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Beverage Alcohol Sales At Giant Eagle Projected To Rise 15 Percent In 2011

June 3, 2011

Sales of beverage alcohol at Giant Eagle Supermarkets will hit $283 million for calendar 2011—a jump of 15%, according to the chain’s senior director of beer, wine and liquor, Olivier Kielwasser. Giant Eagle operates a total of 229 stores in four states: 121 in Ohio, 104 in Pennsylvania, 2 in West Virginia and 2 in Maryland. In Ohio, Giant Eagle sells beer and wine in 120 locations and sells spirits in 43 stores. In Pennsylvania it sells beer only in 23 locations. In West Virginia, wine, spirits and beer are sold, while no beverage alcohol is sold in its two stores in Maryland. Shanken News Daily recently spoke to Kielwasser about Giant Eagle’s beverage alcohol business strategy.

SND: What’s your sense of consumer confidence in the heartland markets where you operate?

KIELWASSER: I think it’s gradually improving. A year ago people were really looking for values, but over the past six to 12 months, the average price point of purchases has risen. We sell a wine brand called Oak Creek (from The Wine Group) for $3.09 a 750-ml. bottle. It’s the cheapest wine on the shelf, and we sell about 15,000 bottles a week. But the unit movement is down, indicating that people are moving toward slightly higher price points. It’s still a huge base, but we see a bit of shifting. Our most popular price point for wine is still between $8 and $12. In spirits, we’re seeing nice increases in sales of flavors—especially in vodka and rum—along with high-end Tequilas and everything in single malts and single barrel Bourbons. We’ve been giving more space to spirits, and that’s enabled us to carry a wider assortment.

SND: What led you to make that adjustment?

KIELWASSER: Super-premium spirits bring a more sophisticated customer into the store. And they don’t just buy spirits. By providing more space to spirits and expanding our selection of higher-end wines, we’ve positioned Giant Eagle as a destination for that type of customer.

SND: How are beer trends?

KIELWASSER: The sub-premium, budget and economy segments are still challenged at our stores. Even premium brands like Budweiser, Miller and Coors are pretty much flat. We’ve seen a nice rise in imported beer sales, and double-digit increases in crafts and microbrews year after year. Beers from Belgium are doing very well.

SND: What’s the breakdown of your beverage alcohol sales by category?

KIELWASSER: Beer is 36%, wine is 33%, spirits are 27% and low-proof spirits is 4%. The low-proof spirits are broken out because of Ohio, which accounts for most of our beverage alcohol sales. In Ohio, liquor or high-proof spirits aren’t generally sold in supermarkets, but low-proof spirits are available in supermarkets with wine licenses, which means they’re pretty much everywhere we sell. Low-proof spirits are defined as spirits with 21% alcohol-by-volume or less. They include brands like Baileys, as well as RTDs and prepared cocktails like Skinnygirl Margarita and Jose Cuervo Cocktails.

SND: Do you own any licenses to sell high-proof spirits in Ohio?

KIELWASSER: We do. The state appoints retailers as their agents to sell high-proof spirits. Today in Ohio, there are approximately 455 liquor agencies, and we have 43 of them. These units are located inside the stores. High-proof spirits are in their own room inside the store.

SND: What’s your strategy for merchandising beverage alcohol throughout your stores?

KIELWASSER: We position it as early in the floor plan as possible, usually after the produce department. We try to ensure that wine is always adjacent to cheese and meat. About a year ago we started working on a total redesign of our beer, wine and liquor departments to create adjacencies and provide more consumer information. The goal is to give customers the impression that they’re in a wine, spirits and beer shop.

SND: Are any new products performing notably well?

KIELWASSER: Apothic Red, a California blend from E&J Gallo retailing at $11.99 a 750-ml., has become our number-one red. It’s a bit sweeter and appeals to our customer base. Sweeter wines in general—such as Moscatos like Barefoot Moscato and Sutter Home Moscato—are doing very well. We’re seeing more and more introductions of Moscatos. Skinnygirl Margarita is also doing extremely well. Jose Cuervo Margarita was always our leader in that segment, but Skinnygirl has outsold it, an incredible achievement.

SND: You’ve talked before about your belief in decentralization as a management principle. Why does that work at Giant Eagle?

KIELWASSER: It works because our stores operate in different demographic areas. We’re in rural markets, in affluent places and in some blue collar areas. The assortment and display activity—especially the display activity—must be tailored to the customer type. The distribution network is also very fragmented in Ohio, so we just let the stores decide on most displays. It just works better. We make sure that we have certain programs implemented in all the locations, but everything else is decided at store level.

Giant Eagle Inc – Beverage Alcohol Revenues
Calendar Year* Percent Change
2008 2009 2010 2011P 2008-2009 2009-2010 2010-2011
$200 $221 $246 $283 10.5% 11.3% 15.0%
*2011 is projected
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