Almost a year after new laws allowed Colorado breweries to sell full-strength beer in all grocery and convenience stores with beer licenses for the first time, regional and national breweries are selling increased volume in chains at the expense of privately owned liquor stores.
The change has given Colorado breweries a new opportunity to re-engage drinkers in their home state in new—albeit traditional—retail channels. However, it’s also causing worries for the specialist outlets that once had a grip on selling any beer over 3.2% ABV.
From 2015-2018, familiar national names like New Belgium Brewing Company (-11.7%), Avery Brewing Company (-23.8%), Great Divide Brewing Company (-25.5%), and Oskar Blues Brewery (-29%) all suffered declines in liquor stores tracked by IRI, a market research firm that compiles scan data from grocery, convenience, and a variety of other stores. Until 2019, any beer over 3.2%—including most of what could be broadly defined as “craft beer”—had to be sold in liquor stores. But that changed at the start of this year, when thousands of new retail avenues became available in January. As a result, state beer sales jumped 20% in 2019’s first month compared to 2018.
Now, the pace of change is only increasing.
“You have to fish where there’s fish,” says Nick Tedeschi, brewer and director of sales for The Post Brewing Company, which runs a series of brewpubs in cities around Denver. “What we were doing in [liquor stores] now versus before is less because chain has taken some of that business.”
These shifts can be seen all over. When comparing the IRI-tracked volume gained in chain grocery, convenience, and other stores, and the losses from liquor stores, it's clear the new laws aren't always a panacea for breweries, however. In the 52-week period ending Sept. 8, breweries like Avery (-437 BBLs) and Ska Brewing (-376 BBLs) were slightly down in IRI-tracked sales, while Oskar Blues (+544 BBLs) and New Belgium (+150 BBLs) were slightly up. Great Divide lost a net of 3,400 BBLs in the timeframe.
Some of those changes were counterbalanced with gains across these companies' entire distribution footprints, which range from regional to national. But at a time when businesses are increasingly focusing on the value of home markets, the opportunity to compete in new ways in Colorado seems particularly important.
Howdy Beer, an American Lager, is the only packaged brand Tedeschi and his team send to retail, which now includes almost 230 grocery stores spread across chains like King Soopers, Safeway, City Market, and more. Earlier this year, the brand’s grocery sales hit a peak of 70% of its overall retail sales across all stores, and have since settled in at about two-thirds of what IRI tracks in chain and liquor outlets.
Tedeschi repeats a finding mentioned almost universally in 2019 as it relates to Colorado’s new laws: new sales strategies at times pit the education and hands-on customer service found in liquor stores against the convenience of grabbing a six-pack from a grocery store alongside toilet paper and ingredients for dinner.
“There are different people buying at different stores,” he says, but also admits that there’s a “huge portion of people” who have been underserved because of a psychological or logistical barrier to shopping at separate locations for groceries and full-strength alcohol.
A bigger issue for some entrepreneurs is that the people who have been buying beer for years from liquor stores are now changing their behavior.
This spring, a little over four months into an era of new laws and business opportunities, the Colorado Brewers Guild was telling members that supermarket chains were seeing full-strength craft beer making up 50% of total beer sales volume, up 10% from the prior year.
“If anybody in the state said their beer sales were up at a liquor store, they’re either fibbing or something is going on in their numbers,” says Bruce Dierking, founder of Hazel’s Beverage World in Boulder. He says it wasn’t uncommon in the past for liquor stores to have beer capture 60-70% of sales, “but now it’s on them to adjust and become something different.”
At Hazel’s, that’s meant increased reliance on imports like Modelo or hard seltzers like White Claw or Truly, which drive much of that category. Wine and spirits are up as the number of shoppers and overall sales are down.
“Time is at a premium for all of us, so why would someone make a separate trip to our liquor store when a beer they want is right in front of them at a grocery store?” Dierking says. “Those are the customers that will be hard to get back.”
In Fort Collins, breweries and bars have already been fighting for the same customer looking for draft beer, but 2019 adds yet another wrinkle—and more players—in this increasingly competitive game.
“The market at least doubled where people can buy beer, and our business has gone way down,” says Steve Musial, owner of Fort Collins’ 287 Craft Spirits. He estimates he’s lost about 20% of sales in 2019. “We’re working on some marketing strategies to try and figure things out, and some stores have tried to sell, but nobody wants to buy into this market right now.”
Musial has ramped up social media posts to promote beer-related events like free tastings and specialty drops of out-of-state beers like Toppling Goliath or Pliny the Elder by Russian River Brewing Company. Fittingly, 2019 started with a drive to increase “likes” on 287’s Facebook page, which offered a $100 gift card while accruing new potential shoppers on the platform. The results haven’t worked as well as he hoped, leading him to cut staff hours to save money.
There hasn’t been a specific challenge like this in his 16 years of running 287, Musial says. He estimates there were half as many stores in Fort Collins a decade ago, with around 20 in operation now. That started "cutting pieces of the pie smaller" for liquor stores, and this year has made everything even more difficult.
"Grocery stores don't have to make their money on beer,” he says, “so they can sell it at a little over cost or whatever they feel will help sell.”
Musial's experience has been echoed in other parts of the state, too. This spring, an owner of Steamboat Springs' Central Park Liquor used similar language to describe the "dramatic" change to Vail Daily, saying the "piece of the pie doesn't get any bigger" as grocery stores took business away.
“It’s all about convenience now,” co-owner Greg Nealy told the paper. “Every Kum & Go, every Loaf ’N Jug, every grocery store now has full-strength beer. We are still advertising the cheapest prices in town, by far, and if they do advertise a ridiculous price, we still match it … but it’s a tough road to hoe.”
Dierking fears this year’s changes are the start of what could turn into chain stores fighting to sell wine or spirits, not to mention whatever might happen in the future with Amazon’s slow encroachment into the marketplace.
“An awful lot of great stores may not be able to survive these changes,” he says. “That’s not something we should want a part of for Colorado.”
For others around the industry, however, what happens next may be a bit more nuanced, highlighting new opportunities and strategies for sales.
Words by Bryan Roth