NACS 2017: C-Stores Primed for Premiumization

Even in an era of craft beverages and high demand for natural products, convenience stores remain a stalwart channel for grab-and-go simplicity. And while sugary sodas and 99-cent iced teas still dominate c-store coolers, premium brands are beginning to make inroads. With the presence of several such companies at NACS 2017, brands that made their name in the natural channel now have the corner shop in their targets.

Brands such as Topo Chico, Argo Tea, and Jones Soda, which have previously established a presence at c-stores as premium alternatives, exhibited on the show floor alongside younger companies like Califia Farms and Roar Organics that are now moving into the channel.

The Trends Catch Up with Convenience

Speaking with BevNET at NACS, Jennifer Cue, CEO of Jones Soda, said she’s seen firsthand the evolution of consumer trends towards natural and better-for-you products, calling this current moment a “transition time” from the old health standards to a new beverage landscape. Many major c-store chains, such as 7-Eleven, are recognizing these changing tastes and are making significant efforts to adapt via premiumization. The retailer has maintained a close relationship with Jones for many years, Cue said.

Cue has been with Jones since its beginning in the 80’s as a Seattle startup. After leaving the company for a period, she returned five years ago as CEO to help refocus the ship following a series of “missteps,” she said. Since then, the company has refocused its efforts on c-store as well as on-premise accounts, carrying the flag as a craft brand.

“We were really cult when we started — skateboard shops, snowboard shops, super niche,” she said. “Then we went mainstream, and we’re in this environment now where craft and premiumization put us in a great position.”

For Jones it was flavors that set it apart on the shelf. Berry Lemonade, Cue said, is the company’s highest selling SKU in 7-Eleven stores, while partnerships with candy brands like Sour Patch Kids drive eyebrow-raising trial. For smaller companies, cultivating those individual customer experiences can go a long way. If Jones sells a single bottle per American a year the company is in an excellent position, Cue said, whereas bigger brands like Coke and Pepsi rely on massive sales numbers.

C-stores have been late to premiumization, Cue said, but the shift is in motion. Recognizing opportunity outside of the cooler, Jones is now growing its fountain business, an area where she noted the major soda brands have seen little competition.

The Hipsterization of Topo Chico

Hot off the company’s $220 million sale to The Coca-Cola Company’s Venturing & Emerging Brands (VEB) division earlier this month, 122-year-old Mexican sparkling water brand Topo Chico has made a long journey from the specialty Latin products section to the main beverage cooler.

Speaking to BevNET at the brand’s booth at NACS, Arturo Chavez, key accounts manager at Topo Chico, said the company took a deliberate marketing approach more than a decade ago to appeal to “hipsters” via music festivals, fashion shows, and specialty food events.

“The way we promote the products is so they discover it,” Chavez said. “They feel it is something they discovered and it becomes a part of them.”

The move out of ethnic food aisles came more than a decade ago with the aid of H-E-B in Texas, which saw the potential for the brand to appeal to mainstream American consumers, Chavez said. While much of its sales volume still goes to Latin markets, the company has stopped playing specifically toward Latino shoppers and instead invested in appearances at venues such as Lollapalooza and sponsorships with Formula One racing.

The brand’s signature glass bottle and old-style label give it a craft presentation — and it is a craft product. Retailing at an SRP of $1.39 per 12 oz. bottle, Topo Chico is well above the average price point for bottled water or canned sparkling water, but is more in competition with Perrier and San Pellegrino than typical seltzers. According to Chavez, the company avoids sales, preferring to keep prices stable.

Pushing Topo Chico as a mixer also aided in driving youth sales, Chavez said. In Mexico, the product is a go-to for Tequila and Scotch cocktails.

“The product appeals to the mainstream,” he said. “The glass bottle we make is premium, and we push that presentation everywhere.”

According to Chavez, the acquisition by VEB is not likely to change too much for the branding of Topo Chico, but vastly expanded distribution is coming soon. Getting plugged into Coke’s network of trucks, he said, will ensure the product’s U.S. retail presence grows greatly. The core product itself, however, is likely to remain the same, coming from the same quality water source.

Roar Organic: Don’t Call it a Sports Drink

With vibrant, colorful packaging and a clean label, Roar Organic Electrolyte Infusions is a functional product that at first glance might look like a Gatorade or Powerade competitor. But at the company’s booth at NACS its president Roly Nesi said Roar is seeking to carve out a different kind of niche for itself, positioning itself in stores as far away from Gatorade as possible.

“We had no place here [at NACS] last year because we would have had to go to the Gatorade door, and there’s no room in the Gatorade door because it has paid [millions] to protect that door,” Nesi told BevNET. “But now an opportunity exists with a whole new door that is not married to a certain function but married to a certain lifestyle. So you’re seeing GT’s, you’re seeing Bai, you’re seeing Core Organic, you’re see us.”

According to Nesi, Roar is distancing itself from the traditional sports drink category by focusing instead on the latest health trends in major cities, such as getting placement in SoulCycle spin studios. Making the move out of the natural channel, the brand is now coming into c-stores as “an affordable organic” retailing around $2.49 per bottle.

“The guy who’s going in to grab his Gatorade is not our customer,” Nesi said. “We’re trying to get the customer who’s going in there, who walks to the door and decides he wants something new. It’s a lifestyle choice more than it is a habit.”