Packaged Beverages: Beverage Boom

What’s succeeding and what’s struggling in nonalcohol, alcohol segments

CHICAGO — When it comes to managing alcohol, what’s not to love? That’s the view of John Herbert, senior category manager for Truenorth Energy, Brecksville, Ohio. “Beer, wine and liquor have always been fast-paced, a traffic driver and can help set the tone for your customer experience,” he says. “I love watching the trends and working to build plan-o-grams to ensure our product selection is efficient and stays out ahead of the next hard seltzer or big innovation.”

The category has seen its share of innovation this year, particularly in ready-to-drink (RTD) cocktails. And there’s excitement in nonalcohol, too.

The growth of energy drinks and enhanced beverages is keeping packaged-beverage category managers on their toes, especially as they grapple with out-of-stocks.

Here’s a look at what CSP’s Category Manager of the Year (CMOY) finalists and winners had to say about what’s happening in packaged beverages and alcohol.

When it comes to nonalcohol beverages, energy drinks were a standout for growth in 2021.

“The one growth trend that’s been mind boggling is energy drinks. It has been on fire,” says Angela Oliver, category manager for Circle K’s Coastal Carolinas business unit, part of Laval, Quebec-based Alimentation Couche-Tard Inc. “Our growth drivers have been energy, isotonics, enhanced beverages and our 20-ounce immediate-consumption soft drinks. The better-for-you growth trends is something that I continue to watch and look for products that will support it.”

Energy drink sales in c-stores totaled $11.3 billion in 2021, according to scan data from IRI, Chicago. That was a 13.7% growth in dollar sales from the year prior. Units were also up with 11.2% growth.

Jack Lewis, this year’s Category Manager of the Year (CMOY) winner for packaged beverages and senior category manager with Richmond, Va.-based GPM Investments, says in 2021 he changed how he displayed energy in the chain’s coolers.

“We started doing a new section in our coolers called performance energy section, where we started expanding some more performance waters and energy drinks, and from there, we started really seeing some great increases in energy-drink sales,” Lewis says.

He also has an innovation shelf on the top of the performance door, where he puts in new brands every quarter to give them a chance to see what they can do. When innovation slowed over the pandemic, though, the same items remained in for half of the year, he said. That’s starting to pick up again though.

Red Bull and Monster energy drinks also picked up strong sales when the country was in a COVID-19 lockdown, he says. Lewis says he’s on his third year of more than 10% growth in the energy segment.

Finding which brands will stick isn’t always easy, though.

“We continue to ride the energy train as it continues to grow year after year with new options and trying to guess which ones are going to be the ones to hit and which ones are the unfortunate flash in pan that comes and goes every year,” says Michael “MJ” Simons, senior category manager of beverages for MAPCO, Franklin, Tenn.

Another segment category managers saw growth in was bottled water. Bottled-water dollar sales were up 18.8% and unit sales were up 13.3% in c-stores in 2021, IRI says.

Lewis says from private label to the premium waters, most of last year he was 30% to 40% up in bottled-water sales.

One of the ways the pandemic changed the category, Simons says, is that consumers are looking for more functional and healthier options. Water is key to satisfying that trend.

Supply chain issues are another effect of the pandemic that c-store category managers are still grappling with.

“It’d be nice to walk into stores and see a cold vault full the way you have it drawn on paper with a schematic plan-o-gram and see what it actually looks like day in and day out,” Simons says. “You have to continue to maintain and change and adapt. That’s definitely the frustrating part right now.”

While out-of-stocks are an ongoing issue, Oliver says things have improved.

“The pandemic has affected foot-traffic in our stores, as well as staffing in our stores, which has challenged us to keep our stores stocked,” she says. “The supply chain disruptions affected most of our packaged-beverage products at one time or another over the past two years. We saw further declines in our take-home 2 liters, as this package supports social events that softened with the pandemic.”

Oliver has brought in new brands to fill voids of brands Circle K couldn’t get, expanded space to brands that were in stock and purchased inventory ahead of expected product disruption to help maintain in-stocks.

“This is what I work to solve for daily and improve on,” she says. 

During the pandemic, consumers found c-stores to be a good place to buy alcohol, says Bob Gulley, senior category manager for Circle K’s Rocky Mountain business unit. Whether it’s beer, wine or liquor, there are opportunities for c-stores in alcohol.

“People are starting to use the c-stores more and more for those type of purchases,” Gulley says. “We’ve captured a bigger portion of different shopping occasions. We still have beer and [consumers] buying bigger packages, but now they’re buying wine and liquor and things like that. So, we’ve done a really good job of capturing that customer and holding onto them.”

Overall, liquor sales in c-stores were up 2.7% in dollar sales and 0.6% in unit sales in 2021, IRI says.

Like any other c-store category, though, alcohol has its challenges. Supply shortages have affected alcohol, like nonalcohol beverages. And inflation is something Gulley will be keeping an eye on in the future.

“[With] people having less dollars [and] fuel prices going up, are people going to start to look back at more affordable alcohol category?” Gulley says.

Being flexible has been key to keeping the cold vault stocked. Gulley will meet with vendor partners to find out what different products they can offer and what’s available in warehouses.

“It really comes down to communication between the suppliers, the wholesalers in my operations and saying, ‘OK, you’re out of that, but what can we move to, what can we bring in, and can we get more of that product?’ ” Gulley says. “So having those relationships really makes a big difference when you’re trying to succeed in the midst of supply-chain issues.”

There are, of course, some bright spots in the category though, ready-to-drink (RTD) cocktails and hard seltzers included.

One of the more exciting things happening in alcohol is the emergency of RTD cocktails, says Herbert of Truenorth Energy. Brands such as High Noon and Monaco came out a few years ago, and now there are many new entrants.

“Whether it be new brands like Onda Tequila or established spirits brands like Jameson, Bacardi and others entering the space, it’s all pointing to a new spirits consumer we didn’t necessarily have access to before,” Herbert says.

The momentum is starting to slow on hard seltzers, Herbert says. He is watching where the volume is shifting and what subcategories, brands and innovations will move to fill that void.

National data shows that seltzers, or beer seltzer-centric, as IRI defines the segment, are still growing, though. It took in more than $2.1 billion in c-stores in 2021 and was up nearly 26% in dollar sales and 21% in case sales, according to IRI.

“It is no surprise that we are keeping a close eye on seltzers and the RTD/canned cocktail trends,” says Michael Varallo, assortment manager for Wawa, Wawa, Pa., and this year’s CMOY winner for alcohol beverages. “I believe the RTD segment will be significant in c-stores given the ultimate convenience and drinkability of the items. Additionally, with seltzers, it will be vital to keep on top of trends to ensure your space is properly allocated and that segment begins to stabilize.”

To keep on top of the trends and COVID challenges, Gulley lives by the motto “if you’re not first, you’re last.” His goal for the category in 2022 is to strive to provide customers with the best products and to help Circle K’s operations team to work through and come up with good tactics to implement.

“Our tagline is ‘Make it easy for our customers.’ That includes our employees. So, [we’re trying to come] up with programs that really strive to be easy for our consumers to understand and for our employees to implement,” Gulley says.

Click here to view the complete Category Management Handbook report.

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