Packaged Beverage Sales Continue To Flow

Despite inflation and unpredictable economic conditions, the cold vault keeps pouring out profits for c-stores.

Anne Baye Ericksen • Contributing Editor

Walking the floor at the National Association of Convenience Stores (NACS) annual conference last month in Las Vegas, a few offerings from beverage manufacturers caught the attention of the Goldman Sachs representatives in attendance.

In the company’s “America’s Consumer Staples: Quick Takeaways from NACS Show in Vegas,” released Oct. 4, Managing Director Bonnie Herzog wrote: “Overall, we came away most impressed with Coca-Cola, Constellation Brands and Monster, all three of which are clearly leaning into innovation and focused on building out their presence in c-stores.”

She specifically highlighted Coca-Cola’s introduction of Costa Smart ready-to-drink (RTD) canned coffee. Produced in three flavors, signature blend, mocha and caramel, the new caffeinated drink will be sold in 11-ounce slim cans and will first appear in Sprouts Farmers Market grocers early next year.

“A huge focus (was) on Monster Zero Sugar, with the majority of our group unable to distinguish the difference between OG Green and Zero Sugar variants,” Herzog added.

“Innovation is a key to driving excitement and satisfaction. The Army & Air Force Exchange Service (AAFES) is excited about the introduction of new flavors and items. New items from top energy brands lead the category, driving traffic and brand awareness,” said Melissa Kitchen, a buyer for AAFES that exclusively serves U.S. military personnel and their families on bases around the world and operates 10 distribution centers.

Still, it could be some time before new beverage brands or flavors will reach convenience store shelves. In the meantime, c-stores must shore up the category that is responsible for an average of more than $33,600 per store, per the most recent NACS State of the Industry Report.

Indeed, 2021 turned out to be a comeback year for beverage sales. In spring, Beverage Marketing Corp. (BMC) released a report that stated approximately 39 billion gallons of liquid refreshment were purchased in 2021, partially due to restaurants reopening to indoor dining. Of more significance, carbonated soft drinks (CSDs) posted the first gain in 17 years, and both RTD coffee and energy drinks climbed by double digits.

SUPPLY & INFLATION

Lingering supply chain delays on top of rapidly changing economic conditions, however, continue to test some retailers. “The Exchange continues to be affected by challenges related to the pandemic, including delays and disruption,” said Kitchen. “We have updated our inventory policies and planning parameters to combat these challenges.”

“Many companies have taken up pricing due to higher input costs,” said Gary Hemphill, BMC managing director.

Carbonated vs. Non-Carbonated

Carbonated beverages may still top sales charts, but non-carbonated beverages keep the category competitive.

Description

Y/Y Dollar Sales Change for two weeks ending Sept. 24, 2022 Y/Y Volume Change for two weeks ending Sept. 24, 2022

Carbonated Beverages Energy Drinks Bottled Water Sports Drinks Tea — Liquid Sparkling Flavored Water Coffee — Liquid Still Flavored Water 14.8% 14.1% 15.4% 9.0% 9.2% 3.8%

17.5% 4.9% -2.4% 4.1% 2.2% -2.6% -0.7% -6.3%

15.1% -16.0%

Source: NielsenIQ xAOC including convenience store data compiled by Goldman Sachs Global Investment Research; America’s Beverages: NielsenIQ data through Sept. 24, obtained Oct. 4, 2022

A service member looks for a beverage in the cold vault section of his local convenience store.

Still fl avored water and CSDs incurred the greatest price jumps over this time last year, approximately 24% and 17%, respectively, per NielsenIQ statistics ending Sept. 24, that were reported by Goldman Sachs. The least affected was RTD coffee, which rose a mere 2.1%. The price adjustments compensated for fl attening volume sales for most segments. All carbonated beverages lost 2.4% for the same two weeks. Sports drinks, sparkling fl avored water and tea also slipped in volume. Coffee from the cold vault was the only product segment to post doubledigit gains.

Dollar sales, however, continue to pour out profi ts. NielsenIQ data shows all tracked packaged beverage categories improved. Low-calorie CSDs led the category with a positive 18% and sparkling fl avored water wrapped it up with 3.8%.

But even with those encouraging statistics, economic circumstances compel category managers to look at how they can further stabilize cold vault activity. Marybeth Benjamin, a category manager for Dandy stores, a Sayre, Pa.-based chain with 67 sites, including in New York, hopes to redefi ne customers’ perceptions of values versus cost. “Due to the increased frequency of price changes and infl ated costs, I have shifted many of our monthly and everyday value promos to a

‘savings focused’ strategy as opposed to a specifi c price point (i.e., buy two/save $1, buy two get one, etc.),” she explained. “This approach has increased our take rate and also reduced changes in point-of-sale marketing when there is a price change.”

Although price points could continue to climb, convenience store owners and operators hope packaged beverage inventory variety, including new brands and fl avors, will keep quenching customers’ thirst. CSD fast facts: • Carbonated soft drinks (CSDs) cost approximately 17% more than they did before Labor Day. • Low-calorie CSDs led the category with a positive 18% in dollar sales. • Coca-Cola will begin distributing Costa Smart ready-to-drink (RTD) coffee next year.