we're seeing across the country is the growth of low-alcohol and no-alcohol products. They've been killing it this last year. The growth rates are in the double digits and it's impressive to see those products and the assortment of those products grow.
These products are attracting a broad range of consumers, not just those who don’t typically drink alcohol, so that something to think about from a convenience store perspective: It's a good idea to have a few of these items in store to drive incremental purchase occasions for the retailers.
MW: That's great insight. What else are you noticing in terms of consumer habits?
GM: We’re also seeing a shift towards value-driven products, particularly in beer. With rising prices and tighter wallets, consumers are gravitating toward lower-priced options. Value beers are thriving. Larger pack sizes are also becoming more popular. For example, I’ve seen Costco selling 60-packs of beer, which speaks to the increasing demand for value. So that's also probably something to think about when we look at deeper trends affecting all consumers: We're looking for value for our money.
MW: Interesting. So, retailers need to be aware of who they’re competing with. Not all may be able to sell larger pack sizes yet, right?
GM: Exactly. In Quebec, the most popular pack size in convenience stores is the 12-pack, which takes up more shelf space than smaller sizes. It's important for retailers to balance their assortment, considering limited fridge and shelf space. Offering single cans, 6-packs, and 12-packs ensures price point variety and meets customer needs.
BEER SALES
2022: $489,046,997
2021: $474,007,836 *the year beer surpassed cigarettes at the top category in convenience nationally
2020: $470,340,271
2019: $377,548,391
MW: And what products might need to make room for beverage alcohol? With limited cooler and shelf space, something will have to give, right?
GM: That’s the challenge. Retailers need to analyze which products bring incremental value rather than just looking at overall sales. While it may seem logical to remove slow-selling items, sometimes those niche products contribute to incremental purchases. It’s a delicate balancing act, and every store will need to make decisions based on their specific customer base.
MW: Absolutely. It sounds like these decisions will vary from store to store, depending on location and customer demographics.
GM: Exactly. The optimal assortment will depend on factors like whether the store is near a grocery retailer or a beer store.
Some stores may choose to specialize, such as those in Quebec that focus exclusively on craft beers. Knowing your customer base is crucial to curating the right product mix.
MW: That's an important point. Independent retailers can carve out a niche by becoming destinations for specific products like craft beer. Differentiation is key, right?
GM: Absolutely. Especially when competing with larger retailers. For example, while about 40% of convenience shoppers are willing to pay a premium for beverage alcohol, there’s still a need to balance price and differentiation. Offering convenience is valuable, but with tighter wallets, there's only so much premium pricing people are willing to accept.
MW: What about the ready-to-drink (RTD) category? It’s often touted as a growth area. Are you seeing that reflected in your data?
GM: It's been growing exponentially in the last four or five years. I just had to look at the data earlier this week. It's still very popular, but it slowed down some versus the pace that we've seen that category grow in the last few years.
MW: Where else are you seeing growth?
GM: We’re seeing higher growth rates from value products. It’s also interesting to note the differences between Ontario and Quebec—Ontario can sell liquor-based RTDs, while Quebec only allows malt-based versions due to regulations. The liquor-based products might offer a higher quality and come at a higher price point.
MW: Do you think people will visit convenience stores for wine? Some retailers are concerned about how to navigate the wide variety of wines available. Any advice there?
GM: Our data shows that about 75% of current convenience shoppers are willing to buy beverage alcohol from convenience stores when available. Even more interestingly, 50% of non-convenience shoppers said they'd make a trip specifically for these products. Wine could definitely be a good opportunity, though our data on wine specifically is more limited. There's still a shopper that's interesting in buying wine and maybe even more premium offerings as well. That might translate very well to a small assortment of wine in a convenience store where people can go, browse a bit, and get a selection of a quality product I see that as a great opportunity for convenience retailers.
MW: What can convenience stores do to keep those new buyers coming back after they make that first trip for beverage alcohol?
GM: In Quebec, many convenience stores have invested in large walk-in coolers to offer a wide range of refrigerated products for immediate consumption occasions. It's a significant investment, but could be a differentiator in attracting repeat customers.
Stores will need to balance the challenges of finding space and determining what to stock, but there’s a huge opportunity to differentiate through product assortment.
MW: What do you think about the timing? Given that overall alcohol consumption is on the decline, do you still see room for growth in this category within the convenience channel?
GM: Generally speaking, people are not as big drinkers as maybe their parents were or still are. Yeah, absolutely. There's a need for some people to be cautious about what they're drinking and make sure that they have like a healthy eating and drinking habit. So, without saying that they don't drink at all, they say “maybe tonight I'm going to go and hang out with some friends and then I'm going to have my beer that I typically drink, a nice craft dark beer that I enjoy. But also, from time to time I'm going to indulge in a low-alcohol product or mocktail of some sort.’
Overall, with Ontario opening the doors to bev-alc, it's going to reinvigorate convenience by a lot. I think it's going to bring so many new occasions and so many new buyers. It's a great opportunity for both the category and the retail channel as well.
MW: That makes sense. Is there anything else retailers should keep in mind?
GM: One trend worth noting is the growing preference for cans over bottles. Cans now make up around 80% of the category, which aligns well with the convenience store environment. Retailers should also consider the implications of bottle returns, as some larger grocery stores may be required to accept them. While this might not be an immediate issue for convenience stores, it's something to keep an eye on as policies evolve.
- FAST FACTS
- 76% of current c-store shoppers said they would buy beverage alcohol products once available
- Roughly half of non c-store shoppers said they would be interested in shopping beverage alcohol products within convenience once available, which is a tremendous opportunity to convert new shoppers to the channel
- Low alc is growing rapidly in both off and on-prem. Within the off-premise channel, Nielsen is seeing 24% growth in value in the last year, and this on top of many consecutive years of rapid growth.
- ¾ of low alc buyers also purchase beverage alcohol products, often times during the same occasion, so it’s important to make space for these products as well
- Assortment optimization will be crucial, especially in fridges where the space is more limited. Margins and sales rate are important, but store owners will have to be careful not to remove products that bring shoppers to their stores. Consider who your competition is (is there a beer store nearby?) and what demographics is coming to your store (age? income level?)* This will help drive decisions as to what should be on-shelf.
