Consumer Behavior Forces Shifts in the Cold Vault

CHICAGO — At the onset of the pandemic, packaged-beverage category managers at convenience stores stocked up on larger pack sizes, saw a shift from dispensed beverages to the cold vault and recorded customers make fewer trips with larger baskets.

Now, traffic is picking up at c-stores as COVID-19 restrictions lift and summer begins.

For packaged beverage category managers, that means making sure the cold vault is ready to go and deciding which pandemic trends will stick and which ones will likely fade.

“People’s behaviors change, and you have to keep that in consideration with our industry,” said Matthew Nefferdorf, director of U.S. retail marketing with Allentown, Pa.-based CrossAmerica Partners LP.

To help retailers navigate a post-pandemic new normal in the cold vault, Nefferdorf and Dana Sump, senior category manager for packaged beverages at Casey’s, Ankeny, Iowa, spoke to CSP about how they’re managing their cold vaults as the country comes out of quarantine …  

While consumers made more trips with higher basket rings amid the pandemic, basket size has started to return to pre-pandemic levels, Sump said. The morning daypart is where Casey’s is still seeing less store traffic than normal, which is likely due to people still working from home, he said.

That may change in the fall, however, when schools are back in session.

“I see a lot of our schools committed to more of a normal school year, which then means parents will probably act accordingly as well. We will likely see families return to their routines as we approach next school year,” Sump said.

That return to work may come in waves, though, as companies like Casey’s have a phased approach.

“Some people are back in the office now, like myself, and Casey’s, specifically, is returning more people over the summer months,” Sump said.

And as the morning commute resumes for many consumers, operators are seeing an increase in demand for juice, dairy and coffee, said Carlton Austin, director of convenience retail strategy and commercialization at the North American operating unit of The Coca-Cola Co., Atlanta.

“But we also know that the workday will continue to look different as working from home and flexible schedules continue for many people,” Austin said. “It’s important for c-stores to think about having what their shoppers want throughout all dayparts beyond the morning as consumers gradually return to some semblance of their pre-COVID routines.”

The morning daypart took a hit during the pandemic for CrossAmerica, which led to a decrease in self-serve coffee sales, Nefferdorf said. For a time, most coffee bars were shut down. And when they reopened, customers were still hesitant to use something with so many touchpoints, despite CrossAmerica regularly sanitizing, he said.

People instead shifted to energy drinks and ready-to-drink (RTD) coffee.

“This time last year, our carbonated beverage subcategory was about 35% of our total [packaged beverage dollar] sales, and energy was closer to 32%,” Nefferdorf said. “Well, now a year later, it’s actually quite opposite.”

Nefferdorf said he expects the energy growth to maintain itself even as the country reopens. People are creatures of habit, he said, and many of those who switched from a coffee bar to the cold vault have been drinking their RTD coffee or energy drink for more than a year now.

“So how many of those people will switch back? How many of those people will continue to keep that trend just because it’s something they’ve kind of built a habit of? We’ve got to take that into consideration when we look at how much space we allocate to those growing categories,” he said.

Nefferdorf is betting that some of those habits will stick. By removing slower-moving items, he made more space for drinks like Starbucks Frappuccinos, Dunkin’s RTD coffees and Monster Energy’s breakfast flavors like Monster Java.

Sump also expanded his energy section at Casey’s—he condensed some RTD teas, flavored water, protein and dairy to make room for more energy drinks. Now they have about a half a door more, or two doors total, of energy per store.  

“Energy's the king of the hill right now; it's growing at a strong pace,” Sump said. “But within energy, there are no surprises we’ve seen yet. The traditional ones, like green Monster and Red Bull and Red Bull Summer Edition, for example, are performing well right now.”

Casey’s is betting that people will start to migrate back to dispensed beverages, and it’s something the chain is promoting this summer. As of May, though, its larger pack sizes of carbonated soft drinks (CSDs) have remained popular.

“For us, it's been about the same because food drives a lot of what our consumers grab from a packaged beverage standpoint,” Sump said of larger pack sizes in beverages.

Casey’s also launched a private-label beverage line in 2020, which includes 2-liter CSDs in flavors like Cola, Root Beer and Lemon-Lime. Private-brand packaged beverages gave Casey’s the opportunity to put together a good meal deal for its customers, Sump said.

“Two-liters continue to be a big piece of our pizza business, when you look at basket affinities. We also expect to see some changes as people migrate back to dispensed beverages and fountain,” he said.

Larger water bottles are doing well, too. One surprise for Sump is how well the 1.5-liter bottles of water he brought in are doing. He carries that size in a range of products and prices from $3 Fiji bottles to a Casey’s private-label bottle for about $2.

At CrossAmerica, though, larger pack sizes have slowed, especially when it comes to alcohol.

“Bulk has definitely been the biggest hit, but I don’t think that’s a surprise to anyone,” Nefferdorf said.

While the alcohol category has grown for CrossAmerica, Nefferdorf said they’re seeing some attrition in the category, especially compared to last year’s sales. In spring and summer 2020, many bars and restaurants were shut down, so people turned to off-premise alcohol options. That’s changed as many businesses reopen and the Centers for Disease Control and Prevention (CDC) said fully vaccinated people can resume activities they did prior to the pandemic.

“I think everyone went back to their normal lives a little bit and doing that means going to dinner and having a drink, and not having to buy a 24-pack and sit at home,” Nefferdorf said.

Most of the large cases CrossAmerica carried were put on the floor, so no major changes need to be made in the cold vault as that demand fades. Nefferdorf is continually monitoring displays to make sure the amount of inventory meets consumer’s demand.

“We’re starting to see more of a shift back to the single serves and the small pack sizes because people are more comfortable with taking more trips inside our stores and stopping in more a couple times of week,” he said.

As mobility increases, demand for single-serve products will increase, said Kate Garner, senior vice president of demand accelerator for PepsiCo North America, Purchase, N.Y.

“Consumers will be looking for assortment in the cold vault to satisfy their broad spectrum of needs, and more specifically their personal favorites,” Garner said. “Additionally, there is an increased focused on energy and nutritional benefits coming out of the pandemic.”

C-stores should not lose sight of the growth they experienced in multi-serve and multi-pack beverages during the pandemic, however, she said. As social gatherings return during summer holidays, c-stores should expect continued demand for these products.

Monitoring these consumer behaviors shifts will be an ongoing process.

“We’re just excited for folks to be able to take more trips to our stores, and we’re excited for the growth that we’ve seen,” Nefferdorf said. “It’s monitoring whether or not the habits that folks had kind of gotten into a year ago, do they continue?”