3rd-Quarter Outlook ‘Cautious’ for Packaged Beverages in C-Stores: Report

Sales healthy but slowed to a 4.4% gain from 2nd-quarter’s 6.6%, Goldman Sachs survey shows
A cold vault filled with various beverages
Image: Shutterstock

Third-quarter beverage sales trends in the convenience-store channel remained healthy but slowed, up 4.4% versus 6.6% in the second. Retailers, meanwhile, expect growth of about 5% this year versus about 6% previously, with about 5% in 2024.

This outlook comes from New York-based Goldman Sachs’ third-quarter Beverage Bytes survey, which represents about 40,000 retail locations—or about 27% of the c-store channel.

Retailers overall remain very positive about the growth trajectory for Constellation Brands, with about 11% year-over-year growth expected in 2023 and 8% in 2024, as well as and the energy drink category, with double-digit growth expected this year and next, the survey said.

Retailers, however, “remain concerned about broader economic pressures/fears of recession and residual fallout from the Bud Light controversy, albeit moderating,” Goldman Sachs said.

Other Notable Takeaways

  • The pricing environment remains healthy/rational with many retailers expecting incremental pricing by both non-alcohol beverage manufacturers and brewers this year and next.
  • In the last few months, beer promotional activity appears to have leveled off as most retailers are not seeing a rise in promotional activity and think brewers can push through incremental pricing.
  • Conversely, Goldman Sachs said, promotional activity in non-alcohol beverages is still picking up as manufacturers continue to drive promotions to support unit growth.
  • The big winners of incremental shelf/cooler space this year are, once again, energy drinks, particularly Celsius, Monster and C4, and Constellation Brands and Monster’s new The Beast Unleashed.
  • Hard seltzer category declines moderated in the third quarter, and retailers expect the moderation to continue for the full year, down 2% year over year versus down 5% previously, and into 2024.

“Despite retailers’ slightly more cautious outlook for broader beverages, we reiterate our buy ratings on both MNST (Monster Beverage) and STZ (Constellation Brands) given their exposure to attractive growth categories and accelerating trends,” Goldman Sachs said. “They remain two of our top stock picks.”

Goldman Sachs said it continues to view Constellation Brands as one of the best growth stories, noting that retailer feedback on Modelo Especial and Modelo Oro is very positive.

With Monster, Goldman Sachs expects healthy third-quarter “topline demand despite some investor concern over a broader slowdown within the category, which is largely attributable to the lapping of price increases that were implemented in September of ’22. We also think investors are failing to appreciate the potential upside that Bang represents on both the top/bottom line, while longer term we see tremendous outsized growth given MNST’s full innovation pipeline, further international expansion opportunities and incrementality from alcohol.”

White Claw continued to gain share, up 1% in sales year over year.

With Molson Coors Beverage Co., Goldman Sachs remains broadly constructive given feedback from retailers suggesting Miller Lite and Coors Light could hold onto at least some of its recent share gains.

“We believe the risk-reward for the stock is skewed positive ahead of its Q3 earnings,” Goldman Sachs said.

With Boston Beer Co, Goldman Sach is modestly more cautious given retailer feedback suggesting hard seltzer sales trends remained weak in the third quarter—down 3% year over year for Truly and the category, while White Claw continued to gain share, up 1% in sales year over year.

Highlights for Non-Alcohol Beverages

The energy drink category remains very strong, including Monster, and the outlook remains positive with expectations for sustained double-digit percentage growth in 2023 and 2024.

In addition, retailers are bullish on Monster Energy Zero Sugar’s recent performance, although less than before, with about 23% of respondents, versus 42% in the second-quarter survey, suggesting sales have been “very strong” while about 45% suggesting sales have been incremental to Monster.

Twisted Tea’s momentum remains strong, although many retailers now expect a slowdown over 2023’s fourth quarter.

Nearly all retailers expect Red Bull’s recently announced price increase to stick, and most expect Monster to follow.

Shelf space allocation this fall for non-alcohol beverages remains broadly unchanged versus 2022, although most plan to allocate incremental shelf/cooler space to energy beverages, led by Celsius, C4 and Monster.

Finally, promotional activity is picking up, although most retailers believe manufacturers can still push through incremental pricing, and most retailers expect extra pricing this year and in 2024.

Highlights for Alcohol Beverages

Beer sales growth in c-stores accelerated modestly, up 5% in the third quarter, with retailers expecting the category to grow 6% in 2023, up from 3% expected in the second-quarter survey, and 4% in 2024.

Category growth for hard seltzer remained pressured in the third quarter, down 3% year over year versus being down 4% in the second quarter. Retailers expect the category to decline 2% for the full year, versus a previously expected decline of 5%, and to be about flat in 2024.

Truly’s momentum is still not improving, according to about 78% of retailers, despite the brand’s new packaging and ad campaigns.

The energy drink category remains very strong, including Monster, and the outlook remains positive.

Twisted Tea’s momentum remains strong, although many retailers now expect a slowdown over 2023’s fourth quarter; however, retailers do not expect Monster’s new Nasty Beast Hardcore Iced Tea to take share from Twisted.

Alcohol beverages’ shelf space allocation in 2023 remains broadly unchanged versus last year, though Constellation Brands and Molson Coors remain the big winners.

Finally, share losses for Bud Light have stabilized, and most retailers expect the brand to regain a limited amount of market share through 2024.

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