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 before been to Wal-Mart Stores headquarters, learned how serious the retailer was about selling more alcohol.
Executives, who included Chief Merchandising Officer Duncan MacNaughton, 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 its alcohol buyers to 12 and offered discounts on a range of brands, from mainstream Coors to craft beers such 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.
Founder Sam Walton frowned on drinking to excess, and Wal-Mart 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 Wal-Mart havent even heard about it.
Inside the company, attitudes are changing. Wal-Mart 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 Wal-Marts home county of Benton.
Focusing on adult beverage is a decision we made this year, said Deisha Barnett, a Wal-Mart spokeswoman. Feedback has been very positive, and distributors have been very collaborative.
Historically, Wal-Marts 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 that retailers face.
Yet beer is a good fit for Wal-Mart.
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 Wal-Mart, 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.
Wal-Marts push into alcohol will put pressure on entrenched players, including Costco Wholesale and the dollar-store chains as well as convenience and grocery stores. Three months before Wal-Marts summit, a Dollar General executive told investors the chain would boost the number of stores selling alcohol to more than 5,000 from about 3,700. This year the company plans to sell alcohol as many as 6,600 of its almost 11,000 locations.
Executives have a three-pronged plan: Devote more shelf space to alcohol and do a better job promoting it. Discount wherever possible.
And hire more alcohol buyers and reduce the size of their territories so they interact more often with distributors.
In the past, the Wal-Mart buyer didnt know us, Bailey said. Now theyre just an email or a phone call away. We can interact daily.