A Supplier Life Raft Is Available and Few Are Getting On Board

Here we are today, nearly August 1, 2017.  There are 22 weeks left in the year.  The biggest purchase season is coming. Labor Day, Halloween, Thanksgiving, Christmas, Chanukah and New Year’s Eve are around the corner.  Roughly 43% of the purchasing will come between October 31 and NYE.  That is a lot of suppliers bets and hopes pinned directly on the last 60 days of the year.

I am a data guy. I always have been a data guy, and here are some cold numbers to drink in, get it? drink in. The opportunity that will always present itself in the blessed OND time frame is GROCERY.  

Grocery stores, specifically the Big 5, generate much of the sales and profits leading up to New Year’s Eve. The average cart is only $19.43 on alcohol while the average cart for non alcohol items is $114.82. What does that mean to us? It means that the consumer goes into the food store to buy food and a liquor store to buy liquor. That imbalance is the opportunity.

What if we suppliers focused more into selling that channel? A state like Arizona is 93% grocery and a few Bevmo’s and Total Wines to pick up the slack. The grocery channel tends to focus on high margin selling like meat and produce. The ironic thing is that they have the largest amount of inventory dollars tied into liquor.  

More data. Within a 66 linear foot aisle, double sided, a grocer can have north of $250K in inventory costs at an average gross margin of 18% blended. What does all that math mean? It means, that if a supplier simply focused on selling into grocery and selling OUT OF grocery with tastings, incentives and promotions, the grocery aisle would be fertile selling ground.

Grocers carry booze because it is a cart additive for the customer, not because it is their area of expertise. The focus is not there because the gross margin is not there. Absence of gross margin you need to promote SKU velocity. It is just that simple. Consumers buy groceries for a week yet purchase booze for the night. Generally the night of the grocery trip.

Grocery stores, big and small alike, all behave the same way. They carry our goods yet have no idea how to sell them. The life raft will be available to the supplier that caters to the grocery channel as much as they cater to the off premise trade.

Six pack beer carriers, make your own six pack holders, 6 pack wine discounts are all a step in the right direction. If Total can re-train the consumer to accept private label wines surely grocers can re-train the consumer to purchase more than one night’s worth of libations.

The life raft, in the critical fourth quarter, will in part, lie within the grocery channel. Off premise retail struggles and consolidation, will place more emphasis on the grocery channel. Have you been to a Whole Foods wine department lately? It is bigger, cleaner, more stocked, and signed better than most off premise stores nationally. Yet the cart…still under $20.00.

The life raft is there, it will be up to a supplier to jump in or swim with the sharks.