Analyst Nik Modi is bullish on the convenience-store industry, and much of what helps him maintain a rosy outlook can be distilled to the trends that are driving beverage sales in c-stores. Let's take a look:
Changing Tastes
"Multiculturals are driving U.S. population growth," Modi said. In fact, "85% of total U.S. population growth was multicultural, per the most recent U.S. census."
With that growth comes a change in consumers' palates, he said. Whether these consumers were born outside the United States or are second-generation here, they've grown up under the influence of parents and grandparents who are cooking with ethnic variety and flavor palates.
“The U.S. taste palate has structurally been altered,” Modi said. “People today want spice.”
For c-store retailers, this requires a greater variety of product flavors and styles.
Recommendation Culture
The consumer-value equation of yesterday was simple: product price divided by product benefit. Today, a recommendation—from a friend, a celebrity or, increasingly, a trending item on social media—has become a major part of that equation (see image).
“Millennials are the least-trusting generation ever,” Modi said. Only 19% say that, generally speaking, most people can be trusted. But a “thumb’s up” or a “like” from the right person can make a new product into a must-have status symbol. “Social media has given these things a false sense of importance,” Modi said, “but we live in a F.O.M.O. culture—fear of missing out—so we’re seeing consumers trade up despite a slow-growth economy.”
Function & Refreshment
Today, consumers want their beverages to meet a variety of functional needs: energy (energy drinks and coffee), relaxation (alcohol), fitness (protein beverages) to simple hydration (bottled water and isotonics). Thanks to the on-demand culture created by the Internet and other conveniences such as cable television, “We are so used to getting what we want immediately,” Modi said. “This is why I’m so bullish on the convenience-store industry. People aren’t willing to stand in line at Walmart for three or four things anymore.”
Don’t write an obituary for CSDs, either. Modi sees this largest segment of the beverage category is simply in needs of improved marketing. “The cola problem is a positioning problem,” he said. And with the amount of money on colas’ back, he has no doubt it will be resolved sooner rather than later.
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