Alcohol for Everyone? More Stores Sell Beer, Wine

Retailers seek to meet demand from customers who skip the bar, drink at home.

ByALICE GOMSTYN <br/> ABC News Business Unit
October 28, 2009, 4:00 PM

Oct. 29, 2009 &#151; -- What makes a grocery store stand out from its competitors? Try a fresh, cold beer on tap.

Last week, a Piggly Wiggly store in Myrtle Beach, S.C. introduced taps dispensing craft beers into growlers -- half-gallon, glass containers also sold at the store -- for $9.99 to $12.99. As with Piggly Wiggly's more traditional alcohol offerings -- wine and canned and bottled beer -- customers aren't allowed to drink their purchases at the store. But what they lose in instant gratification, beer lovers might gain in savings.

"It's a lot cheaper to buy it from us than to pay $4 or $5 for a beer at a bar," said store manager Timmy Parrott.

Parrott's thinking seems to be increasingly popular among retailers large and small as more stores look to off-premises alcohol sales -- sales of alcohol outside of eateries and bars -- to grow their business and meet customer demand.

Earlier this year, the pharmacy chain Walgreens announced it was returning beer and wine to its store shelves after abandoning the products more than a decade earlier. Discount chain Family Dollar is testing beer sales at 10 of its Florida stores this year.

There was "a groundswell of interest saying, 'Hey, now that you've got these great coolers here, it'd be great if you stocked some beer too,' " said Family Dollar spokesman Josh Braverman.

Between Sept. 2008 and last month, the number of U.S. stores engaged in off-premises beer sales jumped by nearly 2,600 while wine sellers increased by more than 3,000, according to market research giant Nielsen. The increase occurred despite the fact that the total number of U.S. grocery stores, convenience stores, drug stores and others declined by more than 3,000.

"While there's lots of disarray going out there in general because of the economy, there are more stores that are deciding they want to get into the beverage alcohol business," said Danny Brager, vice president and group client director for the beverage alcohol team at Nielsen.

Come for the Wine, Stay for the Cheese

The trend is largely driven by the recession, Brager said, as more cost-conscious consumers choose to skip the bar scene to spend a night at home, drink in hand, Brager said.

"A big night in is replacing a big night out these days more and more, so retailers are recognizing that consumers are looking to stores to buy products more so than going out and enjoying an alcoholic beverage while they're out," he said.

Craig Wolf, the president and CEO of Wine & Spirits Wholesalers of America, said his members are seeing lower demand from the struggling restaurant industry, which has been hit hard as consumers cut down on their discretionary spending. But wine wholesalers, too, he said, have noticed an increase in demand from off-premises stores.

"They have started to get inquiries by historically non-alcohol retailers who are starting to question whether they ought to get into the business," Wolf said.

Brager said that including alcohol in their inventories helps stores in three ways. For one thing, alcohol products can encourage foot traffic into the store. They also have higher profit margins than other goods.

But perhaps the most surprising benefit of alcohol products is that they tend to boost sales of other groceries: consumers often pair their alcohol purchases with specific foods -- like meat and cheese to accompany a bottle of wine, for instance.

Such benefits, experts say, can make up for the hassles associated with selling alcohol, including obtaining liquor licenses and carding customers.

Walgreens and Family Dollar both said their alcohol decisions were driven more by customer demand than by any specific desire to compensate for recession-battered sales. Family Dollar's Braverman noted that the discount chain's earnings were up in the last fiscal year, while Walgreens said that the pharmacy chain began mulling the alcohol idea in early 2008, before the worst of the recession had hit.

Recession-Resilient Drinks

Walgreens had sold alcohol since the end of Prohibition in the 1930s and eventually grew to become the largest alcohol seller in the U.S., Walgreens spokesman Robert Elfinger said. But by the 1990s, the chain decided to stop selling beer and wine at most of its stores and focus on other products, such as cosmetics.

Technology that will make selling alcohol less labor-intensive -- for instance, cash registers that remind cashiers to card consumers -- along with changes in customer preferences are what's bringing Walgreens back into the fold.

"We want to offer more of a one-stop shopping customer experience," Elfinger said. "We think moderate beer and wine consumption has really become more of the American mainstream and we believe there's a lot of customer demand for it."

Whatever their reasoning, their timing is good, Brager said.

Alcohol "isn't recession-proof, but it is somewhat recession-resilient," he said. "When times are good, people drink. When times are bad, people also drink."

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