How Walmart Plans to Double Beer Sales In Three Years

Strategy includes Deep Discounts, More Displays, But No Private-Label Brews

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Walmart is already the nation's largest beer retailer after tripling its total alcohol sales in the past 10 years. But one of the chain's top executives told beer distributors this week that the company is just getting started.

"I'm pleased but not satisfied," Chief Merchandising and Marketing Officer Duncan Mac Naughton said during a presentation at National Beer Wholesalers Association meeting in Las Vegas, noting that the company is still "under-shared" in beer sales compared with competitors.

Walmart is already the nation's biggest beer retailer.
Walmart is already the nation's biggest beer retailer.

He reiterated the company's goal of doubling beer sales in the next three years. "I see it as a layup. My team sees it as a big half-court shot. But I'm telling you, it's there," he said during his talk, which was interrupted several times by applause from the crowd of nearly 4,000 beer distributors and suppliers attending the event.

The positive response is a welcome sign for Walmart, which has had an uneasy relationship with distributors, who have complained about the complexities of servicing Walmart stores. Because they use "just-in-time" ordering systems, "their backrooms have no storage," David Black, CEO of Northeast Sales Distributing, said in an interview. His company's territory includes some 50 Walmarts in portions of Georgia and North Carolina. "They refuse the order or they make you sit there for three hours while they take something else."

Mr. Mac Naughton acknowledged that it's "hard to sell beer to Walmart," but said the company was working to improve product flow while securing more dedicated storage space for beer. To date, most of the company's efforts have involved making beer displays more prominent in stores, while adding more refrigeration, hiring more alcohol buyers and plugging beer in circulars.

No private label
Walmart began efforts to improve its relationship with beer wholesalers in September of 2012 when it held an "adult beverage summit" at a Sam's Club in its home base of Betonville, Ark., which drew some 500 alcohol industry representatives, Bloomberg News recently reported.

It was at this meeting when Walmart first pledged to double beer sales. As Bloomberg reported earlier this month, the retailer's strategy includes steep discounting, with beer sold nearly at cost in some stores. When it does so, the Walmart eats into its own profit margin, leaving distributors mostly unharmed. Still, wholesalers have to "hear the rhetoric coming back from Walmart's competitors that don't want to go that cheap," Mr. Black said.

In his presentation this week, Mr. Mac Naughton said Walmart would continue its strategy of "price separation," but did not directly address the topic of selling beer nearly at cost.

He pleased distributors by saying the retailer has no plans to go into private-label beer, as it has done in other grocery categories. He also called on wholesalers to help the company with beer displays. "We don't want cute displays, "he said. "We want 'shoppable' displays: item and price and can I get a case off the top. Sometimes we kid ourselves with pretty. Pretty is fun, but I want sales."

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