CHICAGO — Packaged-beverage category managers at convenience stores are grappling with several questions amid the COVID-19 pandemic: How do I keep shelves full? Can I afford to stock larger pack sizes? What promotions can I offer to cater to people staying home?
And although consumer trends are ever-changing, retailers and category experts have found ways to make it work.
Maverik is focusing on its core items and trusted brands. Circle K’s Heartland Division is partnering with suppliers to offer deals to consumers. And a category expert is encouraging c-stores to keep stocking up on alcohol and larger pack sizes, as not all consumers will be ready to return to grocery stores, restaurants and bars when they reopen.
Here’s how packaged-beverage realities played out for three industry leaders.
Maverik Focuses on Core Items
Maverik’s packaged beverage sales were down about 18.5% as the coronavirus pandemic hit the country in March.
In the months since, foot traffic to the Salt Lake City-based chain’s more than 340 convenience stores and packaged beverage sales have improved. Still, Brian Nichols, nonalcohol packaged beverage category manager, is approaching his cold vault strategy differently than in pre-COVID-19 times.
“What is going to affect the long term, at least for next year’s sets, is all of the out of stocks,” Nichols said.
At least one carbonated soft drink manufacturer told Nichols it was cutting production on certain packages so they can focus on their core items, which means Nichols has holes on his shelves for some of those out-of-production products until July and possibly longer.
“That’s the challenge right now; it’s just focusing on what can we get and how can we keep the shelves as full as possible?” Nichols told CSP at the end of June, acknowledging that there are still many unknowns. As a result, he monitors the COVID-19 situation daily for developments.
When panic buying rose in mid-March, Nichols looked at alternative package sizes, but many were cost-prohibitive, he said. Maverik’s only incremental space is on the sales floor, and that was quickly filled with gloves, facemasks, bleach and other high-demand items. Nichols even had to temporarily give up one cooler shelf of bottled water to make room for deli items, like hot dogs, bacon, cheeses and lunchmeats.
Now that foot traffic has picked back up again (although not back to pre-COVID-19 levels) nothing has changed as far as assortment goes, Nichols said.
“We’ve just been focusing on trying to stay in stock,” he said. “We’re in a horrible mess of manufacturer out-of-stocks and our supplier having out-of-stocks that nobody can forecast anymore. Everything’s just kind of out the window, and it’s tough.”
Nichols said he and his team are spending an enormous amount of time daily tracking down out-of-stock items. They’ve also started conversations earlier than normal about next year’s sets as pantry-loading and out-of-stocks have skewed sales numbers, he said.
“That’s the one thing I know is going to be the biggest headache going into next year’s set is how to navigate all the disruption and the wonky numbers and all the inconsistencies,” Nichols said. “I know everybody’s going to have a reason why their brand shouldn’t be cut or why they should grow, even though they’re negative.”
One way to help stay on track is sticking with trusted brands, Nichols said. With everything consumers are dealing with right now, he said, there is no appeal to bringing in a new, unproven packaged-beverage brand.
“I know we’re struggling with our current brands a little bit, but we’re working through it and there is that trust factor and there is that brand recognition,” Nichols said. “People are still going out for the brands that they know, the budget or value brands. Nothing has really changed too much in that.”
Bottled water and isotonics, like Gatorade, are Nichols’ best sellers. Carbonated soft drinks also did well when Maverik temporarily closed or restricted access to its dispensed beverages for safety reasons, he said, acknowledging that it is unclear if consumers will continue to choose packaged CSDs over the fountain moving forward.
Circle K Embraces Partnerships
Circle K, owned by Laval, Quebec-based Alimentation Couche-Tard, faced challenges in its cold vault, too, amid the pandemic.
Typically reliable energy-drink sales fell as stay-at-home orders kept people home from traveling to and from work, said Chris Borota, packaged beverage category manager for Circle K’s Heartland Division, based in Lisle, Ill.
Despite the challenges, Borota found ways to work with suppliers like Atlanta-based Coca-Cola Co. and Purchase, N.Y.-based PepsiCo to offer beverage and food bundles to customers.
Circle K and Coca-Cola offered a whole pizza and a 2-liter Coke bottle for $8. The deal helped fill a hole created when it pulled its usual pizza-by-the-slice program, forced by COVID-19 to shut down most foodservice operations.
Circle K also partnered with PepsiCo and Mars to offer a “pay it forward” snack bundle. For $4, customers could send a PepsiCo 20-ounce beverage, Mars candy bar and Circle K Chip to local first responders.
Even when COVID-19 slows, Borota said, he’ll think of how Circle K can package and promote packaged beverages, snacks and meals differently in the future.
Larger pack sizes also may have staying power, and can always be broken up into singles if space and demand runs low, he said.
For example, Circle K partnered with Monster to stock a new 10-pack of its 16-ounce cans of the energy drinks. Red Bull also has a six-pack of its 8-ounce cans. Again, Borota said, if future promotions do not go well, both packs can be broken up into single-serve cans to sell in the cooler.
“So once everything opens back up and goes back to normal, and then if the store has a bunch of stock, they can just use that to build their shelves and the cold vault,” Borota said.
In the Beer Cave
One segment of the packaged-beverage category, in particular, stands out as a winner in the shadow of COVID-19: alcohol.
People want to celebrate life, so even if they couldn’t go out to bars and restaurants when stay-at-home orders were in place, they would buy alcohol to bring the party home, said Larry Levin, executive vice president, consumer and shopper marketing at Chicago-based market research firm IRI.
Along with more at-home celebrations, about 90% of Americans are cooking meals at home during the pandemic, which leads to more opportunities for at home alcohol consumption.
And retailers can expect that to continue at least a few more months, Levin said. Although some states are starting to reopen on-premise business, some people plan to wait at least another three to six months before eating or drinking in public, he told CSP in June.
Income cuts could be another factor in higher alcohol consumption at home, Levin said.
“If I’ve seen my income cut significantly, I’m not necessarily going to be able to go out to a restaurant or bar when things are open, but at least I can placate myself with an opportunity to celebrate something in my life, and beverage alcohol plays a role in that celebration,” Levin said.
Innovation in beer did not take a holiday during quarantine. Levin said brewers “all did a really nice job of increasing pack sizes to accommodate an unmet need, an immediate need,” amid the pandemic. Heineken USA, for example, released a 15-can multipack that includes 12 Heineken Original Lager 12-ounce cans and three Heineken 0.0 Alcohol Free 11.2-ounce cans.
In May, A-B launched Bud Light Seltzer 24-pack variety, which intersects the hard seltzer trend and shift the company is seeing into larger packs, Ramona Giderof, A-B vice president of sales for small format, said.
“We continue to recommend to retailers to look for opportunities to reduce assortment complexity and increase days of supply on top movers to reduce risk of out of stock during this time,” Steven Holden, A-B’s senior director of category, small format, said. “We have not delayed any product releases although some items may be seeing delayed distribution as retailers have delayed executing planogram resets into summer.”
The new pack sizes fit consumer trends, as people come into c-stores to buy bigger pack sizes because they want to make fewer trips, Levin said.
“They’re seeing this as a potential way to avoid a bigger box store with a lot more traffic,” Levin said. “We’ve seen a nice growth in both large fluid ounce bottle sizes and pack sizes, but also package counts and products over 24-pack have been growing in c-store as well.”
One downside to larger pack sizes is that while people are buying more, they’re coming back to the store to restock less often, so repeat buying rates are down. Consumers are still pantry stocking every couple of weeks, so that mindset is still at play, Levin said.
The question is, Levin said, whether this becomes the new normal.
Sixty-five percent of people said they are not inclined to go to restaurants and bars once they open, according to IRI.
“So as that mindset continues to be pervasive across the U.S, that sets the table for the need for these bigger packages because people still want to celebrate,” Levin said.
For c-store retailers, determining whether larger pack sizes are worth their space is a matter of watching the market and responding, Levin said. C-store retailers have a good opportunity to maximize their space, but trends should be watched closely as they develop.