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Hard Seltzer & RTD Cocktails

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ENERGY DRINK SALES SURGE AS INNOVATION CONTINUES

Energy drinks is among the fastest-growing beverage segments, as evidenced by its strength throughout the pandemic.

As many of the major brands refi ned their strategies in response to consumer adjustments, energy drinks are experiencing a wider reach than ever before. Thus, energy drink consumers looking for functional energy will continue to fi nd it in c-stores in 2022.

Sales of non-aseptic energy drinks in c-stores totaled $10.6 billion, a 14.0% year-to-year increase for the 52 weeks ending Dec. 26, 2021, per IRI. Leading brands included Red Bull, which saw sales rise 17.8% to $4.7 billion; Monster, whose sales of $3.17 billion refl ected a 13.6% increase; VPX, with sales of just over $973 million, up 12.1%; and Rockstar, whose nearly $487 million in sales refl ected a 12.7% drop.

EYE ON INNOVATION

“Energy is through the roof right now,” said Erin Breeden, merchandising manager for Evansville, Wyo.-based convenience store Hat Six Travel Center. “So many companies are coming out with new names and brands and giving Monster, Red Bull and Rockstar a run for their money. Ghost, Uptime, Zoa, Celsius and Alani Nu are all coming into the scene hard and heavy.”

The proliferation of brands suits Hat Six’s management just fi ne, Breeden said. “I have found that having a large variety is the answer to so many of the outage problems. People will choose something else if there are more choices. We say ‘yes’ to new products.”

As for new products, the category fi gures to get a boost during 2022 thanks to PepsiCo’s recent addition to its Rockstar energy drink line, Rockstar Unplugged, which features hemp seed oil and B vitamins. PepsiCo, which acquired Rockstar in 2020, wants to garner younger and female customers with the launch, which includes a multimedia marketing campaign titled “Turn Up Your Mood,” to do just that.

“During the pandemic, there has been a signifi cant decline in selfservice beverage sales,” noted Don Burke, senior vice president for Management Science Associates in Pittsburgh. “It appears that some coffee consumers concerned about the self-service area of the convenience store turned to the packaged beverage section, choosing an energy drink for their caffeine consumption.”

As the pandemic winds down in 2022, Burke said, the question is, “How many of these potentially new energy drink consumers will return to dispensed coffee?”

“We predict another strong year for energy drink sales,” he said, “albeit at a more moderate pace, likely in the 7% to 12% range.”

Energy Drinks Stay Active

The category’s dollar sales grew by 14%, with Red Bull and Monster maintaining a solid hold on the energy drink consumer, capturing a hair under three-fourths of the category dollar share and double-digit sales growth along with VPX. Reign held relatively steady, while Rockstar and NOS saw signifi cant drops in dollar sales.

Product

Energy drinks (non-aseptic) Red Bull

Monster

VPX

Rockstar

Dollar Sales Dollar Share of Category Unit Sales

Price per Unit Current 1-Year % Change Current 1-Year Change Current 1-Year Change Current 1-Year Change

$10.6 B 14.0% 100.0 0.00 3.94 B 11.4% $2.70 $0.06

$4.70 B 17.8% $3.17 B 13.6%

$973 M

12.1% $487 M -12.7% 44.2 29.8 9.14 4.57 1.45 -0.11 -0.15 -1.40 1.53 B 17.1% $3.07 $0.02 1.23 B 12.5% $2.57 $0.02 380 M 11.9% $2.56 $0.01 236 M -15.3% $2.06 $0.06

NOS $322 M -9.1% 3.02

Reign $320 M -1.1% 3.00 -0.77 -0.46 127 M -10.7% $2.54 $0.04 126 M -4.7% $2.54 $0.09

ENERGY SHOTS BOUNCE BACK

Energy shot sales are up, but competition in the segment remains fierce from a bevy of new product innovations as well as from energy drinks.

Energy shots had a strong year in 2021, and while their growth in sales should continue in 2022, that pace is expected to slow to the 4-8% range, according to Management Science Associates InfoMetrics data.

The convenience store channel saw sales of energy shots of nearly $641 million, an 8.8% rise for the 52 weeks ending Dec. 26, 2021, according to IRI. That’s a strong rebound after last year when the pandemic caused energy shots in convenience to fall 12.2% for the 52 weeks ending Dec. 27, 2020, per IRI.

Living Essentials Marketing LLC’s 5-hour Energy brand accounted for the lion’s share of energy shot sales in 2021, with sales just under $578 million, a gain of 10.5%. The next-largest brands in sales were Tweaker at just under $25 million, down 4.5% year to year, and VPX at $17 million, up 18.9%, according to IRI.

CATEGORY EXPANSION

“The non-alcoholic shots category has begun to splinter,” said Gary Hemphill, managing director of research for Beverage Marketing Corp. in New York City. “Energy is the dominant shot, but we’ve seen more coffee, juice and tea shots in recent years. While some shots offer an energy boost, others offer health and wellness.”

Despite new entries into the market, traditional energy shots remain popular with consumers, but the segment has been overshadowed in recent years by energy drinks, which are showing greater growth, Hemphill said.

Indeed, last October Living Essentials launched its own carbonated energy beverage in a 16-ounce can, a move that CEO and founder Manoj Bhargava referred to as a ‘natural progression.’ The line is available in three flavors: berry, grape and watermelon.

Energy shot sales have been flat at Baltimore-based High’s, which operates more than 54 c-stores in Maryland and Pennsylvania.

“We think many customers have switched to energy drinks,” said Mike Jackson, category manager for High’s.

“We are expanding on other energy shot-type items that have more of a focus on actually providing something other than energy that could help in 2022, such as sleep aid and vitamin supplements.” The Hartman Group’s health, wellness and functional ingredient research found that interest in emerging ingredients that are seen to enhance energy, such as nootropics, ashwagandha, maca and others, skews younger, reflecting a more exploratory approach to functional solutions among Generation Z and millennials. Among consumers overall, 44% said they were interested in trying nootropics in their diet, the Hartman Group found. In addition, 43% said they were interested in ashwaghanda, and 46% expressed an interest in trying maca.

Healthy Growth for Energy Shots

With 5-hour Energy far outpacing the rest of the category, Red Dawn boosted its dollar sales by 62%, followed by VPX with an 18.9% dollar sales lift.

Dollar Sales Dollar Share of Category Unit Sales Price per Unit

Product

Energy Shot

Current 1-Year % Change Current 1-Year Change Current 1-Year Change Current 1-Year Change

$641 M 8.8% 100.0 0.00 202 M 6.3% $3.17 $0.07

5-hour Energy $578 M 10.5% Tweaker $24.9 M -4.5% 90.2 3.89 1.38 -0.54 167 M 9.7% $3.47 $0.03 20.7 M -5.5% $1.20 $0.01

VPX

Red Dawn

Vital $17.0 M 18.9% $4.67 M 62.0% $4.05 M -3.0% 2.66 0.73 0.63 0.23

4.93 M 16.3% $3.46 $0.08 0.24 679,282 55.2% $6.87 $0.29 -0.08 2.64 M -6.6% $1.53 $0.06

QUALITY, CONVENIENCE DRIVE BEER AND WINE SALES

Spurred by pandemic lifestyle changes, more Americans are drinking increasing amounts of beer and wine.

The flip side, however, is that customers have come to expect a high level of convenience in terms of online ordering and delivery options that c-store operators may consider integrating as competition grows. The convenience store channel saw sales of beer reach $24.2 billion, a 2% gain, for the 52 weeks ending Dec. 26, 2021, per IRI. Leading brands were Bud Light, Modelo Especial, Michelob Ultra, Corona Extra, Coors Light, Budweiser, Miller Lite, Busch Light, Natural Light and Heineken. Of those, the greatest gain for the period belonged to Modelo Especial, whose sales grew by 16.1% to just over $2 billion.

For the same period, sales of wine totaled $1.1 billion, up 1%, according to IRI. Leading brands included Sutter Home, with just over $147 million in sales, a year-to-year gain of 6.3%, and Barefoot, with sales of nearly $121 million, down 8.4%.

CATEGORY EVOLUTION

Quality is a top consideration for consumers in 2022 when it comes to beer and wine sales.

Some 26% of U.S. customers claim a high level of spending on wine either because they purchase it in large portions or because they opt for high-end, premium brands, according to Ethan Elliott Maddison, a beverage specialist with GlobalData. With beer, 33% reported the same.

Meanwhile, one in five (19%) consumers said they often purchase alcoholic beverages in convenience stores. “Perhaps unsurprisingly, sales are driven by the convenience of these stores, which are often open during later hours and at closer proximity to homes than large supermarkets, allowing people to ‘pop’ out for a bottle of wine or case of beer,” Maddison noted. “For this reason, most convenience stores are able to charge more for these products compared to hypermarkets and online.”

Given the growth of online shopping, companies like Drizly and Uber Eats, and the emerging trend of quick-commerce, more Americans are coming to expect doorstop delivery within 60 minutes of ordering. This trend is predicted to grow as more players enter the market. “Beer is definitely a category in transition,” said veteran convenience store retailer Amer Hawatmeh, the longtime president of St. Louis-based St. George Oil. Hawatmeh divested his 52 Coast to Coast c-stores, moved operations to California and introduced his Coast to Coast Bodega concept in Santa Clarita.

He noted the beer market has shifted, with an increased interest in craft beer. “People are willing to pay for quality,” he said. “You give them something unique and hip, and they will pay for it.”

As for wine, Hawatmeh said, c-stores need to make room in 2022. “I always said (wine) is something retailers should be getting into,” Hawatmeh said. “Get rid of the wasted square footage in your stores, and bring in the Barefoot (brand) and the two-for-$14 pricing.”

Beer Sales Balance

Following 2020 sales highs, with beer sales growth of 13.7%, beer saw a more modest increase of 2% at convenience stores for the 52 weeks ending Dec. 26, 2021, per IRI. Bud Light led the category, with dollar sales of $3.18 billion, down 6.3%, followed by Modelo Especial at $2.02 billion, up 16.1% for the period.

Dollar Sales Case Sales Price Per Case

Product

Beer

Current 1-Year % Change Current 1-Year % Change Current 1-Year Change

$24.2 B 2.0% 865 M -3.0% $28.01 $1.38 Bud Light $3.18 B -6.3% 132 M -8.8% $24.00 $0.66 Modelo Especial $2.02 B 16.1% 56.9 M 11.9% $35.45 $1.28 Michelob Ultra $1.67 B 8.3% 56.1 M 6.2% $29.78 $0.56 Corona Extra $1.34 B 9.4% 35.6 M 6.3% $37.68 $1.06 Coors Light $1.32 B -1.0% 54.2 M -3.7% $24.30 $0.66 Budweiser $1.16 B -5.7% 47.4 M -8.3% $24.50 $0.66

Miller Lite $1.16 B -4.4% 48.5 M -7.0% $23.84 $0.65

RTD COCKTAIL, HARD SELTZER

CONSUMERS THIRSTY FOR NOVELTY

C-stores face the old conundrum with both hard seltzer and ready-to-drink (RTD) cocktails: Consumers want old favorites, but they also want exciting new brands and line extensions.

Hard Seltzer Continues Climb

Hard seltzer sales at convenience stores grew 16.8% for the 52 weeks ending Jan. 15, 2022, per NielsenIQ.

Segment Dollar Sales 1-Year % Change

Hard seltzer $1.76 B 16.8%

Beer/flavored malt beverage (FMB)/cider $22.7 B -3.2%

Source: NielsenIQ, Total U.S. Convenience data for the 52 weeks ending Jan. 15, 2022

IRI numbers for the 52 weeks ending Dec. 26, 2021, show the hard seltzer category at c-stores with sales of more than $2.1 billion, an increase of 25.9% year to year.

Within that category, White Claw was the leading brand, with sales just topping $1 billion, up 9.6%. Truly followed at nearly $529,000, a 56.2% gain. Bud Light Seltzer recorded sales of just over $199 million, a jump of 13.5%. Corona Hard Seltzer notched sales of almost $53 million, a decline of 16.8%.

“Single-serve cans will explode in volume this year,” said Bump Williams, the founder, president and CEO of Bump Williams Consulting in Shelton, Conn.

Key for growth will be a balance of what he called big, successful legacy brands like White Claw.

“Be selective on any and all new products and line extensions,” Williams warned. “Ask the question, ‘Where will these volumes be coming from? Brand switching or incremental business?’”

RTD COCKTAIL SALES UP

According to NielsenIQ, Total U.S. Convenience data for the 52 weeks ending Jan. 15, 2022, showed total spirits sales were $3.04 billion, up 9.8%. Within that category, preparedcocktail sales were slightly over $167 million, a dramatic 62.4% rise.

“I’m seeing increases in our stores in both hard seltzer and ready-todrink cocktails,” said Thelma Seguin, director of store operations for Fabulous Freddy’s Car Wash, which owns and operates five convenience stores in Las Vegas.

While RTD cocktail sales rose slightly for the chain in 2021, this year is already bringing larger-scale increases in business, she said.

“The industry, I think, is coming up with some new innovation,” Seguin added. “We’re always trying to bring in what’s new, and people are just trying more things. People have been home more.”

Consumers also appreciate the flavor profiles of some of the newer RTD cocktails, Seguin has found.

“They are fruity. It’s almost like everything is fruity and sweet,” she said. Young adult consumers are the age group gravitating toward the RTD cocktails, she noted.

Freddy’s dedicates a full shelf to RTD cocktails, as well as space in its cooler. The chain’s top seller is Monaco Cocktails, of which it stocks four varieties.

Like a great many c-store operators around the country, Freddy’s plans to present shoppers with lots of variety in RTD during 2022.

“Bringing in some of the new items that are coming out; that’s pretty much what the plan is,” Seguin said.

In a segment like RTD cocktails, Seguin stressed, newness is key.

“Consumers are always looking to try something new,” she said. “They do have their favorite, but you know, I have my favorite pizza, and I always want to try something new.”

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