Hard Seltzer News Podcast was joined by Sara Hillstrom, Senior Director of Category Development at Anheuser-Busch.
HSN: As the hard seltzer category expands exponentially, with a variety of brands, flavors, and ABVs, there are strains on shelf space and cold vault space, particularly at convenience stores. Do you see c-stores expanding alcoholic beverage real estate? And if not, what categories do you think will lose out?
Hillstrom: It’s such a great question. When it comes to store execution, retailers are really the experts. They know their shoppers and their business better than anyone else. But, one thing I’m seeing — there are definitely strains on the cold vault in c-stores. There’s just not a lot of space, in general. Beer is typically getting four or maybe five doors, and I am seeing a ton of out-of-stocks, especially on the weekends, which is just so frustrating to shoppers. Now, whether or not c-stores are going to actually increase cold space for alcohol — I certainly hope so. And I think there’s a couple of reasons why it would make a ton of sense. First, beer is the largest category in the cold vault, but, by a lot. So, if I’m looking at the latest 52 week data from IRI, beer is a 22 billion dollar business in c-stores, and the next categories are half as big. Energy drinks are 10 billion and sodas are nine billion. And, then, on top of that, beer growth is outperforming non-alcoholic segments, all of them, except for energy drinks…It’s this huge category, and it’s growing a bunch, so when c-store operators are looking for space for seltzers, I think it’s worth at least considering increasing space for beer and alcohol. But, honestly, if you’d asked me about this before COVID, I would have said it was so unlikely because the non-alcoholic side — so, the side that has water and soda and juice — and the alcohol sides of the cold vault are run by totally different departments, which makes it so hard to have that holistic conversation about the cold space. So, I think things have changed in COVID, and I think there’s increased focus on beer in c-stores. With all the growth, in beer, wine and spirits, as a result of what’s happening during COVID, and then the declines on non-alc –so non-alc is down, beers up 18%, wines up 10% spirits are up 33% — I think c-stores are really taking a look at this category and saying, “You know, does that make sense? Is that something I should do?” and I think, bottom line, is that it really could make sense to add a door for beer.
HSN: How about grocers? Will they give up part of their wine section for hard seltzer?
Hillstrom: Grocery stores are in a different position a little bit, because they have so much more space to work with…The footprint of a grocery store is so much bigger, and the cold space is bigger than what c-stores are working with. So, they have already had an easier time making room for seltzers to begin with, while still maintaining healthy days of supply for the rest of the category…Days of supply are how you maintain your products in-stock for shopper favorites, so what they’re gonna do with wine space sort of depends. First, not all grocery stores even have cold wine space. If they don’t, there’s not really anything to look at. But, [for] those that do, it really comes down to how productive that space is. If the current products are turning and yielding a really good return for the retailer, then, no, it wouldn’t make any sense to cut it and give it to seltzers. However, there are some grocers who have already started cutting cold wine space to give it to both seltzers and then flavored malt beverages and have had some pretty positive results. For those retailers, two things are true, which drove their decision and drove the positive outcome. First, the wine space wasn’t that productive…Then second, the shoppers were fine buying ambient wine. So, shoppers are willing to go and get room temperature wine — you don’t miss out on the sale. For those retailers, reducing cold wine space and giving it to fast growing segments like seltzers actually increased total dollar sales. So, in general, I think grocery [stores] will do what makes the most sense for them, but all in the context of their current cold space set up.
HSN: The pandemic has driven up e-commerce sales of alcoholic beverages. Can you comment on the e-commerce share of your hard seltzer brands, and whether you think this has long lasting effects on the way consumers buy hard seltzer?
Hillstrom: E-commerce is such a hot topic right now. I mean, with everyone home, online sales are shooting up in all sorts of categories. It’s obviously not just food and beverage, but [sic] home goods and beauty, and sort of everything is on fire… The situation with seltzers is really interesting. Seltzers’ share of the category has always been higher online than in store. So, before COVID, seltzers were 9% of the total beer sales online, and they were just 5% in the store. During COVID, online seltzer sales have gone from 9% of the category to 11% percent, and in-store they’ve gone from 5% to 7%. So, seltzers are gaining share both online and offline, but they’re still a bigger portion of the category online. Our brands follow a similar trend. They have a higher share of the category online than they do in store. I’ll give you a couple of examples. So, Bon Viv! is our seventh largest brand on Drizly, out of the entire portfolio — including beer — and offline it’s number 26…Bud Light Seltzer, just the variety pack — so, one single SKU — is the ninth highest selling pack on Drizly, out of total beer. It’s not even in our top 50 in store. So, it just shows you the momentum seltzers have online…For some of the pure play online retailers, seltzers are already 25% of the beer category, and part of this is driven by the broader assortment shoppers can find in those online retailers. When they go into stores, you’re typically going to find just the top SKUs from any brand — like, one or two variety packs and maybe one or two of the single flavor packs. But, with some of these pure play online retailers, they’re taking the whole portfolio for a brand — so, all of the flavors of the variety packs, and then a lot of the single flavors as well. So far, I’m not seeing anything that suggests these online trends are slowing down — not for seltzers and not for beer. And, according to Numerator, there’s actually been a 200% increase in total household penetration — or the number of households buying beer — online during COVID. So, it’s going to continue to grow as more people discover this channel, specifically for seltzers. Shoppers are seeking flavor variety which they’re getting. So. as long as they can reliably find the products that they like, I suspect their online purchases are going to continue.
HSN: As a woman executive at a company with some of the world’s most recognized beer brands, what advice can you give to other women looking to advance in industries with a long history of being run by men?
Hillstrom: Well, for any of your listeners that are thinking about a career in beer or alcohol, I’d say do it. Join us. Because it is such a fun industry and it’s full of smart and talented people. And, at Anheuser-Busch in particular, I have some of the greatest colleagues that I really love working with. I also get to work on some of the biggest, most well-known brands — which is really cool. And, I like it when I tell people what I do, and they say things like, “Oh my god, I love those Clydesdale commercials!” It’s so fun to work on things that people recognize. And, it doesn’t hurt to come with products that they also want. I’ve totally filled my friends’ summer with Bud Light Seltzer. But, you asked about women, and I’d say for your female listeners, my biggest advice is to work at companies that care about diversity and believe it has a positive impact on business results. We at Anheuser-Busch place a lot of importance on diversity. First, because we want the best of the best working here, which you can’t do if you’re ignoring half of the talent out there. But, second, it’s so important that our workforce reflects the diversity of our consumer base. According to Kantar, women make up 40% of all the alcohol consumed. So, it’s a demographic that really matters in my industry. And, it’s important that we have women in the room when we’re talking about marketing or strategy or sales, so we make the right decisions. I can actually give you a really simple example. In category management, which is the function I work in, we spend all this time talking about product placement at the shelf — so, where do you put something — and we consider anything that’s at eye level really primo real estate. But, think about this: So, the average woman is six inches shorter than the average man. And, I’m in the Hillstrom: camp. I’m actually only 5’4.” So I am not a very tall person.
HSN: Me too!
Hillstrom: Oh, so, perfect — you’ll totally understand this. So, I’ve been in these discussions where people are like, “We need to put the product here!” or, “It needs to go there!” and I’ve had to raise my hand and kind of say, “Hey, you know what, if we are talking about the female shopper, that’s not really what eye level looks like. We have to drop it down a shelf.” It’s so simple. It’s such a simple insight, but it really does matter, and that perspective has to be in every single conversation…I have thousands of examples just like that, which illustrate how important diversity is — not just gender, but race and age, experience and perspective — to make sure that our consumer base is reflected in every single one of our decisions. So, if there are any women listening who want to come join the beer industry, definitely do it. Come join us. Bring your full self and your unique perspective to the table, and pick a company that’s super excited to have you.
HSN: You sound really happy with where you’re at, but what’s on the horizon for you? Where do you see yourself in 5 years as someone in this industry?
Hillstrom: Thankfully, I am very happy. I do love what I do. As the head of category development, I get to shape the future of alcohol retail and make a pretty lasting impact on the category. But, I hope, for the future, I’m still looking at something that’s forward looking…It could be innovation; it could be strategy; I could work on one of our more unique segments like canned wine or canned cocktails. But, honestly, as fast as those categories evolve, five years from now, I could actually be working on a segment that doesn’t even exist today.
HSN: Our audience includes a lot of craft beer brewing companies. A lot of our audience isn’t necessarily coming from big beer backgrounds. So, hard seltzer for them — they’re very curious about it, and it creates kind of a moral dilemma for them as craft beer brewers, and seeing how popular these big brands are, like White Claw and Truly. Do you get the sense that they’re a little bit scared, maybe of this hard seltzer category? Or do you think more and more smaller brewers will they justify getting into this category?
Hillstrom: I think you’re right, craft brewers are definitely curious. And, I actually think they are excited about it, for a couple of reasons. First, [sic] IRI has reported that the seltzer growth is 50% to 60% incremental to beer — which is great. Seltzers have done such a good job of bringing new drinkers into the category, and they’re also expanding what people drink. [This] means as they add seltzer into their drink rotation, they’re still drinking their other favorites. The second reason craft brewers are probably excited is they’re already getting in the game. There’s 300 craft seltzer SKUs in the market today. Craft represents a hundred million in sales of the seltzer segment. And, so, since craft brewers are constantly innovating — I mean, they invent new styles every year — there’s so many new products that they bring into the category. I’m not at all surprised to see them take advantage of such a massive trend and put their own spin on seltzers.
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