NEW YORK -- Supermarkets can increase their beer sales by concentrating on premium brands and expanding their refrigerated selling space, according to the head of the nation's second-largest brewer.
"We suggest that retailers not stock too many cheap beers or too many of the microbrews," Jack MacDonough, chairman of Miller Brewing Co., Milwaukee, told SN during a recent interview.
"The limits of shelf space are a challenge both for ourselves and for the retailers. In our category management program we urge retailers to take a look at the profitability of the department," he said.
"It is better if they devote more cold shelf space to strong national selling brands with fantastic turns, as opposed to the microbrews. For while the microbrews may have higher rings, they usually have much lower turns," MacDonough explained.
While MacDonough cited the fact that beer sells much better cold than warm, he was quick to note the challenges cold sales pose because of the finite amount of refrigerated space available in the stores.
"Beer sells much better when it is refrigerated. Even if the consumer is going to take the case of beer and throw it in the trunk and drive around for four hours, they still want to buy it cold," he added.
MacDonough said supermarkets, which account for 20% of all beer sales, are vital to the beer category. "In supermarkets that sell beer, it is consistently one of the largest selling categories and a real draw for the store," he said. "Beer is one of the fastest turning items in the store. And because it is direct-store delivered, supermarkets like it because it requires minimal care on their part."
He noted, "The supermarket shopper that is looking for beer is a better shopper and on average spends more than other consumers."
MacDonough tipped his hat to the microbrews, saying the awareness they have created for the category has helped make beer become even more important as a traffic builder.
"What the microbrews have served to do is to make people appreciate beer as a fine beverage that can be consumed with a great meal. If you think about it, there really is no soft drink or other beverage that has that appeal," he said, noting an extensive supermarket beer section will be a traffic draw, much like a fine wine department.
"People won't choose a particular fine restaurant because it carries a particular brand of soft drink," he said.
But while microbrews have developed a following, MacDonough said, he is not concerned about microbrews taking over the market. They have a market share of only 2% and, in general, the mainstream premium beers have been growing at a faster clip.
"The profile of the beer brands is not unlike that of the cereal business. It is a rare product that will have more than a 4% share. There are a few that will have a greater market share. The shelf space is trending toward the premium brands," he said.
In spite of the attention microbrews and regional beers have given the category, beer industry gallonage has been exhibiting slight declines in recent years, but MacDonough is not overly concerned.
"Our revenues were up 7.5% over the last year, primarily because we're concentrating on premium products. If the consumer is willing to trade up and spend more to buy a better quality beer, than both we and our retail customers can make more money," he said.
In 1995, he said, Miller shipped 45 million barrels of beer, a slight decrease from 1994, but in line with a U.S. market share that shrank an estimated 0.5%. However, Miller's premium-priced beers grew 1.3% and now account for 81.8% of the company's volume.
MacDonough said he expects that percentage to increase in 1996 as the company's newest premium product, Miller Genuine Draft, becomes established in the marketplace this summer.