The Supply Side: Heineken opens a supplier office in Northwest Arkansas

Heineken USA is among at least five adult beverage companies to hang a shingle near Wal-Mart’s corporate offices in Bentonville amid the retailer’s push to boost income and improve margins with more alcohol sales.

The White Plains, N.Y.-based adult beverage company will celebrate a grand opening on Sept. 15 at its first Northwest Arkansas office at 3201 Market Street, Suite 106, in Rogers. Local experts say others are soon to follow given Wal-Mart plans to double alcohol sales by 2016.

“We are excited to be expanding our presence in Northwest Arkansas to further align with Walmart & Sam’s Club strategies,” said Todd Pastor, a Heineken national account director serving Wal-Mart and Sam’s Club.

This move to Northwest Arkansas has been a gradual 18-month transition as the company built out its local sales team. Heineken USA said the need for an office made sense given its plans for future growth. The local team will primarily serve Wal-Mart and Sam’s Club.

“We were privileged to work with Heineken USA and Todd Pastor. A lot of thought, time, and creativity went into their space design, and we were excited to be a part of that. The Northwest Arkansas real estate market continues to improve. Leasing activity is up and there is more investor interest than we have seen in quite some time.” said Steve Fineberg, president of Steve Fineberg & Associates.

‘VENDORVILLE’
Cameron Smith, CEO of Cameron Smith & Associates, said his firm also worked with Heineken in preparation and staffing for this new office.

“According to our records about five new offices have opened here over the past year among those companies who play in the adult beverage space, creating roughly a dozen jobs,” Smith said.

Smith said Heineken’s move is part of the “Vendorville” attraction.

“We know for a fact that several other adult beverage companies are doing due diligence at this time and exploring the benefits of operating a sales office in Wal-Mart’s backyard. We expect more suppliers will follow,” he said. “Just as grapes planted close together are more productive, vendors in Bentonville’s Vendorville make each other better. Being gathered in Northwest Arkansas allows them to work with the best of the best.”

ANSWERING WAL-MART CALL
Wal-Mart’s campaign to be tops in beer sales began in 2012 when the retailer hosted a conference in Bentonville for the adult beverage industry. At the time Wal-Mart sought to double its alcohol sales by 2016 and grab a larger piece of the $46 billon U.S. beer market.

The retailer made a conscious effort to bring on more buyers for the adult beverage category and increase the amount of shelf space and promotional area for adult beverages in its stores.

It is also one of the categories that saw price investment by Wal-Mart as noted by former Walmart U.S. CEO Bill Simon during a speech given last fall at the Goldman Sachs investor conference.

“We continue to look for opportunities to invest in price. A great example for us is adult beverages. We have been continuing to move prices lower on that and seeing returns in the form of market-share gains in that category,” Simon noted.

ATTRACTING MILLENIALS
In November 2013, Latriece Watkins, divisional merchandising manger over alcoholic beverages, told The City Wire that the retailer’s efforts were helping to draw in more Millennial shoppers. She said the Millennials were also having an impact on the entire adult beverage industry.

“I grew up drinking Kool-aid as a kid and they like flavored coffee and craft beer,” she said.

Watkins said roughly two years ago beer makers were tired of losing share to wine and spirits with sweeter flavor profiles. She said this is when they began to innovate with more flavored beer such as hard lemonade and seasonal brews.

She said Wal-Mart has traditionally sold beer and wine in the back of the store, but Millennials see that as inconvenient, so they began making other choices for that product. When the retailer moved the adult beverages out front, Watkins said they noticed more beer and wine sales. 

“When they are in the store getting their other items, if they see the beer, they buy it,” Watkins added.

In Wal-Mart’s recent earnings call new Walmart U.S. CEO Greg Foran said improved adult beverage sales were part of the reason sales and traffic comparables were up 5.6% and 4.1%, respectively, in the quarter at its smaller Neighborhood Market formats.

Other adult beverage companies that have already set up shop in Northwest Arkansas include Anheuser-Busch, Constellation Brands, MillerCoors and Pabst Brewing Co.