The Four Types of C-Store Customers

FILED NOVEMBER 6, 2009

Dear Client:

Researchers at the Palmerston Group (commissioned by ad agency Cole & Weber) went undercover as clerks in c-stores across the United States to identify and define their four key shoppers. Their research goal was to develop a consumer segmentation model for c-store consumers based on need-states and purchase-triggers. The study took place in August 2009 over a nine-day period. C-store sales in the US were just over $624 billion in 2008 (Source: NACS) and it's estimated that $300 million was spent on c-store advertising last year. Clearly, it's important that marketers understand the c-store channel.

The study found there are four key shoppers in the c-store space:

Mr Jones: A regular convenience store shopper, this person knows what they want and the store is just a means to an end.

The Neighbor: The c-store serves as a part of this person's daily routine; they know the clerk by first name and often have something to converse about.

The Last Minute: Rarely enters the c-store unless there is a direct need.

The Thrillseeker: In search of an experience; they walk into the store without a clear defined idea of what they're looking for, but they know they want something.

"Each consumer type corresponds to a distinct marketing challenge," said Mike Doherty, president of Cole & Weber United. "Our goal was to define this consumer and the various touchpoints in order to better reach them."

BOSTON BEER BLOWS THROUGH EARNINGS ESTIMATES, BUT "LESS OPTIMISTIC" ABOUT PRICING NEXT YEAR

Boston Beer has bounced back in the Q3 with a nice quarter with core depletions up 6%, putting YTD depletions up 2%. Volume gains were primarily attributed to increases in Sam Adams Seasonals, the Twisted Tea family and the Brewmaster's Collection, which were partially offset by decreases in Samuel Adams and Sam Adams Light. But the real bonanza came in profits as Boston cut sales and promo expenses and cycled last year's product recall. Net income was $10.4 million, which is over a 100% increase over last year. Gross margins also improved to 54% compared to 51% for the year. Boston Beer Co is also now clear of making PABs for Diageo, which ended in May, freeing up capacity in their Pennsylvania plant to solely make Boston Beer products, which helped margins.

PRICING. But here's the money shot. As far as pricing, revs per barrel are up 2% this year. Boston plans to increase that number next year, though not necessarily all through pricing (reducing discounts, etc.). But as chief Martin Roper said in the conference call, they won't know "exactly what the competitors will be doing" and plus, it's "unclear what the consumer will bear....and we're less optimistic about pricing opportunities next year." I've heard that from several other brewer execs as well. Methinks our October price increase may be valued by the industry come Fall of next year, because it may be a tough sell again.

Founder Jim Koch said the volume growth "exceeded our expectations" and but that BBC continues "to face increased competition from expanded distribution of domestic specialty brands and regional craft brands. We are happy with our sales execution, our brand strength and our position within the craft category and remain positive about the future of craft beer and our potential for future growth." It's truly amazing how craft has bucked the trend in the poor economy.

CLARIFICATION: In our interview with MillerCoors President Tom Long yesterday, he referenced past activity-based costing tests conducted with customers. Tom called back to the BBD World Headquarters to clarify that his reference was to historical studies conducted on warehouse delivery of non-alcoholic beverages [Ed. Note: when Tom worked for the Coca-Cola Company]. MillerCoors has never conducted a direct to retail test with Wal-Mart or any other retailer.

Until tomorrow, Harry

"We must make the best of those ills which cannot be avoided."
-Clarence Day

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