Wells Fargo: C-Stores “Upbeat” in Q3 Survey
Convenience retailers are feeling good about rising sales and brand innovation, according to the Q3 “Beverage Buzz” c-store retailer survey published by Wells Fargo Securities.
Analysts Bonnie Herzog, Sam Reid and Patty Kanada described overall feedback from the quarterly survey of individuals representing approximately 20,000 U.S. convenience outlets as “very upbeat” thanks to “disruptive innovation” in energy drinks, malt beverages and hard seltzers.
Total beverage sales, including alcoholic drinks, were up 5.2% during Q3, according to the survey. Beverage promotions increased 2.7% over the same period last year, compared to 1.6% growth in Q1. For non-alcoholic drinks, sales grew 3.9%.
Based on the survey, c-store retailers are moderately positive about The Coca-Cola Company’s recently unveiled slate of innovation for 2020. Specifically, the forthcoming launch of Coca-Cola Energy in January is posed to disrupt the energy drink set, and respondents broadly agreed that category pillars Red Bull and Monster, the latter of which is distributed by Coke, are likely to feel the greatest impact. Respondents were divided on whether Coke’s product will be line-priced with either Red Bull or Monster.
“My guess is Red Bull will largely ignore Coke Energy and keep focusing on what they do well,” said one retailer. Another retailer noted that “Coke will sell more of what is more profitable which is Coke Energy over Monster,” describing the situation as “a repeat of Monster going after Mountain Dew.”
Retailers were also asked about rumors that Coke is preparing to jump into the sparkling water category with a new product launch sometime this year. Only 29% of respondents indicated that they had heard such speculation, while 64% said they had not and 7% said they were unsure. The soda giant also earned plaudits for its limited flavor offerings, with one respondent calling them “hugely successful.”
According to the survey, retailers are forecasting for dollar sales of energy drinks to grow 8.4% this year, an increase over the 7.8% estimated in the Q2. Those high expectations have been buoyed by the emergence of the fitness energy segment through products like Bang, Reign, C-4 and A-Shoc. All respondents indicated they will be expanding shelf space for the category, though not all brands will enjoy the same real estate; while 94% said they will make more room for Bang, less than 60% were willing to commit to adding slots for Reign.
Bang’s new products, such as Birthday Cake, won praise as well, with 33.3% of respondents naming it as the non-alcoholic brand that did the best job introducing new innovation in Q3. However, the company’s rapacious growth has generated some concern among retailers that its manufacturing and distribution can keep pace.
“[I] heard comments from suppliers of Bang that a Bang executive was going to pull distribution of Bang from current non-Anheuser Busch suppliers and make AB exclusive distributor…” said one retailer, adding that AB distributors in his or her area “have not shown a propensity to execute non-alcohol distribution well over the years.”
PepsiCo’s performance was greeted less enthusiastically; survey respondents estimated sales increased just 0.4% during the third quarter. Over three quarters of retailers surveyed said that increased advertising and investment spending has not resulted in improved sales for the brand. Excitement levels for Bolt24 — Gatorade’s functional beverage subline — were also mixed. Some respondents noted it was “too soon to tell” how the product is doing, while others have described sales as “slow” and “lackluster.”
Keurig Dr Pepper (KDP) saw c-store sales increase 1.7%, according to retailers. While some saw the brand in a good position within energy thanks to A-Shoc, the departure of allied brands Body Armor and Fiji still loom large for others. “Now that KDP seems to be done buying companies (for now) they need to make sure they can remain focused on all brands,” said one respondent. “I’m a little nervous.”
Looking towards 2020, retailers are expecting overall beverage sales to grow 4.7%, versus 4.2% increase this year. Along with Coke’s innovation roster, respondents highlighted A-Shoc, Reign and Monster Sparkling Energy Water as products to watch. Category wise, energy drinks (7%) and bottled water (7.1%) are projected to generate the largest increases in sales for the channel. Over 75% of retailers expect non-alcoholic beverage prices to rise at least 3% next year, with the largest increases coming from Coke, PepsiCo and KDP.
Nielsen: Sales Up, Dollar Share Down in C-Stores
Sales growth in the convenience retail has slowed relative to all channels, despite an uptick in year-over-year sales during the four-week period ended on Oct. 5, according to a Wells Fargo Securities analysis of Nielsen sales data.
U.S. c-stores saw overall dollar sales increase 2.7% over the same period last year, with a 4% increase in pricing. Volume was down 1.1%.
In energy, strong growth for the category — sales accelerated over the four-week period, increasing 9.7% — was still outpaced by 10.8% growth in all channels. Red Bull enjoyed a rise in dollar sales, going from 5.4% growth over the 12 week period to 8.2% during the four weeks. The brand’s volume increased 7.8%.
Meanwhile, sales of Monster (excluding Mutant and coffee SKUs) remained flat at 3.8%, while volume fell 2.2% and pricing increased 6.2%. Elsewhere, Bang’s sales momentum showed signs of slowing down, rising at a still healthy rate of 147.6% over the four weeks, compared to 195.2% over the 12 weeks. The brand’s volume rose 133.8% in the four weeks, while the percentage of units sold on promotion increased 10.2%.
Within carbonated soft drinks, both The Coca-Cola Company and National Beverage Corp. reversed sales declines during the four-week period. Dollar sales for Coke’s complete CSD portfolio increased 4.1%, helping the category to post overall sales growth of 1%. Having seen its sales and volume grow 4.9% and 4.1% year-over-year, respectively, National Beverage Corp. posted 16.4% and 19.9% gains in each of those categories during the four weeks. Pricing dropped 2.9%.
PepsiCo, however, continued to struggle with its soft drinks. Sales tumbled 1.5%, volume fell 4.2% and pricing gained 2.8%.