C-store beverage sales remain in good health, but decelerated on a sequential basis in Q1 2024, according to the latest Beverage Bytes survey of convenience channel retailers by Goldman Sachs Equity Research this week.
- Total convenience store beverage sales (non-alc and alcoholic) were up 2.6% in Q1, compared to 4.8% in Q4 2023.
- Despite the slower growth, retailers remained consistent in projecting 4.6% growth for the full year, in-line with the previous two quarterly surveys. Beverage sales grew 6.2% in 2023.
- Retailer sentiment is more reserved, with 30% stating their outlook on total beverage has become more negative, compared to 13% who said the same in Q4.
- 30% of retailers are more optimistic on beverage, down slightly from 33% who said the same in Q4.
Energy Drinks Gain Space
Energy drinks continue to outpace the total beverage category, growing sales by 7% in Q1 (slowing from +8% in Q4), as brands Celsius (+44%), C4 (+29%), Ghost and Alani Nu continue to post elevated growth. Meanwhile, category leader Monster (+2%) and number-two brand Red Bull (+3%) have maintained growth while decelerating from the prior quarter (+8% for Monster and +5% for Red Bull in Q4).
One brand with a notable turnaround was Bang, which under the ownership of Monster has ended a more than year-long streak of declines with a 4% increase in sales for Q1 (the brand was -15% in Q4). Regardless, retailer sentiment on Monster’s acquisition of Bang is still mixed, as 44% say they have not seen any change in the brand’s performance, while 31% said its performance has “deteriorated significantly,” 6% said it was “slightly weaker” and just 19% reported improvement.
Retailers who were positive about Bang said there has been strong promotional activity to drive sales and that the Bang consumer is still “out there” and willing to come back to the brand after a chaotic period that marred the brand’s reputation.
Another brand receiving mixed reviews is PRIME, whose energy drink sales were up just 5% in Q1 compared to 47% growth in Q4. Retailers projected sales to increase around 7% this year, compared to expectations of 23% growth in last quarter’s survey.
Other retailers, however, say the opposite, citing “lackluster support” for Bang from Monster and distribution partner The Coca-Cola Company, with one retailer claiming they will cut Bang facings from 10 to three this year.
Meanwhile, Celsius continues to earn new facings and cooler space as sentiment on the brand is “largely upbeat.” One retailer pointed to the brand as evidence that convenience stores need to reduce shelf space for soda and beer in order to increase room for energy drinks. Another retailer suggested that the brand’s Celsius Essentials line has taken share specifically from Bang and Rockstar.
Promos in Demand
Around 35% of retailers said they see signs that promotional activity for non-alc beverages will increase in the near future, compared to 44% who said the same in Q4, while 59% say there are “no signs” of promo activity rising. About 6% said promo activity is decreasing.
However, 75% said they expect brands will need to initiate more promos soon to stop sliding volume sales, while 25% say they expect manufacturers to continue to go forward with new price increases. While many manufacturers have foregone promotional activity, retailers suggested that some are ”getting more aggressive,” including Coke and Pepsi. Congo Brands, which produces Alani Nu and PRIME, has also increased promos.
“One retailer noted that while promotions have not picked up yet, the outlook is gloomy unless they do,” the report stated. “While another retailer noted that there has been an increased focus on gross profit dollar generation this year vs last year, where retailers were more concerned about unit growth.”
Despite a need for promos, 65% of retailers expect manufacturers to again take pricing action this year – down from 100% who said the same in Q4 – with most expecting increases to come in the second half of the year. Of those retailers, 29% expect significant increases. However, 35% believe current pricing will be maintained throughout 2024.
Within energy drinks, one retailer suggested they anticipate Q3 price increases from Celsius, and 29% expect Monster to raise prices significantly. About 6% thought Red Bull will lower prices this year, which no retailer has suggested may happen in either of the past two Beverage Bytes surveys.
Spring Shelf Standstill?
A strong majority of retailers (80%) said they don’t plan to adjust their shelf or cooler space for non-alc beverages during spring resets this year. But the 20% planning to make changes say they will increase the space given to NA drinks, with an estimated 4.5% increase on a weighted average store basis.
Celsius is the biggest winner in new allocations, with 81% saying they will give more space to the brand with a projected 10.6% weighted average store expansion. Red Bull will likely lose the most space, predicted to fall 2.5% on a weight average store basis.
Other manufacturers looking to benefit and expand on a projected weighted average store basis include Coke (+1.6%), PepsiCo (+1.9%), Keurig Dr Pepper (+1%), Monster (+2.8%), Bang (+1.6%) and C4 (+8.3%). Coconut water brand Vita Coco is projected to lose 0.3% shelf and cooler space this year.
Alcohol Updates
Around 58% of retailers said alcoholic beverage promotions are increasing, up slightly from 50% in the Q4 survey. About 50% said they expect brewers to raise pricing this year, down from 67% in Q4.
Beer sales decelerated to a 3% increase in Q1, down from 7% in Q4, but expectations for the year are still “healthy and broadly stable” at an estimated 5% growth rate for 2024.
Boston Beer (+4%), Constellation Brands (+10%) and Molson Coors Beverage Company (+9%) saw positive sales growth in Q1. Anheuser-Busch InBev sales fell -4%, in line with Q4. Sales for Heineken in the quarter were flat while craft beer was “marginally ahead of the category.”
Hard seltzer sales decline -4% in Q1, a slight improvement from -5% in Q4. Retailers now project a -2% decline for the year, showing optimism from Q4’s prediction of -4%.
A 90% majority of retailers said they don’t plan to make changes to shelf and cooler space for alcoholic beverages during spring resets, while 10% plan to increase space, a weighted average store basis of +0.2%.