Seven Reasons This Should Be a Great Summer for Beverages
With a healthy jump over Memorial Day weekend, season off to a solid start
NEW YORK -- The kickoff of the peak beverage selling season--Memorial Day weekend--suggests a prosperous summer is on the way for convenience stores.
Convenience store beverage sales growth accelerated, up 4% for Memorial Day 2014 vs. 2% for Memorial Day 2013, according to the latest Wells Fargo's Beverage Buzz survey of convenience store retailers.
"The largest contributors to this growth were improved weather conditions and heavy promotions (particularly multi-purchase promos). Although the carbonated-soft-drink category remains under pressure, energy, waters and non-carbs all appear to be growing," wrote analyst Bonnie Herzog. "So far for Q2, our retailer contacts indicated beverage sales are up 4% for the quarter, lapping a modest 1% in Q2 2013. Therefore we believe heading into Q2 earnings, beverage sales should be relatively solid in the c-store channel and should help support Q2 results."
Some of the key takeaways from this survey:
Convenience store beverage sales were up around 4% during the Memorial Day holiday 2014 vs. 2% last year.
- Nearly 80% of survey respondents indicated beverage sales were better during this holiday weekend than last year.
Multipurchase promotions drove volume gains over Memorial Day Weekend.
- Retailer comment: “It is turning out to be a great year in the beverage category as a whole with all of the extra ‘two-for’ promos we’re running as opposed to last year.”
Weather conditions are improved from last year with favorable impact on beverage sales.
- 77% of respondents indicated that weather was having a positive impact on sales in Q2 2014 vs. Q2 2013.
- Retailer comment: “Simply because our overall customer count is up [sales are up]; otherwise if customer count were not up, I would project a 1%-4% decline in beverage sales.”
Promotions were up 5.4% during this Memorial Day holiday vs. last year with Coca-Cola promoting the most.
- Retailer comment: “The must buy” pricing from Pepsi and Coca-Cola is “protecting some gross profit, but [not necessarily] leading to increased sales dollars or case volume.”
- Monster was the most promotional in the energy category, according to two-thirds of respondents.
Cola and energy drinks were the most heavily promoted categories for Memorial Day.
- Retailer comment: “Nearly every package size of cola has had a '2-for' deal running all year, led in particular by Coca-Cola.”
Multi-purchase promos and reduced price points are the most-effective promotional activities
- Retailer comment: The grocery channel multipurchase promos exceeded those in c-stores at a “lower price than our everyday price, leading to a reduction on 2-liter bottles, one of the few packages that c-stores used to be able to count on for sales and profits, but not anymore.”
- Online media (including social media) appear to be gaining traction as successful means to promote, with 70% of respondents indicating online promos were either "somewhat" or "very" effective, up from only 50% in 2012.
The pricing environment remains stable so far in 2014.
- Retailer comment: “It’s too competitive right now in the category to increase prices.”
- 35% of respondents indicated that they expect Coca-Cola to raise prices over the balance of 2014 vs. 16% for Pepsi and 10% for Dr Pepper Snapple Group.
Energy-drink growth remains positive with incremental improvements from last year.
- Retailer comment: “Monster increased its cost of goods and took away the CMA quarterly payments that they were making to me, which increased the retail price to the customer--not a good recipe for increasing sales and driving foot traffic into the stores.”