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The US military is used to being on the front lines of conflicts around the world. But the ultimate battle they're embroiled in is perhaps one they never expected: the battle between beer, wine and spirits.
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The ongoing battle between the categories for market share is spreading to military bases after a recent pilot test of beer and wine sales at commissaries (the equivalent of on-base grocery stores). It was the first time commissaries were allowed to sell alcohol in the system's history, following a decision in April 2018 by the Department of Defense (DOD), which oversees the commissary system, to allow testing.
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But the DOD's decision to exclude spirits from the test opened a new front in the ongoing, often fierce, competition for market share among alcohol categories.
The 90-day pilot test was conducted in 12 selected commissioners from July 23, 2018; ended at the end of October. Satisfied with the results, DOD decided to continue selling beer and wine at the 12 test stores while it evaluates whether to expand the sale to the rest of System 226 stores in the United States and abroad. As of Dec. 8, about $394,315 worth of beer and wine was sold at the 12 police stations — $190,574 worth of beer and $203,741 worth of wine — according to Lt. Carla Gleason, a Pentagon spokeswoman.
The spirits industry had hoped a trial of sweetener sales at commissioners might follow. But the DOD decided it would not proceed with a pilot test for spirits. "The department has evaluated the sale of alcoholic beverages at police stations," says Gleason, "and stands by its original decision to limit sales to a small selection of beer and wine."
David Ozgo, senior vice president for economic and strategic analysis for the Distilled Spirits Council, says the trade group lobbied for spirits' inclusion. "We shared our concerns with DOD personnel and provided them with input and information about the benefits of adding distilled spirits along with beer and wine to commissary shelves," he says. "Spirits, wine, and beer all compete for the same drinking occasions. By discriminating against spirits, DOD is picking winners and losers in the marketplace and trying to dictate consumer preferences... Excluding spirits puts us at a competitive disadvantage ."
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Gleason says, however, that the DOD was simply trying to emulate the practice of grocery stores when it made the decision not to ship spirits. "Commissary stores should be similar to commercial grocery stores and can sell merchandise similar to commercial grocery stores," she says. "Beer and wine are commonly available in commercial grocery stores, and the availability of these products in commercial grocery stores provides our customers with the convenience they typically experience in commercial grocery stores. Distilled spirits are excluded from this authorization because they are not commonly available. in commercial.Sold in grocery stores throughout the United States.
Ozgo disagrees. "We believe that, in accordance with the 28 states that allow the sale of alcoholic beverages in grocery stores, alcoholic beverages are sold in police stations," he says. "The modern consumer wants convenience and choice. Spirits have been gaining market share from beer and wine for nearly 20 years. The current generation of military men and women, among all ranks, enjoy spirits, and the commissary system must make the purchases as easy and convenient to do.
Ozgo adds that leaving spirits out of sales sends a negative message to commissioners. "Our policy in the United States is that if beer and wine are allowed to be sold in a place, then spirits should be allowed to be sold," he says. "We are not advocating for equal treatment just for commercial reasons. When spirits are treated differently than beer and wine, it sends the message that beer and wine are "soft" or non-intoxicating alcohol. That's a dangerous message for our servicemen and women, and it's why all branches of the military teach standard drinking equivalency as part of their alcohol training.
In fact, alcoholic beverages, along with beer and wine, have been available on military bases for years, but through other channels, such as the base exchange, which is similar to a department store. The sale of beer, wine and spirits at the exchange will continue unchanged under the commission's new policy. But the exchanges will now also serve as a direct supplier for the commissaries' beer and wine products and will also offer price and category management. They charge the commissary for the actual cost of the goods, together with any additional costs they incur to deliver these products to the commissary and a reasonable allowance to compensate for the expected loss of revenue from the migrated sales (sales that may now lose exchange commissioners).
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Alcohol sales account for about 9 percent of total sales at Army base exchanges. The top three brands for each category are Bud Light, Miller Lite and Coors Light for beer; Apothic Red, Stella Rosa and Roscato for wine; and Hennessy, Crown Royal and Jack Daniel's for spirits, according to Chris Ward, senior public affairs manager for the Army and Air Force Exchange Service.
At the 17 naval base exchanges in the United States and Japan that fall under their separate system (such as the Coast Guard and Navy), alcohol products brought in $53.9 million in 2017. Beer is the top seller, followed by from alcoholic beverages, then wine. The top selling beer brands are Budweiser, Miller and Coors. Bourbon is the best-selling spirits category overall, with the top brands by volume being Jack Daniel's and Jim Beam. Barefoot is the best-selling wine brand of the summer, according to Bryan Driver, a Marine spokesman and director of plans, policy and analysis for business and support services for Headquarters Marine Corps.
Ozgo points out that the move to offer beer and wine in commissaries is because commissary sales have dropped significantly. Store sales fell nearly 23 percent between 2012 and 2018, according to Gleason. "The commissary system has been losing business to off-base/post alternatives for years," says Ozgo, "and is trying to modernize its business practices."
Gleason says the decision to expand commissary sales for beer and wine wasn't primarily based on revenue generation. "It was also intended to provide customers with a shopping experience similar to commercial grocery stores without displacing primary food items," she says. "Although there are many aspects of commissaries that mimic commercial grocery stores, commissaries are not specifically designed to compete with the civilian market. Ultimately, the mission of the commissary is to provide a savings benefit to military members and their families. The entire base of the commissioner's clients are the persons who have been designated as authorized defenders.
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Alcohol sold at commissaries is not taxed, she says, because commissaries are a statutory, free benefit that serves the military, and the products sold there are not subject to local or state taxes. "The intent was to offer only a limited selection of beer and wine," says Gleason, "and DeCA [the Defense Commissary Agency, the DOD agency that directly manages the commissaries] will refrain from engaging in marketing practices that would glamorize the use of alcoholic beverages".
Joe Bollinger, director of military transportation for Brown-Forman, the spirits and wine company based in Louisville, Kentucky, says the U.S. military channel is one of the top 10 customers for his company, accounting for about 90 per percent of Brown-Forman's product sales. . in the channel is made on the basis of the United States and 10 percent abroad. The spirits category is growing about 4 to 5 percent in the military channel, he says, with the Brown-Forman portfolio also growing about 4 percent in the channel.
DOD policy, Bollinger points out, is that the shelf price on military bases for liquor brands must be 5 percent below the everyday shelf price of Walmart, Total Wine and similar off-base competitors. "Military patrons are brand loyal and look for value when shopping on base," he says. "We work with military spirits buyers to implement in-store promotions such as tastings, engraved bottles, etc. to build loyalty with our brands."
About 5.4 million military families shop at the commissary, according to recent statistics, resulting in about $4.9 billion in total annual sales. "We deliver tangible value through the benefit of savings, which financially benefits our employers," DeCA's value statement reads. "We are the link that supports our customers for products and services that are trusted, valued and represent their choices."
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Some experts are concerned that if the sale goes ahead, the basic commissary system will not survive. So it's possible that the rest of the alcohol industry, not just spirits, will lose this revenue option. For now, however, wine and beer brands are awaiting DOD's decision on whether they will soon be included in the
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