Thanks in part to encouraging sales growth and a rebound in energy drinks, C-store retailers are more optimistic about the outlook for the total beverage category than a month ago, according to a survey conducted by Goldman Sachs Equity Research analysts published today.
Over 80% of respondents in Goldman’s proprietary “Beverage Bytes” survey from Q2 and Independence Day said they were more upbeat about beverages than they were in June, as sharply positive sales trends — up 8% year over year for Q2 and up 11% for 4th of July — have caused retailers to upgrade their year-end forecasts from down 1% in late May to up 10% currently. The survey represents the thoughts and opinions of 20,000 convenience retail locations, or approximately 13% of the total U.S. channel.
Retailers were particularly bullish on alcoholic beverages, as the shift from on-premise to off-premise consumption drives consumers to c-stores and towards thriving categories like hard seltzer. The reaction, however, for non-alcoholic beverages was mixed, as the change to bulk purchasing habits has hurt impulse purchasing and fountain drinks. Some retailers predicted a modest return in immediate beverage consumption, but others worried that the pandemic (and subsequent cancellation of major summer events) will result in a sluggish recovery in foot traffic.
The pandemic’s disruption of global supply chains has also begun to impact c-store retailers, who have reported shortages in certain formats, including 20 oz. bottles, from major manufacturers like Coca-Cola and Pepsi.
Respondents also noted that energy drinks were one of the big winners in taking shelf space during cooler resets, of which 80% of retailers said they have already completed.
C-store retailers are feeling good about the momentum behind energy drinks, according to the survey: having predicted 4% sales growth for 2020 in late May, that has been bumped up to 7%. Strong performances from both Monster (up 4% for Q2 and 5% for Independence Day) and Red Bull (up 5% and 7%, respectively). The two brands were noted for using aggressive promotional pricing to drive volume, and it appears to have worked: 70% of retailers said sales of Monster accelerated between May and June, with 80% saying the same for Red Bull. That may have gone too far in the case of Coca-Cola Energy; sold as low as 2-for-$3.50 in select locations, some retailers noted that the brand’s premium position was being diluted.
Rumors surrounding Monster’s potential entrance into non-energy drink categories such as hard seltzer, CSDs and sports drinks received a mixed reaction from store managers. While 25% of respondents cited alcohol as a potential opportunity for the brand to extend, there was no broad consensus on when, how or if Monster should step too far away from its core competency in energy.
Despite largely completing its transition into Pepsi’s distribution system, that process has not been completely smooth: about 75% of retailers saw some degree of disruption during the switch. C-store owners’ enthusiasm around Bang has cooled, the analysts noted, as competitive pressures increase in the form of chief rival Reign and emerging disruptors like Celsius, C4 and A-Shoc. Sales for the brand, which fell 4% in Q2 and 2% for Independence Day, are expected to be flat for the year; in late May, retailers were predicting 8%. Meanwhile, Pepsi’s other energy drink brand, Rockstar, also underperformed, though the analysts suggest Pepsi management is likely to announce changes in formulation, packaging and positioning for the brand in the near future.