Energy Drinks Soon to Fill 30% of the Cold Vault?
Analyst, retailers see continued potential for growth
NEW YORK -- Watch for energy drink to continue to grow share of the cold vault in convenience stores as retailers look to capitalize on one of the fastest-growing categories in beverages.
"The energy category today only comprises approximately 20% of our retailers’ shelves," wrote analyst Bonnie Herzog of Wells Fargo Securities in a summary of her most recent Beverage Buzz survey of c-store retailers. "Our retail contacts think that over time, there is an opportunity to expand the energy shelf space by 50% to over 30% of total c-store shelf space."
The survey results of retailers representing more than 15,000 convenience store locations across the country show that the energy category has shown the most growth of any beverage category within the c-store channel, and with a healthy margin.
"We estimate that retailers have nearly a 40% margin for energy drinks vs. 35-40% margin for total beverages and only 30% for carbonated soft drinks," Herzog wrote.
Those trends are expected to continue, Herzog wrote.
"Energy drinks represent 25% of our retailers' current beverage sales, up from 22% in [the fourth quarter of 2013], as the category continues to outperform but could represent as much as 34% of sales at some point in the future, up from [an estimate of] 31% in our 4Q13 survey. This demonstrates the growing contribution this category is expected to make for c-stores going forward and the potential opportunity for the category to continue to grow."
During the first quarter, energy drinks continued to lead sales growth with expectations for sales growth of 10%. Other growing beverage categories include enhanced waters/sports drinks, which are expected to continue to perform well, with 7.7% growth projected, likely as a result of strength of flavored sparkling waters, which have had a break-out year. Meanwhile, total CSDs are expected to be down 1.3%, offset by 1.1% growth in flavored CSDs.