NEW YORK -- In a survey of beverage retailers representing more than 10,000 U.S. convenience stores, first-quarter nonalcoholic beverage sales in that channel decreased 2.7% year-over-year due to weak store traffic from cold weather and higher payroll taxes, following two consecutive quarters of strong growth, according to Wells Fargo Securities's Beverage Buzz report.
Most (66%) of the respondents to the survey indicated sales of nonalcoholic beverages declined year over year in the first quarter, compared to 16% in the fourth quarter, with none in the third quarter indicating declines.
"Given the boost c-stores typically provide, we think beverage companies' North American results could be pressured," Bonnie Herzog, managing director of beverage, tobacco and consumer research for Wells Fargo Securities LLC, New York.
"We estimate beverage manufacturers increased prices slightly during the first quarter versus a 2% to 2.5% increase in the fourth quarter," she said.
Citing one of the coldest March's on record, as well as payroll tax changes that reduced disposable income and persistently high gasoline prices, she said that volumes were negatively impacted in the c-store channel. "As a result, higher promotions were used to help drive volume, with 83% of respondents indicating increased promotions in first quarter year over year."
Other Beverage Buzz findings:
- Lower foot traffic contributed to weak beverage sales.
- C-stores focused on improved foodservice offering to drive purchases of higher-margin packaged beverages; however, the c-store channel continued to be out-promoted by drug, grocery and mass.
- Energy drinks captured most shelf space growth in c-stores, up on average 11% year over year with teas and flavored carbonated soft drinks (CSDs) also performing well, up 6% and 3%, respectively.
- CSDs expected to remain weak in 2013 despite continued improvements in momentum of flavored CSDs
- Negative media coverage of the energy category and strength of energy shots dragged category down slightly, but growth remained strong.
- CSD category weak in the c-store channel as consumer choosing cheaper/healthier options.
- Retailers are generally happy with existing direct-store delivery (DSD) model for nonalcoholic beverages.
- Energy players' focus on innovation and promotional pricing continues to drive sales.
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