NEW YORK -- Following on 6.5% sales growth in 2014, packaged beverages momentums continued through the first quarter of 2015, according to Wells Fargo Securities' latest Beverage Buzz survey of convenience-store retailers.
"Non-alcoholic beverage trends remain very strong with +6.4% sales growth in Q1 and alcoholic beverage sales up a solid +5.5%," analyst Bonnie Herzog said. "It appears lower gas prices continue to drive robust results, as one retailer suggested, 'No doubt that consumers had more money to spend and indulged,' which resulted in 'a lot of trade-up as they could afford the premium brands,' as well as increases in basket size and fuel purchased per trip."
This is a strong carry over from 2014, when packaged-beverage sales in c-stores grew 6.5% and beer sales grew 3.5%, according to preliminary NACS State of the Industry data unveiled last week.
A breakdown of the major beverage companies in c-stores:
Monster
"We estimate Monster's c-store volume grew +9% in 1Q15 with minimal net retail pricing growth, as Monster-funded promos kept net retail prices flat," Herzog wrote. "While many retailers reported very strong performance for Monster, several continue to raise concerns about the pending transition in distribution in terms of the potential for out of stocks and delivery issues. Further several retailers have taken advantage of favorable buy-in options from legacy Anheuser-Busch (A-B) distributors as they deplete their Monster inventory, which could result in retailer destocking next quarter.
"Bottom line," she concluded, "we continue to believe that Monster is well positioned to drive substantial growth through its innovation and international expansion, however, believe [there could be] minor disruption issues as it transitions distribution in the United States."
Coca-Cola Co.
"Based on our survey results, we estimate that Coca-Cola's average retail price growth was up a solid +2.5% and volumes were up a strong +4.1% in Q1, both above results posted for the past four quarters," Herzog said. "Our retailers consistently called out smartwater as a leading contributor to growth, along with new package innovation.
"... Coca-Cola [has shown] strong net pricing growth in carbonated soft drinks and performance of non-carbs in this channel."
PepsiCo
Strong results in the c-store channel were led by Kickstart and Gatorade, according to the report.
"We estimate PepsiCo volumes were up +4.1% with average retail prices for Pepsi beverage products up +2.2% in Q1," Herzog wrote. "Similar to last quarter, Gatorade sales were very strong in the quarter with one retailer suggesting, 'Gatorade is one of the fastest-growing brands we have today.'
Dr Pepper Snapple Group
"We estimate that Dr Pepper Snapple's retail volume was up a modest +0.6%, and its price was up +0.7%," Herzog wrote. "These results place DPS at the bottom of its peers. While several retailers believe that DPS' 'c-store focus has declined,' most are generally encouraged by DPS' Allied Brand performance, including Vita Coco and Bai5. In fact, given the success of Bai5, DPS recently announced a $15 million minority stake investment in the company for a 3% stake (implied $500-million valuation), which we view as positive."
Looking out to the rest of the year, Herzog said, "our retailers project mid-single-digit beverage sales to continue in 2015, with one retailer projecting "this will be a banner year for the beverage industry.
The comment comes just as U.S. beverage sales grew 2.2% in 2014, according to Beverage Marketing Corp. data, the first substantial growth in more than six years.
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