Last September, 500 representatives from the alcohol industry gathered at the Sams Club auditorium in Bentonville, Ark., for an adult beverage summit.
Attendees, some of whom had never been to Walmart Stores headquarters, learned how serious the retailer was about selling more alcohol. Executives, who included Chief Merchandising Officer Duncan Mac Naughton, told the gathering they wanted to double sales by 2016.
In the year since, the worlds largest retailer has focused as never before on beer a U.S. category worth about $45 billion and has moved aggressively to grab market share. The company has doubled the number of alcohol buyers to 12 and offered discounts on a range of brands, from mainstream Coors to such craft beers as Deschutes. It ditched slow-selling products to make way for beer and is even selling it in garden centers. New stores are designed to put the suds front and center.
Were seeing dramatic increases in sales, said Steve Bailey, who attended the summit as vice president of chain accounts for Columbia Distributing, which supplies beer to about 90 Walmart stores in Washington and Oregon. That has pushed us to pay more attention to Walmart.
Founder Sam Walton frowned on drinking to excess, and Walmart has said little publicly about its latest ambitions. Unlike initiatives to expand produce or steak sales, the beer push has been so discreet that some analysts who cover Walmart havent even heard about it.
Inside the company, attitudes are changing. Walmart now promotes alcohol in its circulars, reversing a previous ban. Two Walton grandsons even spearheaded a successful campaign to overturn a ban on retail alcohol sales last year in Walmarts home county of Benton.
Focusing on adult beverage is a decision we made this year, said Deisha Barnett, a Walmart spokeswoman. Feedback has been very positive and distributors have been very collaborative.
Historically, Walmarts business model has involved buying massive quantities of products directly from suppliers. With alcohol, the company in most cases must instead buy products from a network of third-party distributors one of a variety of state and local regulations retailers face.
Yet beer is a good fit for Walmart. Most states allow it in grocery stores. Shoppers buy it regularly and often buy other products at the same time. Repeat visits are crucial for Walmart, which in May forecast fiscal second-quarter profit that was less than analysts estimated.
Beer is a traffic-driving category, said Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York. High-frequency consumables can help them with their traffic problem. Beer fits that.
Walmarts push into alcohol will put pressure on entrenched players, from Costco Wholesale and the dollar-store chains to convenience and grocery stores.
While Walmart has been selling wine, beer and spirits since its first supercenters opened in the late 1980s, executives at Septembers summit said the chains share of the alcohol market lagged behind that of the grocery market.
Mac Naughton and two other executives laid out a three- prong plan to remedy that: Devote more shelf space to alcohol and do a better job promoting it. Discount wherever possible. Hire more alcohol buyers and reduce the size of their territories so they interact more often with distributors.
While Walmart recently has struggled to keep shelves stocked with a variety of merchandise, this has not been an issue with beer, said Ron Newsad, a distributor for Dayton, Ohio-based Heidelberg Distributing.
The orders come from Walmart corporate: If we dont have it, we cant sell it, he said.
Amy Baldwin, a marketing director for Mobile, Ala.-based Gulf Distributing Holdings LLC, said Walmart is designing new stores to highlight beer.
Theyre redesigning stores to have adult beverage in a more appealing position in the front of the store near produce, said Baldwin, whose company distributes Diageo, Heineken and MillerCoors products.