-By Nick Lake

Summer's coming. Beer season. And as grocery retailers develop strategies to help maximize their sales during the 2009 summer selling season, it's clear there are a number of unanswered questions about the economy that could impact your business: Have job losses begun to stabilize? Which way will the stock market go today? Have we hit rock bottom yet?

If we had a crystal ball, it would be easy to determine the answers to those and other questions about our economy. But it's impossible to predict the future. If you're a grocery retailer hoping to entice consumers to increase the size of the basket at the checkout this summer, statistics tell an interesting beer story with two very different main characters — the cautious consumer and the affordable-luxury-seeking consumer.

The Cautious Consumer

For anyone in retail, consumer confidence remains a critical issue. Consumers today are cautious, and with good reason. More than 3.6 million jobs have been lost since the recession started, and more than half a million people have become unemployed just since January. The stock market has not only declined significantly since the crash in September, it also has exhibited extreme volatility in the months that have followed. And the housing market looks like it has a long way to go before it regains full health.

Nielsen's research shows that with consumer confidence at its lowest level in years, consumers' wallets seem to be as frozen shut as the credit markets. They're just not letting go of their money like they used to.

The impact of the cautious consumer can be seen across the beverage alcohol sector.
 
Opting Out of Going Out

We know that consumers are often choosing to stay home instead of going out for entertainment. The number of families cooking dinner at home has also increased — up to 37 percent from 31 percent — which has obvious implications for the restaurant business. Eighty-three percent of fine-dining establishments showed lower sales compared to a year ago. Even more affordable restaurants are struggling, with 66 percent reporting lower sales in the last year.
 
At the grocery store, consumers from across income spectrums — from affluent families to minimum-wage workers — are looking for ways to maximize value. Consumers tell Nielsen they are switching to less expensive grocery brands and some show a preference for larger-volume economy-size packages with a lower price per serving.
 
Beer — Showing Strength in the Recession

Before the crash, wine and spirits were growing faster than beer. Today, it's just the opposite. In 2006, beer was growing at 3 percent. Today, in the worst economy in almost a century, beer shows an increase in growth to 3.2 percent. Small growth, yes — but growth nonetheless, especially when compared to wine and spirits. In 2006, wine grew 6.4 percent; in 2008, growth had slowed dramatically to 1.8 percent. Spirits also showed a decrease in growth in that time frame — growth went from 3.3 percent in 2006 to 2.2 percent in 2008.

To attract the cautious consumer, value matters. The value beer segment, which traditionally exhibits flat sales, is now seeing growth for the first time in nearly five years. The same is true for wine. For retailers that sell wine, today's sweet spot is in the $5-to-$9 bottle range, where before, back when people were spending more, growth was found in the $12-to-$15 bottle range.

The Affordable-Luxury-Seeking Consumer

Despite the economy, there still remain consumers who enjoy affordable luxuries — and beer provides them with many different ways to indulge.

What are these consumers buying?  Not premium and import beers, which have taken the biggest hit from the economy. Consumers seeking affordable luxury are spending money on above-premium and microbrew beers. Above-premium grew more than 12 percent since a year ago; craft/microbrew beers saw more than 20 percent growth in the last year (though the growth has slowed in recent weeks).

Transforming Uncertainty Into Sales

Understanding consumers' need for value and desire for affordable luxuries can help grocery retailers maximize the opportunities of the 2009 summer selling season. Tactics and strategies to consider include:

Recognize beer's strengths: Though laws prohibit the sale of beer in some states, it's one of the most enduringly popular items in the grocery store, ranking seventh in terms of sales — ahead of prepared frozen foods (eighth), total paper products (ninth) and coffee (30th).
Promotion, promotion, promotion! It works!  Last summer, as the economy weakened, consumers bought more beer on promotion than at any other time in the past three years. As we look to the 2009 summer selling season, we believe consumers will remain price- and value-conscious. The sputtering economy is forcing grocery retailers to face sluggish sales and increased competition for the beer consumer. To remain competitive, retailers need new ways to increase sales without significantly impacting profit. Retailers should plan to use a combination of tactics to promote more brands across all segments of the beer industry, including premium, super-premium, import and craft, providing consumers with choices that reflect the wide range of consumer flavor preferences.
Feature and display for the category works across all segments: A display brings an average category lift of 150, meaning retailers will sell 1.5 times more beer than in a week without promotion.
The premium segment should be the cornerstone of this strategy, for despite the slowdown in premium beer sales, the lift for this segment (160) is higher than the category average. Premium beers represent the largest segment (nearly 45 percent) and include the industry's biggest brands (Bud Light, Coors Light and Miller Lite). Displays for this category also provide great traffic-building opportunities that position the store as a beer destination.
Retailers should also look to add displays of imports and crafts because they respond higher to "display only" than any other segment. Craft and import displays can help the retailer sell nearly 55 percent more beer (compared to a week when those segments are not on display). While the biggest brands in this segment certainly represent the greatest opportunity for case gain, smaller, upscale brands also represent an opportunity for higher margins with consumers who are not price-sensitive. This provides a great way for retailers to enhance their image and demonstrate the variety and value they bring to the consumer.
Quench the heat with a selection of chilled beers: Cold beer and convenience are key beer shopper needs, and retailers should look for innovative ways to meet them.  
Bigger is better: According to consumer feedback from a recent Nielsen survey, nearly 50 percent of consumers indicated the desire for larger packs with lower per-serving costs. To answer this need, retailers should consider stocking larger pack sizes of beer. Our data shows that 18-, 20- and 24-packs show lifts 15 percent higher than the category average.

Resisting the Recession by Focusing on Value and Variety

We're coming out of a tough winter, and we're not exactly sure what the summer holds. We do know that, in the last year, consumers have shown a return to beer — and smart strategies for selling this popular product can make a difference at the register. Focusing on hops can help you get the happy ending we all seek this summer.

Nick Lake is VP, group client director, for The Nielsen Company, the parent company of Progressive Grocer.