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A Supplier Life Raft Is Available and Few Are Getting On Board

Expert Editorial

Here we are today, nearly August 1, 2017.  There are 22 weeks left in the year.  The biggest purchase season is coming. Labor Day, Halloween, Thanksgiving, Christmas, Chanukah and New Year’s Eve are around the corner.  Roughly 43% of the purchasing will come between October 31 and NYE.  That is a lot of suppliers bets and hopes pinned directly on the last 60 days of the year.

I am a data guy. I always have been a data guy, and here are some cold numbers to drink in, get it? drink in. The opportunity that will always present itself in the blessed OND time frame is GROCERY.  

Grocery stores, specifically the Big 5, generate much of the sales and profits leading up to New Year’s Eve. The average cart is only $19.43 on alcohol while the average cart for non alcohol items is $114.82. What does that mean to us? It means that the consumer goes into the food store to buy food and a liquor store to buy liquor. That imbalance is the opportunity.

What if we suppliers focused more into selling that channel? A state like Arizona is 93% grocery and a few Bevmo’s and Total Wines to pick up the slack. The grocery channel tends to focus on high margin selling like meat and produce. The ironic thing is that they have the largest amount of inventory dollars tied into liquor.  

More data. Within a 66 linear foot aisle, double sided, a grocer can have north of $250K in inventory costs at an average gross margin of 18% blended. What does all that math mean? It means, that if a supplier simply focused on selling into grocery and selling OUT OF grocery with tastings, incentives and promotions, the grocery aisle would be fertile selling ground.

Grocers carry booze because it is a cart additive for the customer, not because it is their area of expertise. The focus is not there because the gross margin is not there. Absence of gross margin you need to promote SKU velocity. It is just that simple. Consumers buy groceries for a week yet purchase booze for the night. Generally the night of the grocery trip.

Grocery stores, big and small alike, all behave the same way. They carry our goods yet have no idea how to sell them. The life raft will be available to the supplier that caters to the grocery channel as much as they cater to the off premise trade.

Six pack beer carriers, make your own six pack holders, 6 pack wine discounts are all a step in the right direction. If Total can re-train the consumer to accept private label wines surely grocers can re-train the consumer to purchase more than one night’s worth of libations.

The life raft, in the critical fourth quarter, will in part, lie within the grocery channel. Off premise retail struggles and consolidation, will place more emphasis on the grocery channel. Have you been to a Whole Foods wine department lately? It is bigger, cleaner, more stocked, and signed better than most off premise stores nationally. Yet the cart…still under $20.00.

The life raft is there, it will be up to a supplier to jump in or swim with the sharks.

Brian RosenExpert Editorial
by Brian RosenRosen Retail Method

Brian Rosen is Former CEO of America’s #1 Retailer, Sam’s Wines in Chicago, Former Partner at PricewaterhouseCoopers in Retail and sought after retailer consultant.

He can be reached at @roseretail or brian@briandrosen.com

 

1 Comment on "A Supplier Life Raft Is Available and Few Are Getting On Board"

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  1. Bob Henry says:

    Brian:

    Let’s add this to the discussion . . .

    Excerpts from MediaPost
    (December 8, 2016):

    “40% Of Alcohol Beverage Buyers Make Their Decisions In-Store”

    Link: http://www.mediapost.com/publications/article/290633/40-of-alcohol-beverage-buyers-make-their-decision.html?edition=98740

    Fully 40% of U.S. consumers who buy alcoholic beverages haven’t decided what they’re going to purchase when they walk into the store, according to a new study from IRI.

    Of the 60% who do have a planned beverage purchase, 21% end up changing their minds in store, and 50% of those who change their minds ultimately buy a different brand than they originally intended.

    . . .

    All of which points to “immense” opportunities for alcohol manufacturers to find new pockets of growth by engaging and influencing consumers while they’re in the store, point out IRI’s analysts.

    Beer, wine and spirits manufacturers are increasingly aware of the importance of working with retailers to win over consumers, according to Robert I. Tomei, president of consumer and shopper marketing for IRI. “When you consider how often most shoppers are going to the store, and that 21% of them change their minds during the shopping trip, you realize the impact that in-store signage, creative labeling and other marketing could have on your portfolio,” he stresses.

    [Bob’s aside: But all that overlooks the single most important contributor . . . the salesperson in the wine aisle “qualifying” and “upselling” and “closing” the customer.

    Because as the saying goes: “Wine is sold, not bought.”

    Meaning: fine wine is “hand sold.” It doesn’t sell on its own.]

    ~~ Bob

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