Labor Day marks the unofficial start of the fall season, and judging from the results of Goldman Sachs Equity Research’s latest “Beverage Bytes” survey, retailers are expecting it to be a good one.
Out of a survey group representing 30,000 U.S. convenience retail locations, or roughly 20% of the channel, 65% of respondents indicated that they had a more positive outlook on the total beverage category as compared to the previous one to two months. The sentiment marks a significant jump from a low of 31% in Goldman’s April survey, though the figure is down from 81% in July.
Despite the persistence of out-of-stocks for some items and depressed store traffic, overall beverage sales were up 7% year-over-year over the holiday, with store owners reporting an encouraging rise in immediate consumption drinks. Consumers are likely to continue prioritizing bigger basket sizes in Q3, during which inside sales growth is projected at 4%. However, foot traffic is expected to fall by 5% in the quarter, as it did in Q2.
Retailers reported existing shortages, with a potential to rise in future months, for some of the best-known products on the market, specifically Gatorade and 12 oz. cans of Coca-Cola, that are expected to continue into the fall. The severity of the issue across retail is unclear — store owners noted that products ranging from Body Armor to Starbucks Frappuccino to Monster and Red Bull have been impacted at different levels — but some suggest that out-of-stocks could become more widespread in the coming months.
In terms of energy drinks, retailer feedback was mostly upbeat. The category grew 8% year-over-year this Labor Day (compared to 6% growth during 4th of July), and store owners generally expect the segment to remain strong through the rest of Q3.
Monster enjoyed this year’s holiday: the company grew 5% year-over-year, suggesting to Goldman Sachs analysts that business is rebounding as individuals return to work. Reign Total Body Fuel was singled out for praise by some retailers in the survey, but future innovations in the company’s pipeline — such as new juice-based varieties and a forthcoming watermelon flavor for Monster Ultra — are also generating excitement. The brand stepped up its promotional activity over Labor Day, with 6% of retailers reporting a significant increase and 31% noting a modest increase. Overall, nearly 80% of those surveyed indicated that sales have accelerated in August as compared to July.
Meanwhile, Red Bull continued to put up strong numbers, growing 9% year-over-year during Labor Day, driven mainly by its seasonal Editions releases; the brand’s Watermelon Edition is still generating excitement amongst retailers and likely to become a permanent addition to its flavor roster, according to the survey. The company’s sales momentum is projected to continue through the end of the quarter, with overall 2020 year-over-year growth estimated at 7%.
Outside of those brands, retailers noted a comeback of sorts for Bang: after falling 4% year-over-year in Q2 and dropping 2% over 4th of July, the energy upstart saw sales increase 7% over the Labor Day weekend. Looking ahead, survey respondents were also upbeat on the potential for new Bang flavors and encouraged by Pepsi’s innovation plans for next year. Further afield, retailers praised strong numbers from Celsius while lamenting the continued slide of Rockstar, with some suggesting its sales may have been negatively impacted by Pepsi’s focus on supporting Bang in the wake of its recent distribution pact with the brand.