Top 5 Beverage Stories of 2017

CHICAGO -- 2017 has been a challenging year for beverage retailers as sales have languished and new taxes have cropped up. But there's been a change in the wind in the second half of the year.

Here’s a look at five stories that have kept the category interesting since Jan. 1, 2017 …

Convenience-store traffic declined 2.4% during the first half of 2017, according to reports. And while the measure reportedly improved in the second half of the year, retailers still struggled to drive feet through their doors.

One major result was a lag in beverage sales, where unit sales of carbonated soft drinks were down 5.5% for the year, sports drinks down 5.8% and beer down 1.8%, according to IRI c-store scan data for the period ending Dec. 2. Energy-drink unit sales were up only 1.0%.

A report from Coca-Cola Co. offered some suggestions to turn this trend around.

Sweetened-beverage taxes were on this list last year as a cautionary tale of a growing trend that could be spreading across the United States. A year later, they’re still being considered by municipalities big and small, but there’s a new wrinkle in the story.

In May, voters in Santa Fe, N.M., rejected a 2-cent-per-ounce soda tax 58% to 42%. And in Cook County, Ill., which includes the city of Chicago, public outcry was enough to force the county board to vote in October to repeal its 1-cent-per-ounce tax on sweetened beverages.

The decision is a victory for retailers, many of whom feared the tax was a model for similar measures in other markets.

The 15-2 repeal vote by the Cook County Board of Commissioners came only 10 weeks after the surcharge was levied on all sweetened soft drinks, including ones made with noncaloric sugar substitutes. The rollback began Dec. 1, ending a fierce lobbying battle that pitted grocery and convenience stores, restaurants and other soda-selling businesses against health advocates and parties that hoped to raise $200 million per year in revenue from the tax.

The boom in ready-to-drink (RTD) coffee continued in 2017, as iced coffee and cold brew saw an amazing number of new products and SKUs come to store shelves, not all of them welcome. In its first year in stores, Coca-Cola Co.’s Dunkin' Donuts Iced Coffee grew to be the No. 3 RTD coffee brand in c-stores. And Coca-Cola Co. will add McCafe Frappes to its packages lineup in 2018.

For some retailers, it’s a double-edged sword. “Why do I want their brands on my shelves?” said one retailer on condition of anonymity. “They’re my competition. I’ll put their brands on my shelves when they put mine on theirs.”

In 2017, the beer category became a chameleon. After a few years of leaning on craft and imported beers to drive growth, the trends became less obvious. One report, from home alcohol-delivery service Drizly, suggested macrobeers—Budweiser, Miller and the like—were making a comeback. “More than 90% of beer SKUs in Drizly’s catalog are craft as defined by the Brewers Association. Despite the fact that there is an abundance of craft beers available to the consumer, macrobeers represent more than half of beer sales on Drizly and are growing.”

Meanwhile, beer manufacturers were looking at one of the fastest-growing beers in the country—low-calorie Michelob Ultra—as a model to revive the light-beer category. Thus we’ll see a plethora of premium light beers on the market in 2018.

And finally, craft beer saw its volume growth go from healthy double digits (up 26% in c-stores in 2015) to 5% growth in 2017, according to The Brewers Association. “The growth pace for small and independent brewers has stabilized at a rate that still reflects progress but in a more mature market. Although more difficult to realize, growth still exists,” said Bart Watson, chief economist of the Brewers Association, Boulder, Colo.

From the Himalayas to Fiji and Norway to Niagara, the premium bottled-water category is heating up with a remarkable collection of waters from hither and yon. But it's not just destination waters that are driving the trend. Beverage brands outside the water category—Body Armor and Bai, for example—are jumping on the trend with the promise of everything that made their hydration- and antioxidant-rich original lines winners.