Survey: Energy Gains Fuel Optimism In C-Stores

C-store retailers remain generally upbeat about the beverage category even as immediate consumption habits in individual categories continue to be disrupted, according to the latest “Beverage Bytes” survey by Goldman Sachs Equity Research.

The survey — representing nearly 35,000 retail locations or 25% of all stores in the channel — reflects the changing landscape for convenience retailers still feeling the impact of COVID-19.

Despite a 10% drop in store traffic, overall beverage sales in the convenience channel were up 7% in Q4 2020. Retailers are projecting a 5% increase in year-over-year sales growth in 2021, with the expectation that a national vaccination program will allow people to go back to on-site work and to resume their previous consumption habits. With many consumers still working from home, respondents were split as to whether an increase in basket size and bulk purchasing has offset a decrease in store trips.

Survey respondents were less uncertain about energy drinks, an immediate consumption beverage category that proved particularly resilient to pressures this year. The segment grew sales a robust 10% year-over-year in Q4 and is expected to continue expanding in 2021 by a further 9%.

Within the category, established leaders like Red Bull and Monster are still growing even as a cohort of upstart brands like C4 and Celsius are trying to chip away at their market share. Red Bull led the way in Q4 with an 11% increase in c-store sales, followed by Monster, which saw its sales rise 6%. Even as Red Bull consolidates its position, though, analysts noted that Monster is likely offsetting share losses in convenience through gains in non-tracked channels. Retailers expect the brand to grow 5% in 2021, while Red Bull is projecting 8%.

Meanwhile, some respondents noted that Celsius — up 38% year-over-year in c-store sales in Q4 — and C4 are positioning themselves to be long-term category players in the channel. Optimism around brands like the gamer-focused G-Fuel and new market entrants like Zoa (distributed via Molson Coors) and BODYARMOR Edge Energy (100mg caffeine) was also notable, according to the report.

On the other end of the spectrum, retailers were negative on Bang, which remains legally entangled with jilted distribution partner PepsiCo. That brand’s exceptional growth in 2019 helped it land the Pepsi deal, but the Goldman Sachs report notes that some retailers feel that Bang’s performance was due in large part to its limited distribution and that sales dipped as product availability widened.

As noted in the previous edition of “Beverage Bytes,” a majority of retailers (75%) believe that the Bang-Pepsi divorce could disrupt the energy brand’s business. Some noted that the disruption has already caused issues in several key regions, while others said that the energy drink maker will have time to secure alternative distribution by the time its contract with Pepsi expires in 2023. Several suggested that Bang decided to end the agreement in order to align non-alcoholic and alcoholic distribution under a single banner ahead of its move into hard seltzer.

The much-touted launch of Coca-Cola Energy also underwhelmed c-store retailers this year, with some suggesting it may be pulled from coolers by mid-year barring a turnaround. The disappointment with that product may also be influencing how retailers are considering other moves from the major brands, as the response was mixed as to whether Mountain Dew’s forthcoming high-caffeine line Rise will be a success or end up siphoning sales from its Kick Start, Amp and Game Fuel products.

Retailers were broadly positive about Coca-Cola’s decision to purge underperforming brands and SKUs from its portfolio, although it should be noted that many such products were not typically sold in convenience stores. The majority of respondents indicated that they expect Coke to continue to pay to keep its space regardless of SKU count, though others said that the company struggled with in-stock issues rather than too many products.

Pepsi also earned praise from retailers for its focus on low sugar beverages and for its 2021 innovation lineup, which, in addition to Mountain Dew Rise, also includes Mountain Dew Major Melon, Pepsi Mango and new items from Gatorade/Propel and Starbucks. Survey respondents were similarly upbeat on Keurig Dr Pepper for its low-sugar options, revamped CSDs and new Snapple bottles, though some had concerns over the momentum behind portfolio brands A-Shoc, Core and Runa.