CHICAGO — Whether it’s because convenience-store consumers are looking for a healthy beverage or because they’ve been more on-the-go since the world has largely reopened from the COVID-19 pandemic shutdowns, bottled water is doing well in the channel.
Total bottled water sales were up nearly 15% in c-stores for the five weeks ending Oct. 3, 2021, according to IRI, a Chicago-based market research firm. C-store retailer Rutter’s is seeing even stronger growth than that, Senior Category Manager Sean Pfeiff said. But ongoing production issues will keep him from expanding his bottled-water set for 2022.
- Rutter's is No. 87 on CSP’s 2021 Top 202 ranking of U.S. c-store chains by store count.
Pfeiff shared insights with CSP into how he’s managing the high-performing category, while bottled-water suppliers shared their thoughts into what’s driving c-store consumers’ water purchases.
Discovery Phase
Rutter’s is still in the discovery phase of what post-COVID packaged beverage trends may look like, Pfeiff said. But bottled water is a segment that has been doing well in the York, Pa.-based chain’s nearly 80 stores.
One trend he expects to stick coming out of the pandemic, though, is larger pack sizes. Rutter’s has seen better growth in its 1-liter bottled-water packages compared to the 20-ounce sizes. The stores carry some take-home packages with 24-, 12- and six-packs of bottled water, “but that’s not really what’s driving business,” he said.
C-store consumers are gravitating toward larger sizes of single-serve bottled waters as in-home consumption remains higher than pre-pandemic levels, said Sarah Gustat, executive vice president of marketing for Sparkling Ice maker Talking Rain Beverage Co.
They also want variety. The pandemic made consumers more likely to stock up on bottled water and to buy in bulk options, so there is now a higher demand for different size options including variety packs, single-serve bottles and 1 liters, according to the Preston, Wash.-based company.
Varity, Private-Label Key
Pfeiff said Rutter’s variety in its bottled water sets is one of the reasons it’s doing well.
“Whether it comes to some of the premium waters, spring waters, alkaline waters. we have a great assortment, and I think that that’s really helped us, because there are some packages you’re just not going to find at a grocery store,” he said.
Another reason is the chain’s private-label offering. Rutter’s has its own dairy and produces its own private-label bottled waters, which allowed it to have bottled water in stock during the pandemic when many retailers struggled to keep cooler doors filled, he said.
That doesn’t mean Rutter’s isn’t hurting from supply issues though. Pfeiff likely won’t expand bottled water space for 2022 due to ongoing production problems, he said. An average Rutter’s store has about 12 cold-vault doors, not including dairy. Water usually takes up just less than two doors, Pfeiff said.
Typically, Pfeiff won’t bring in new packaged beverages in the middle of the year, but he brought in some new bottled-water products in 2021 in between resets to fill in some gaps where an item might have been discontinued or put on limited allocation.
He’s also had to focus more on stocking core brands and products.
“The smart retailers are going to remember where their bread gets buttered, and those key packages and focusing on the reliable packages is a smart move,” Pfeiff said. “But at the same time, we pride ourselves on variety, and so we’ll do what we can to strike a good balance.”
Inventory constraints and supply chain issues are top concerns in retailers’ minds, said Megan Bushell, CEO of alkaline water company Defy, Denver.
“We’ve seen shelves empty nationwide, from the Carolinas to California. This has presented an opportunity for startups and challenger brands like Defy to establish a foothold in the space,” she said. “We are seeing more nontraditional bottled-water brands in the cold set to help fulfill consumer demand, which the dominant players cannot currently fill.”
That’s been an opportunity for Rutter’s, Pfeiff said. He loves bringing in innovative new products and giving the smaller companies a shot to succeed, but in 2022, retailers must have an awareness of the product issues that are going on to maintain full coolers.
“Not just in the beverage categories or the c-store industry, but it’s everywhere,” he said of the supply problems. “We have to be cognizant of that and be very methodical on what products we choose to put on our shelves.”
It's important to allocate space for what you know performs well, but it’s equally important to allow room for innovation because there are always new water trends and varieties being introduced, said Carlton Austin, director of convenience retail strategy and commercialization at The Coca-Cola Co., Atlanta.
“Additionally, we recommend making both chilled and ambient water available to offer customers a choice based on their preference,” he said.
This is something Rutter’s does in some of its stores. Pfeiff said he stocks 1 liters of ambient water in racks in the center store, usually in an endcap position.
Enhanced Waters Excel
Meanwhile, enhanced waters have been another area of growth for Rutter’s, Pfeiff said. These include drinks that have added elements such as high-alkaline properties, added vitamins and even caffeine. Flavored and sparkling waters are growing, too, with Sparkling Ice leading the segment, he said.
This could be because c-store consumers are looking for healthier options than carbonated soft drinks (CSDs) or juices.
C-store consumers are increasingly interested in healthier options that offer additional functional beverage options, said Jen Moore, category manager and sales development and operations manager at Stamford, Conn.-based BlueTriton Brands. In addition, consumers are looking for alternatives to CSDs, which sparkling waters provide, often with fewer calories, sugars and additives, she said.
Younger generations are leading this mindful drinking movement and, in turn, driving the demand for better-for-you alternatives to sugar-based drinks, said Scott Miller, CEO at Bothell, Wash.-based Essentia Water.
While he acknowledges that consumers are looking for healthier options, Pfeiff said that is not necessarily a driving force when determining what drinks to stock. At the end of the day, what matters is how the beverage performs.
“I let the customer decide,” Pfeiff said. “They really dictate … the type of products that we offer. And, of course, the backbone of the category is [still] going to be carbonated, and it’s going to be energy [drinks].”