Red Bull recently asked consumers a very telling question: What triggered your c-store visit today? Not surprisingly, 80% of respondents answered “habit.”
The response illustrates just how many customers operate on autopilot as they make their way through a convenience store. Eighty-four percent of consumers head straight for a specific product, and 56%, after getting that specific product, go right to the register to pay.
“C-stores are the epitome of habitual behavior and selective attention,” said Prashant Jairaj, capabilities manager for Los Angeles-based Red Bull North America.
Meanwhile, retailers fall over themselves trying to drive new traffic, draw attention to deals and generally get consumers to buy more.
For three days in October, c-store retailers and suppliers met in Chicago for CSP’s Cold Vault Summit to discuss new and better ways to drive c-store traffic and sell more stuff using beverages as the linchpin.
“If you can get a new customer in your store, what three products do you want him to buy?” asked moderator Ieva Grimm, a former retailer and now president of her own consultancy, Pittsburgh-based Synerge.
With the cold vault flaunting 78% shopper penetration, the ideas flowed on how to get consumers in the door, to the cooler and buying something more. What follows is a collection of ideas, statistics and conclusions reached during the summit.
The Changing Tide in Beverages
From 2010 through 2014, double-digit movement was par for the course within beverage sales trends at all retail channels, suggesting consumer preferences are firmly entrenched in a period of evolution.
Three Reasons Consumers Are Reaching for Flavor Variety
Stop blaming consumers’ concerns about health for slowing the growth of carbonated soft drinks. Yes, some consumers branched off from CSDs to buy bottled water or iced tea, but many also are turning to energy drinks and sweet coffee drinks as alternatives. So where should we place blame? Nik Modi, managing director and analyst for RBC Capital Markets, New York, has some ideas.
1. Rise of Hispanic Influence
There's been a major change in the ethnic makeup of younger generations. "The U.S. taste palate has structurally been altered,” Modi said. “People today want spice.” This is led primarily by the increasing influence of Hispanics, both as a growing part of the American population and manufacturers’ efforts to please them with flavors they grew up with at home in Mexico or other Latin countries.
2. 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 a trending item on social media—has become a major part of that equation. Only 19% of millennials say that, generally speaking, most people can be trusted. But a “thumbs-up” or a “like” from the right person can make a new product into a must-have status symbol. “We live in a FOMO culture—fear of missing out—so we’re seeing consumers trade up despite a slow-growth economy,” Modi said.
3. Function and Refreshment
Today, consumers want their beverages to meet a variety of functional needs: energy (energy drinks and coffee), relaxation (alcohol), fitness (protein beverages) and/or simple hydration (bottled water and isotonics). Thanks to our on-demand culture, “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 Wal-Mart for three or four things anymore.”
Don’t write an obituary for CSDs, either. Modi believes CSDs are simply in need of improved marketing. “The cola problem is a positioning problem,” he said.
Three Beverage Dichotomies, Deciphered
For every trend, there is an equal and opposite trend. We look at three contradictions to help you decide whether to feint left or juke right.
1. Caffeine Quandary
ON ONE HAND: A Technomic study shows 25% of millennials are purchasing energy drinks from convenience stores more often than in previous years.
ON THE OTHER HAND: The same study shows 29% are purchasing energy drinks less often.
WHAT GIVES: Millennials grew up with Starbucks, so functional beverages are a mainstay of their diet. But the demographic is so large that the older portion, those 30 to 38 years old, are moving on to coffee or perceived healthier options as they get serious jobs and start families. However, the younger half, those 23 to 29 years old, is still driven by the rush and excitement—health be damned!
2. SKU Rationalization
ON ONE HAND: Shoppers generally buy the staple brands in the cold vault.
ON THE OTHER HAND: They’re drawn to a wide variety of types, brands and flavors.
WHAT GIVES: “Appeal to the most valuable shoppers in your store,” said Jeremy McManes, shopper insights manager for Dr Pepper Snapple Group, Plano, Texas.
3. 'I Deserve It'
ON ONE HAND: Much of the U.S. population remains troubled by the economy.
ON THE OTHER HAND: More expensive brands—Starbucks, craft beer—are growing.
WHAT GIVES: “Younger generations have never seen a booming economy,” said Modi. However, they are used to affordable indulgences, and they will reward themselves.
Top Beverages at C-Stores By Day-Part
| Breakfast | Snack | Lunch or dinner |
| 1. Coffee | 1. Regular CSD | 1. Regular CSD |
| 2. Fruit Juice | 2. Coffee | 2. Fruit Juice |
| 3. Regular CSD | 3. Iced tea | 3. Iced tea |
| 4. Energy drink | 4. Energy drink | 4. Water |
| 5. Iced tea | 5. Water | 5. Energy drink |
Bundling Opportunities
Among convenience-store shoppers who make a second purchase, beverages are the most commonly purchased products, accounting for 38% of all “second points of contact,” according to Red Bull.
Throughout the summit, there were frequent calls for bundling beverages with other products as a way to drive sales and increase basket size. Where do the opportunities lie? We’ll let the statistics tell the story:
- 53% of gasoline shoppers also purchased a drink.
- 43% of sweet-and-salty-snacks trips have a packaged beverage purchased with them.
- 25% of prepared-food trips have a cold-vault product purchased with them.
- 22% of immediate-consumption purchases pair a beverage with a meal or snack.
What works best together? Try energy drinks and granola bars, iced tea with lunch, or CSDs with sweet and salty snacks.
Gen Z, Represent
Have you met Generation Z? Members of this just-coming-of-age generation may be living in your home, and they’re definitely shopping in your convenience stores. The data hounds at Technomic introduced attendees at the summit to this youngest generation of consumers, born since 1993. Gen Z and the much-hyped millennial generation have many things in common: appreciation for convenience, a variety of flavors, transparency in marketing, value, function and better-for-you products.
| Category | Millennials | Generation Z |
| Born | 1977-1992 | 1993-2012 |
| Current ages | 23-39 | 22 and younger |
| Key characteristics | Multifaceted and diverse | 47% come from ethnic minority groups |
| Beverage power | A driving force in shaping the beverage market | $250 billion in spending power already |
| C-store habit | 80% visit once a week | The most likely of all generations to visit Starbucks; 74% visit c-stores once a week |
| Beverage habit | 68% say they purchase a packaged beverage every or nearly every c-store visit | 72% said they buy a packaged beverage every c-store visit |
Three Retailer Success Stories
1. Water's Way
Penny Robertson, director of marketing for Dodge’s Stores, Tupelo, Miss., has found bundling bottled water with the chain’s fresh-food offer—which includes fried chicken, egg rolls and corn dogs—has resulted in a nice lift for the beverage category. Much of the new bottled-water growth is coming from premium water brands and ambient placement. “Single bottles at room temperature at the coffee bar have paid off,” she said.
2. Beyond the Core
During his time with Walgreens Drug Stores, Deerfıeld, Ill., a chain new to the cold-vault world, Dan Dolgner endorsed a strategy of core SKUs enhanced by a “manager’s section” that allows for new products with an exit strategy. “We fool ourselves that we’re selling a great variety because we look at the total cooler,” he said. “But the top 10 SKUs are bolstering that. … You’ve got to be nimble when introducing new products; you’ve always got to have the core items [in stock].”
3. Emphasis on Energy
Country Fair, Erie, Pa., wants to be a destination for energy drinks. With three of its average 14 cooler doors dedicated to the subcategory, it’s well on its way. But sales manager Jaime Pukylo knows that doesn’t mean ignoring healthier products that customers expect today—whether they intend to buy them or not. “People want a store that stocks that good-for-you stuff, but they’re still going to buy a Snickers or energy drink,” he said.
Three Ways to Attract Younger Shoppers
The generational opportunity is strong for convenience stores: Millennials and Generation Z are more willing to shop in a convenience store than older generations and are more likely to purchase an alcohol beverage in a c-store, according to a report from Technomic Inc., Chicago.
Senior director Donna Hood Crecca offered three suggestions for reaching those consumers more often and selling more to them once they’re in the store.
1. Bundling
Only 48% of convenience-store beverage purchases include food. “This is a tremendous opportunity to add an upsell,” Crecca said. “Co-promotions, bundling, merchandising—anything that connects the food with the beverage. … Send the message: Grab a yogurt with that bottled water.”
2. Snacking
Forty-three percent of millennials consider a beverage a snack, and just as many say they are snacking more frequently, according to Technomic. “C-stores own the snack day-part,” Crecca said. Think about promotions during what used to be considered off-hours to drive home the snacking opportunities in the store, from grab-and-go food products to protein drinks or a more decadent treat.
3. Differentiation
About half of millennials said they’re more likely to visit a c-store with a wide variety of beverages. Be sure to promote the variety while highlighting more personal elements of your brand, such as a knowledgeable staff, sampling programs or competitive pricing.
“Almost 50% of millennials believe c-stores are more expensive than other channels of retail,” Crecca said. Break the perception through promotions. “Fifty-seven percent of millennials said competitive prices will make me choose your c-store over another one.”
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.