Convenience store retailers are optimistic that beverage sales will continue to increase despite traffic pressures, according to the latest “Beverage Bytes” survey by Goldman Sachs Equity Research.
Overall beverage sales in the segment rose 5% year-over-year during Q3, a shift that suggests to analysts that “consumers have continued to step-up basket sizes” while taking fewer shopping trips. Morning traffic, in particular, has been impacted by a lack of students in areas in which schools have not been fully reopened, while there are signals that other day periods have been unaffected and that overall traffic may be improving.
However, according to the survey representing nearly 45,000 U.S. retail locations, better results are in the forecast for 2021, with expectations for a 6% rise in sales (versus 4% in 2020 overall) and 1% increase in traffic (against a 7% drop this year). With COVID-19 infections still on the rise in many states, survey respondents indicated their belief that work-from-home trends will continue to cause consumers to focus primarily on take-home consumption occasions.
According to the report, c-store retailers are “broadly neutral-to-positive” on beverages, with some commenting that strong performances from key categories — energy and sports drinks among them — indicate that traffic and immediate consumption habits are ticking upwards. Yet other respondents said that recovery has been uneven, with the potential for further disruption as on-premise establishments begin reopening.
In an encouraging sign for retailers, energy drink sales doubled during the last quarter, rising 10% year-over-year. Red Bull posted a 12% increase in sales in c-stores during Q3; though survey respondents broadly noted that momentum is expected to continue, thanks to its innovation pipeline and overall category strength, some warned of potential shortages that could impact the brand’s 12 oz. and 16 oz. can inventory. As reported by retailers, the strength of its wide-ranging flavor portfolio, including this year’s new entrant, Watermelon, and its promotional strategy is paying off. “Some retailers also noted that Red Bull – perhaps more so than its energy drink peers – has done the best in terms of converting consumers from hot coffee to energy drinks,” the report noted.
Meanwhile, Monster sales grew 5% in the convenience channel during the quarter. Analysts acknowledged that, while losing share to Red Bull at c-stores, Monster’s growth in non-tracked channels outside convenience is helping to offset those losses. The momentum is expected to continue: 75% of retailers indicated that sales have accelerated in September (vs. August), with many also noting optimism for Monster’s forthcoming 2021 releases.
Months after Pepsi announced its distribution partnership with Bang, retailers are “starting to reconsider” whether the deal is helping the brand, according to the Goldman Sachs report. Sales for Bang during Q3 fell 6% year-over-year, with some survey respondents linking that decrease with rising interest in rivals Celsius and C4, while another, A-Shoc, underperforms.