Wells Fargo: C-Stores Report Solid Growth Over Labor Day Weekend

Convenience stores are capping off a strong summer with 4.1% growth in Labor Day beverage sales, according to Wells Fargo Securities’ latest Beverage Buzz c-store retailer survey released today.

The survey collected responses from retailers representing nearly 20,000 convenience stores nationwide. Overall beverage sales, including alcoholic drinks, were up 4.1%. Non-alcoholic beverages grew 3.5% — a “modest deceleration” from 4.4% growth in the second quarter of 2019, according to analyst Bonnie Herzog. Retailers cited good weather and low fuel prices as factors leading to solid beverage sales.

The energy drink category saw some of the strongest sales for the holiday weekend, with 9.3% year-over-year growth driven by performance energy line Bang, as well as a strong showing from Red Bull. According to Herzog, the category is now projected to grow 8.3% in 2019.

Monster, however, lagged behind overall category performance with sales growth of 3.1%. One retailer noted that “Monster is focusing so heavily on [performance energy line] Reign they are losing focus on their Monster flagship brand.” However, sales for Reign are slowing down as ‘buy one, get one’ promotions come to an end and Bang continues its momentum. Although 65% of retailers said repurchase rates on Reign were “moderate,” only 6% of those retailers suggested repurchase activity was “very strong” — down from 19% in Wells Fargo’s second quarter c-store survey. In addition, 24% of survey respondents said repurchase rates were weak — up five points from the second quarter. Instead of Reign, retailers said that many consumers are going back to purchasing their preferred Monster SKU or switching to Bang.

“[Reign] was selling well on [buy one, get one promotions] but now it is just sitting on the shelves looking like a Bang knock off or [a] low-end non-premium brand,” one retailer told Wells Fargo.

Overall, retailers continue to be optimistic about Bang; 63% of those surveyed said sales of the brand have accelerated. However, some expressed concern about parent company VPX Pharmaceuticals’ distribution network, noting the existence of significant regional gaps keeping the brand out of some stores. Of the respondents, 31% said Bang sales have plateaued and none said they have deteriorated.

Retailers were split on whether they would carry Stoked, a CBD-infused energy line preparing to launch under the Bang brand. Many said they were unaware of the new product, while others remain wary about the regulatory environment surrounding CBD.

In addition to Bang, younger entrants to the energy category such as C-4, Uptime, and Celsius are also “showing significant potential,” according to one retailer.

Beyond energy, bottled water was up 5.1%; One retailer noted that “an extremely hot summer” led to increased sales for premium bottled water brands such as Essentia. Ready-to-drink coffee grew 4.4%, sports drinks increased 3.9%, and iced tea was up 2.7%. Meanwhile carbonated soft drinks grew just 0.1%. Juice declined 0.7%.

Sales for Coca-Cola Company products “were essentially flat” compared to last year’s 5.3% growth, according to Herzog. However sales of sports drink brand BodyArmor have continued to seize market share from PepsiCo’s Gatorade.

PepsiCo sales were up just 0.4% over the holiday weekend, compared to 2.4% growth last year. Sales for Keurig Dr Pepper (KDP) were down 0.5% versus 2.3% growth last year, however retailers were optimistic about the growth prospects for CORE Hydration — which the company acquired last year for $525 million.

Sales for alcoholic beverages grew 4.9% over Labor Day, with Constellation brands leading the space at 7.5% growth behind a strong performance from Corona. However, spiked seltzer proved to be a breakout trend as consumer demand for White Claw and its competing brands continue to grow. Sales for Mike’s Hard, which owns White Claw, were up 3.8% during the weekend.

“For alcoholic beverages it’s all about White Claw,” said one retailer. “Every distributor in California is out of the product. I had one store order 10 different flavors of White Claw and only received one case in. Stores that do get product in sell out in a few hours. It’s kind of gone crazy.”