CHICAGO -- What’s putting the sparkle in bottled water? Where are the opportunities for carbonated soft drinks and energy drinks? How can foodservice help boost beer sales in convenience stores?
These questions and more were answered during CSP’s Cold Vault Forum. The event, held in Chicago in late September, brought together more than 60 convenience-store retailers and suppliers to discuss trends, pain points and what could be the mainstream beverages of tomorrow.
Here are seven highlights …
1. CSD opportunity
As sales of carbonated soft drinks (CSDs) and particularly diet sodas continue to wane in convenience stores and beyond, industry watchers remain optimistic that this once-expanding subcategory can turn around.
As health and wellness concerns increased as a consumer trend, “the expectation was that diet sodas were going to grow, and in actuality, it’s the opposite,” said Gary Hemphill, managing director and chief operating officer of Beverage Marketing Corp., New York.
But as research into better artificial sweeteners continues, Hemphill said that trend could reverse at any time.
“The perfect zero-calorie sweetener doesn’t quite exist yet,” he said, suggesting product development opportunities abound for whoever gets it right.
Bonnie Herzog, managing director of consumer equity research for Wells Fargo, New York, said because of the sheer size of the CSD category—66% of all beverage dollar sales—manufacturers can’t ignore it.
“There’s still opportunity in terms of innovation,” she said, suggesting there’s room to experiment in diets, flavors and package size.
2. Energy boost
For nearly 10 years, energy drinks were one of the most reliable subcategories in packaged beverages for consistent, double-digit growth. But recent scan data from IRI, Chicago, shows unit sales actually dipped 1% in convenience-stores during the 52-week period ending June 11, 2017.
Herzog of Wells Fargo offered three reasons for the struggle this year:
- Limited innovation in 2017. Herzog said she’s optimistic this trend will turn around in 2018 with both Monster and Red Bull showing a desire to get back to consistency and Anheuser-Busch’s recent acquisition of Hiball Energy.
- Major price increases in 2015. This historical move by both Monster and Red Bull created a tough year-over-year comparison to overcome. Herzog said she expects price increases to be fairly limited going forward.
- Monster growing elsewhere. With attention moved to other channels—from Home Depot to vending—"the slowdown in scan sales is not fully reflected in Monster’s reported results,” suggesting consumers are finding convenience in other purchase opportunities.
3. Foodservice advantage
Adult beverages as a driver of foodservice traffic may be an opportunity for convenience-store retailers, according to Donna Hood Crecca, associate principal of Technomic, Chicago (which is owned by Winsight).
“Fifty-six percent of customers are more likely to go into a c-store for foodservice if [the store] has a wide selection of adult beverages,” she said, citing Technomic data.
The correlation is even more direct for customers Technomic calls “heavy users” or “super-heavy users” of c-stores.
4. Beer run
Anheuser-Busch has defined seven trip missions that drive beer sales and two of them that most apply to convenience stores:
Mission Share of all beer trips Share of c-store beer trips
Routine refill 22% 15%
For me, for now 21% 25%
Social beer run 18% 19%
Savvy stock-up 14% 10%
Planned event 9% 11%
Browsing restock 9% 12%
Unplanned fill-in 8% 11%
“The two main trip missions for c-stores are 'For me, for now' and 'Social beer run,' ” said David Vartanian, senior director of category management for A-B. “Those two missions should help you decide: What am I going to put on display, and what am I going to stock?”
5. Not enough new?
More than one speaker at the Cold Vault Summit cited the importance of new products in attracting consumers and selling more packaged beverages. In fact, in 2016, eight of the top 10 best-selling new products in convenience stores were beverages, according to IRI’s 2016 New Product Pacesetters.
But it was Dr Pepper Snapple Group’s director of category management, Jeremy McManes, who pointed out a surprising decline in the number of new beverage products released in 2016.
In 2015, more than 1,300 new beverages were introduced, while 2016 saw only about 850.
“Shoppers want more variety,” McManes said, pointing specifically to juice drinks, ready-to-drink teas and even carbonated soft drinks as areas ripe for growth.
6. Watching water
Not all styles of bottled water are created equal, and neither are package sizes.
While it was generally agreed that the bottled-water category offers the most space for growth in coming years, Andy Baran, Nestle Waters North America’s national sales director for the convenience store channel, cited that much of the category growth today is driven by sparkling waters.
Specifically, Baran said dollar sales of sparkling water increased 33%, according to Nielsen c-store data for year-to-date Aug. 12, 2017. Still, unsweetened water grew 2%, sweetened and enhanced waters dipped 2% and the total bottled-water category was up 2%, Nielsen data showed.
Packaging-wise, single-serve still-water sales were up 1%, case pack water was up 5% and still multiserve was down 2%.
7. Ready for prime time?
Prashant Jairaj, capabilities manager for Red Bull, Santa Monica, Calif., in explaining the history of health and wellness in beverages, offered four functional product segments that may see their time come sooner rather than later:
- Kombucha. This $249 million segment saw its sales growth rise 41% in the past year.
- Cold-brew coffee. At only $73 million over the past year, cold brew has a lot of room for growth. And it’s coming quickly, with sales up 153%.
- Cold-pressed juice. With prices as high as $12 a bottle, a boost in the sale of cold-pressed juices could add up fast. The segment stands at $65 million in sales per year, up 26% from the previous 52 weeks.
- Coconut water. The most lucrative category on this list to date, coconut water grew only 2% over the past 52 weeks, but dollar sales hit $356 million.
“Ubiquity: That’s really what separates a drink in the mainstream from an alternative trend,” Jairaj said.