How Buffalo Wild Wings is Embracing Craft Beer to Drive Sales

By Markets Fool.com

After posting a painful string of same-store sales disappointments to start 2016, Buffalo Wild Wings (NASDAQ: BWLD) finally began to show signs of improvement with its encouraging third-quarter results last month.But though Buffalo Wild Wings shares have rebounded nearly 20% as a result, don't expect the wings, beer, and sports-centric restaurant chain to rest on its laurels now.

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Buffalo Wild Wings will offer Lagunitas Fandom Ale for a limited time. Image source: Buffalo Wild Wings.

To be fair, B-Dubs' same-store sales still declined for the third consecutive quarter, falling 1.8% and 1.6% at company-owned and franchised locations in Q3, respectively. But Buffalo Wild Wings stock is up in part because those declines represented a marked deceleration from prior quarters. And Buffalo Wild Wings CEO Sally Smith partly credited her company's stronger showing to the early successes of both the new Half-Price Wing Tuesdays promotion,anda new 15-minute guarantee for the existing FastBreak lunch program.

Cheers to another differentiator

"As we look forward to 2017," Smith added, "we remain committed to continued innovation in delivering a differentiated experience in casual dining and we're identifying areas of opportunity to improve margins."

With the tagline "Wings. Beer. Sports," what you see is what you get at B-dubs. But how, exactly, will Buffalo Wild Wings continue to differentiate its restaurants in today's increasingly competitive casual dining market?Aside from sales-driving initiatives surrounding its namesake menu item, B-Dubs is wisely refocusing its efforts on the second word in its tag line: Beer.

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Earlier this month, Buffalo Wild Wings introduced Fandom Ale, a new limited-time craft beer that was created as a result of surveys that showed guests enjoy "balanced, easy-drinking beers with full flavor, specifically wheat beers and pale ales." As such, Fandom Ale was brewed as part of Lagunitas Brewing Company's "Fusion" series of special limited-release craft beers, and represents a "fusion" of the two aforementioned beer varieties.

"We worked to come up with something approachable, interesting and fun for sports fans," explained Karen Hamilton, Lagunitas director of communications. "We're excited that Fandom Ale will be the first Fusion to be distributed to every state in the country."

A winning blueprint

Even before Fandom Ale, Buffalo Wild Wings already stood tall as the largest pourer of draft beer in the country through its more than 1,200 domestic restaurants. And alcoholic beverage sales typically comprise around 20% of the company's total revenue -- a pretty penny considering Wall Street expects Buffalo Wild Wings to turn in roughly $2 billion in total sales in 2016.

But that's not to say Fandom Ale is a grand experiment. Rather, it follows an older blueprint for success; Three years ago, Buffalo Wild Wings teamed up with Redhook Brewery to bring beer connoisseurs Game Changer Ale, which has since become a guest favorite and consistently keeps patrons coming back for more.

As I wrote at the time, B-Dubs' director of beverage innovations, Patrick Kirk, noted Buffalo Wild Wings had long thought of brewing its own beer, but ultimately realized it would be smarter to work with others to reach the same end. And given Buffalo Wild Wings' role in the process with Red Hook, it effectively enjoyed first dibs on the majority of Game Changer Ale's shipments.

For now, Fandom Ale's limited release status seems to indicate it will be similarly exclusive to Buffalo Wild Wings restaurants. But if Fandom Ale proves anywhere near as popular as Game Changer Ale has grown from its own similar beginnings, don't be surprised if it becomes another staple for Buffalo Wild Wings guests over the long term.

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Steve Symington owns shares of Buffalo Wild Wings. The Motley Fool owns shares of and recommends Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.