CHICAGO — As the world opens following the COVID-19 pandemic, consumers are using convenience stores more regularly, resulting in buyers increasing their purchase size per trip, Sally Lyons Wyatt said.
Wyatt, executive vice president and practice leader with Chicago-based market research firm IRI, said when it comes to packaged beverages in c-stores, sparkling is showing gains. Outside of still bottled water, carbonated drinks are among the largest product categories in c-stores. CSP took a look at how these beverage segments are performing now.
Energy drinks, carbonated soft drinks (CSDs) and carbonated water saw growth in dollar sales year-over-year in convenience stores, Wyatt said. Sparkling alcohol beverages, primarily hard seltzers, are also showing growth, although recently, the segment has shown sign of challenges to come.
Energy drinks is driving the category, said Adam Ruessler, manager of consumables for Oklahoma City-based Love’s Travel Stop & Country Stores Inc.
“Energy hasn’t skipped a beat even through COVID-impacted time periods. This year has already been record worthy in terms of volume,” Ruessler said.
Here’s a look at how sparkling beverages are faring in c-stores. ...
Energy Powers Up
While total sparkling dollar sales are up, energy drinks is the only segment growing share in c-stores, Wyatt said. This is primarily driven by an increase in trips and penetration.
Energy was up nearly 15% in dollar sales and 14% in unit sales in c-stores so far in 2021, as of June 13, according to IRI.
For Ruessler, it’s one of the leading segments for growth for the entire company, behind only deli.
“We’ve actually outpaced the industry for the last three years running,” he said.
Chris Stewart, director of packaged beverages at Casey’s General Stores Inc., Ankeny, Iowa, said energy drinks are the growth leader for its 2,230 stores, as well. Monster and Red Bull are driving most of the growth within the segment, he said.
“Innovation such as the Red Bull Summer Edition and Monster Gold are providing strong incremental sales for the category and are two of the top innovation items in 2021. Watermelon has been a flavor profile that has been on trend for the last 12 months,” Stewart said, listing Red Bull’s 2020 Summer Edition, Monster Ultra Watermelon and Mtn Dew Major Melon as examples.
Retailers need to consider the long-term trends when considering vault space, said Laura Lynn Freck, senior director of shopper and category insights at Red Bull North America, Santa Monica, Calif. Energy-drink growth has been consistently strong during the pandemic and as trips return to c-stores.
In general, shoppers have been reaching for familiar favorites across brands and flavors in beverages, she said.
“While flavors are always a driver of trial, there is also a lot of substitutability that happens across flavors, and shoppers tend to revert to their tried-and-true favorites over time,” Freck said.
CSDs Go Soft
CSDs are up in sales and units in c-stores, according to IRI and NielsenIQ, Chicago, but trends are softening in some areas.
Carlton Austin, director of convenience retail strategy and commercialization at Atlanta-based The Coca-Cola Co., North America, said flavored colas are performing well in the category—up 16.1% from last year. Lemon-lime, orange and root beer are leading the growth in non-cola flavors, Wyatt of IRI said.
At Casey’s, CSD sales softened a bit coming out of the coronavirus pandemic, Stewart said.
“Single-serve CSD performance has stabilized and is about in-line with total nonalcohol performance impacted by consumers gradually migrating back to fountain drinks,” he said.
But for Ruessler, the return to fountain has been slower than expected. He said Love’s isn’t losing those consumers, though, they’re just turning to the cold vault.
“While retailers should identify and highlight growing categories and new innovations, they should also continue to dedicate cooler space to the traditional beverages that their customer base is looking for, such as sparkling soft drinks, packaged water and energy drinks,” Austin said.
Hard Seltzers: Oversaturated?
While hard seltzers provide the largest sales percentage growth of all alcohol categories for Love’s, the segment has become oversaturated and dominated by the leading brands, Ruessler said.
Ruessler said he’s been rationalizing SKUs in many beverage segments, including hard seltzers. White Claw and Bud Light Seltzer are his top sellers. He plans to reduce hard seltzer space this fall.
“What we gave to it, it was a big bet for us, for alcohol,” Ruessler said. “We found that all that innovation we had taken in didn’t do as well as [manufacturers] anticipated or planned.”
Goldman Sachs Managing Director Bonnie Herzog said in a late July report that the hard-seltzer segment slowdown is real and more pronounced than originally thought given category confusion from overproliferation of SKUs and tough comparisons to last year.
The Boston Beer Co. said it overestimated the growth of the hard-seltzer segment and the demand for Truly Hard Seltzer in second-quarter 2021, which negatively affected its volume and earnings.
“We increased our production of Truly to meet our summer peak and have had lower-than-anticipated demand for certain Truly brand styles, which has resulted in higher-than-planned inventory levels at our breweries and increased supply chain costs and complexity,” Dave Burwick, Boston Beer’s president and CEO, said.
Hard seltzers, however, are still expected to grow 33% to $2.2 billion in the convenience channel in 2021, according to Tracy Nguyen, senior director of category development at Anheuser-Busch, New York. This would bring the segment to 9.4% share of beer.
“Hard seltzer, with flavor variety, fewer calories and carbs than beer and premium value propositions, sits at the intersection of the growth trends in alcohol,” Nguyen said.
Switching to Sparkling
Seltzer, sparkling and mineral waters saw double-digit gains in c-stores for the first half of 2021. The segment was up 18.5% in dollar sales and 17.4% in unit sales for 2021 through June 13, according to IRI.
Consumers looking for healthier options is driving this growth, said Angela Smith, manager of consumer insight and engagement at Talking Rain Beverage Co., Preston, Wash.
“As consumers continue to scrutinize labels and prioritize their overall health and wellness, they are looking for products that align with their needs,” she said. “As a result, we continue to see more consumers swapping out their sugary sodas for other options, such as flavored sparkling waters.”
The health benefits become especially important with younger generations, Wyatt said.
“Millennials and Gen Z consumer groups prefer less sweet drinks, zero sugar, enhanced flavored waters and clean energy,” she said.