Destination categories, channel choice, and beer distribution laws

Abstract

Consumers tend to choose the type of store, or grocery channel, on the basis of “destination categories,” or categories that tend to be important attractors relative to others. Whether or not a category is truly important to generating incremental market share, however, is a difficult empirical question, because there has been little exogenous variation that permits a clear test of whether categories tend to attract traffic. In this study, we leverage a change in beer distribution laws in the state of Colorado that permitted full-strength beer to be sold for the first time in traditional supermarkets. We use a difference-in-difference estimation strategy to test whether the introduction of a new category of products represented an incremental gain in channel attraction using both consumer panel and retail scanner data. Our results show that the introduction of beer into grocery stores in Colorado led to an increase in total weekly sales (1.2%) and a relative increase in expenditures for some categories, notably those that are likely to be complementary to beer purchases. Additional results using the consumer panel indicate an increase in the frequency of grocery store visits by beer-purchasing households as well as an increase in monthly grocery store expenditures (8.0%) among beer-purchasing households.