CHICAGO -- The year so far in packaged beverages has been a mixed bag of positive trends and hard-to-explain slowdowns. For every move toward an improvement in category sales, it seems there has been a negative story line that’s kept that improvement from peaking.
Here’s a look at the top five stories in packaged beverages so far this year …
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5. Soda taxes (trend: positive)
A year or so ago, retailers were watching their state and local governments for hints of sweetened-beverage taxes expanding into their neighborhoods. The taxes, which were a growing trend across the United States in 2016 and early 2017, were adding 1 to 2 cents per ounce to the cost of drinks, driving consumers to neighboring communities to make their beverage purchases and even leading to black markets.
By the beginning of 2018, eight cities had adopted the sin taxes in effort to battle obesity in children or, more bluntly, fund pet projects. But as conservatives took over Washington, D.C., following the election of Donald Trump, the so-called soda taxes have lost momentum. So much so that Chicago/Cook County, Ill., actually reversed its tax, and Philadelphia’s is on life support in a state Supreme Court battle challenging its constitutionality.
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4. Beer sales sag (trend: negative but improving)
Beer volume sales in convenience stores were down 1.1% during the 52 week period ending May 19, 2018, with much of the decline coming from the biggest brewers and biggest brands in the country. Both Anheuser-Busch and MillerCoors’ sales were down 3.0% during the period, according to Nielsen data shared by Wells Fargo Securities.
Some reasons suggested for the decline: As consumers drink more high-end beers (read: higher alcohol by volume), they’re drinking less total beer. Also, as craft-beer drinkers seek out more exclusive brews, they’re likely drinking more in brew pubs, where sales volumes are more difficult or impossible to track.
The good news, however, is that in more recent time frames, the sales decline has turned around. During the 12-week period ending May 19, c-store volume sales of beer was flat and during the four-week period, sales actually increased 2.7%.
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3. Bottled-water boost (trend: positive)
Bottled water’s amazing run continues, with sparkling flavored water as the big winner. Bottled-water unit sales as a whole increased 6.1% during the 12-week period ending June 16, while sparkling-flavored waters are up an impressive 18.7%, according to Nielsen data. National Beverage Corp.’s La Croix continues to be the product to watch in all channels, while Nestle Waters North America and Coca-Cola drive sales in convenience stores.
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2. Keurig acquires Dr Pepper Snapple (trend: positive)
In January, coffee and home-brewing leader Keurig Green Mountain announced it would invest an estimated $18.7 billion to acquire Dr Pepper Snapple Group. The deal is expected to close in early July.
"The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere," said Bob Gamgort, CEO of Keurig and the new combined company Keurig Dr Pepper (KDP).
Photo courtesy of Dr Pepper Snapple Group.
1. C-store traffic slows (trend: negative)
While not specific to beverages, the decline in convenience-store traffic was the industry story of the year in 2017. And as foot traffic goes, so goes beverage sales. And there are signs the slowdown is continuing this year. A year ago, a Coca-Cola Research Council report suggested channel traffic was down 2.4% in the first half of 2017, while NACS reported a longer-term trend. It said consumers made one less trip per week to c-stores in 2017 than three years earlier, down to 2.6 vs. 3.6 visits.
This year, retailer RaceTrac Petroleum reported laying off about 100 people at its corporate headquarters and in operations, at least in part to make up for losses in store traffic. And in May, Murphy USA reported the traffic slump continued into its first quarter. Customer traffic was slow in January and February, then rebounded in March, President and CEO Andrew Clyde said. The chain’s total retail gallons declined 1% during first-quarter 2018, while volumes on a same-store-sales basis declined 4% vs. the prior year’s first quarter.
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