After a solid performance in Q4, convenience channel retailers are feeling more positive about the growth of the beverage category heading into 2024, according to the latest Beverage Bytes survey from Goldman Sachs Equity Research.
The quarterly survey polled retailers representing about 40,000 convenience store locations nationwide, or about 27% of the category. Of the respondents, 33% said their outlook on total beverage growth has improved during the fourth quarter of 2023, up from just 7% in Q3 and the highest percentage since Q2 2022. Just 13% said their outlook is more negative, a sharp decline from 50% who said the same in Q3.
The optimism reflects accelerating sales growth for beverages of 4.8% in the quarter (up from 4.4% in Q3) and projections of roughly 4.5% growth for 2024.
In addition to outsized performance from Constellation Brands products and the energy drink category (up 8% in Q4), retailers cited “resilient consumer demand” despite continued pressures in the broader economic environment. Some respondents highlighted increased promotional activity from brands as a boon to beverage sales.
However, concerns remain around inflation and pricing, as well as increased competition from the mass and foodservice channels.
“One retailer noted that consumers are being more thoughtful on their purchases, and this trend will continue throughout the year, while also noting that the inelasticity of beverage pricing and promotions will hurt unit and dollar sales,” the report stated. “Another retailer noted that unit growth will be driven by deep discounting and creative promotional activity, while also noting that traditional 2-for-1 promotions likely won’t be all that attractive to consumers this year.”
Clean Energy Pulls from Coffee
The prevalence of better-for-you and clean energy drinks is taking share from the coffee category, Goldman noted, suggesting the rise of performance energy brands like Celsius, C4, Ghost and Alani Nu is “likely one of the reasons for the overall coffee category slowdown.”
Retailers reported that energy drink sales grew about 13% for the full year 2023, accelerating slightly from 11% in 2022 and representing the third consecutive year of double-digit growth. However, the 8% growth in Q4 marked a slowdown from +11% Q3 sales.
Based on retailer sentiment, Celsius appears to be leading growth in the category (+88%) with Ghost and C4 (+60%) also contributing. At least one retailer said they will look to add Ghost and PRIME Energy to select stores only this year in order to gauge their direct impact on sales performance. With the rise of the new wave of energy brands, another retailer said Red Bull is losing cooler space and that “the company’s proprietary coolers are being replaced by Celsius and C4 coolers.”
Monster’s performance energy portfolio of Bang and Reign have been losing shelf space, however the company’s overall portfolio has continued to perform well, growing sales by 8% – in line with the category – during Q4.
Retailers said they are still approaching Bang with caution after a chaotic year for the brand, which saw its parent company VPX close amid bankruptcy with the IP and assets acquired by Monster. Sales of Bang in convenience fell -14% in 2023, though retailers now project a -6% slide for 2024. Retailers were mixed on Monster’s purchase, with some expressing optimism for Monster’s plans to revive Bang and said Bang’s sales are largely incremental to the energy category, while others cited confusion over where the brand will live within the modern set “with one retailer noting Bang doesn’t fit well within functional energy.”
Meanwhile, Celsius continues to excite retailers, who said the PepsiCo-distributed brand’s new Celsius Essentials line is taking shelf space from the conglomerate’s owned portfolio of Rockstar and MTN Dew. Essentials, a new 16 oz. canned line, is likely to gain two to three facings in most convenience stores this year, the report claimed, however some retailers worried it could cannibalize core 12 oz. Celsius sales.
Celsius Likely to Win Shelf Space, Red Bull Loses
A quarter (25%) of retailers intend to increase non-alcoholic beverage space in their stores this year, leading to an estimated 5.4% weighted average store basis expansion this year.
Among all non-alc brands, Celsius is expected to be the biggest winner, projected to grow its facings by 12.8% on a weighted average store basis, followed by C4 which is expected to rise by 9%.
Other beverage manufacturers are also likely to benefit from added shelf space, including Monster (+3.4%), PepsiCo (+2.8%), Keurig Dr Pepper (+2%), The Coca-Cola Company (+2%), and Vita Coco (+1.3%). However, zero sugar soda maker Zevia is looking at no additional cooler or shelf space and private label (-0.1%), Bang (-0.8%) and Red Bull (-3%) stand to lose facings.
Constellation Dominates Beer Sales, Bud Light Stabilizes
Beer sales growth accelerated in Q4, up 7%, compared to 5% growth in Q3. Among the category, Constellation Brands has remained the growth leader, up 16% in the quarter with retailers projecting 9% growth in 2024 for the company.
Molson Coors (+13%) and Boston Beer Company (+9%) also reported strong growth, while Heineken (+4%) and craft beer (+3%) underperformed total beer sales.
Anheuser-Busch InBev (ABI) reported beer sales down -4% in the quarter, however that’s a notable improvement from -12% declines in Q3. One retailer suggested the company’s sales are on track to rebound this year as the impact of the transphobic backlash against Bud Light has softened over time.
Hard seltzer sales fell -5% in the quarter, retailers reported, worsening from -3% in Q3. The category was down around -5% for the full year 2023, compared to +4% growth in 2022.