The grocery business is a hot topic these days, with talk of increased pricing dominating headlines across every major news outlet (including here at Food & Wine). While the cost of goods is another story, a few experts from Cornell University have been investigating how stores can sell more groceries — and it turns out that you also need to sell six-packs.
In January, researchers from the Ithaca, New York-based university released the findings from a new study published in the American Journal of Agricultural Economics. Their research revealed that when a grocery store starts selling beer, its sales increase across other major categories like snacks, cheese, deli meat, and soda. This, the analysts said, is because it attracts more beer-purchasing households.
“Our results show that the relaxation of laws that would allow alcoholic beverages to be sold in grocery stores can lead to fundamental changes in how people shop, where they shop, and what they buy,” Bradley J. Rickard, professor of food and agricultural economics at Cornell University, commented.
The team added that these findings have critical implications for the grocery business, which operates with much smaller margins than you may think, averaging a profit of 1% to 3% on most items. Supermarkets are still able to turn a profit overall in spite of these margins, because they have such high volumes of sales — so selling more matters.
To come to the conclusion that beer drinkers make great grocery store customers, the researchers used nationally representative data at the store and the household levels. They found that when full-strength beer was introduced to grocery stores in Colorado in 2019, it led to a net increase in total sales and, as noted in a press release from Cornell, a “relative increase in expenditures for some complementary categories.”
Researchers also observed that beer-purchasing households visited a grocery store 3.6% more often, and increased their grocery store expenditures by 8% per month. Spending on “complementary,” or related categories, which include items like fresh produce, snacks, cheese, deli products, and soda, increased by a whopping 17% for beer-purchasing households .
“In recent years, the trend has been to privatize alcohol sales, moving beer into grocery stores, often followed by wine and liquor,” Rickard said, noting that 42 states and Washington, D.C., allow wine sales in grocery stores. And as the recent study indicates, the expansion of alcohol sales in grocery and convenience stores could have a profound effect on business for supermarkets — while this analysis focuses on beer, it has positive implications for the expansion of wine and liquor sales in grocery stores too.
On the other hand, wine and spirits shops in states that currently prohibit the sale of wine and liquor in grocery stores are against the possibility of change, with some telling researchers that it could kill “hundreds of small businesses and would not benefit local wineries,” per Cornell’s press release. See the complete study, and what its conclusions might mean for supermarkets, here.
