Total beverage sales growth in the convenience-store channel was up 6.2% in 2023 and 4.8% in the fourth quarter, according to New York-based Goldman Sachs’ fourth-quarter Beverage Bytes survey, which represents about 40,000 retail locations—or about 27% of the c-store channel.
Thirty-three percent of retailers reported that their outlook on the beverage category has improved in the fourth quarter due to resilient consumer demand and unit growth due to increased promotional activity and strong energy drink growth. This is a jump from 7% in the third quarter.
Challenges this quarter have included pricing pressures and competition between the mass and food channels, which has weighed on traffic and broader economic pressures and inflation in beverage prices, according to the survey. One retailer noted that manufacturers are driving value for shareholders through price increases, albeit at the expense of volume, with this trend likely to carry through the year.
Traffic pressures were more pronounced in the fourth quarter and down 0.2% year-over-year (vs an increase of 0.4% in the third quarter), likely reflecting the economic pressures on the consumer and pressures from higher prices, according to the survey.
Looking ahead, retailers expect the beverage category to grow 4.4% in 2024, with traffic expected to grow 0.3%.
Clean and better-for-you energy drinks continue to grab more customers from the coffee segment, though retailers said that Red Bull seems quite vulnerable. This trend has been underestimated, according to the survey, and is likely one of the reasons for the overall coffee category slowdown.
While retailers expect healthy 8% category growth in 2024, expectations moderated compared to a prior survey where retailers expected 13% category growth.
One retailer indicated that Monster and Red Bull continue to be the primary growth drivers of the category, while Celsius is a strong No. 3.
There is emerging competition in the hard tea category, and Monster Energy’s new Nasty Beast Hard Tea has sparked interest.
Seventeen percent of retailers noted they expect Nasty Beast to take at least some share from Twisted Tea, while another 33% of retailers indicated the brand could “maybe” take some share from Twisted Tea.
A retailer said they will have the brand in store upon launch and expects it to do well given the brand targets Monster’s core customer base.
Of the retailers who were a bit more cautious on Nasty Beast Hard Tea, one noted that the consumer is unaware that the brand is a main competitor to Twisted Tea, while another suggested that the brand is unlikely to last.
Non-alcohol Beverages Takeaways
Ninety-four percent of retailers indicated that pricing across the major non-alcohol beverage manufacturers increased moderately or significantly in 2023, up from 76% who expected this in the third-quarter survey.
Looking ahead, all retailers (100%) expect that beverage manufacturers will implement further price increases this year. Of these retailers, 35% expect significant price increases.
Fewer retailers this quarter (44%) indicated they are seeing signs of promotional activity picking up in the non-alcohol beverage space, but most retailers (65%) expect manufacturers will have to start to promote more to prevent volume erosion.
One retailer noted that the fourth quarter and 2023 as a whole was a bit of an anomaly as the price war between food and mass heated up. Food closed a lot of its share gaps at a profit cost, but this has already slowed, said a survey responder; therefore, it’s likely that the rest of 2024, especially the back half, will be more promotional as many will need to offset fourth-quarter 2023. This retailer highlighted that promoting more in 2024 is likely but expects retail price points to be higher on promo. Essentially, manufacturers are still trying to push pricing this year, but he believes customers will respond even less than last year, ultimately driving down units and sales.
Another retailer noted that it’s not necessarily the total amount of promotions that has changed, but rather the promotional length that has increased, especially among smaller brands.
Alcohol Beverages Takeaways
Seventy-five percent of retailers noted modest alcohol increases in 2023, while 25% of respondents indicated that pricing increased significantly. Looking ahead, all retailers indicated they expect modest price increases this year.
Beer category sales growth accelerated in the c-store channel’s fourth quarter, up 7%, according to the survey’s retailer contacts. Retailers’ expectations for beer category growth in 2024 is slightly more optimistic, with expectations of 5% growth, compared to 4% growth expectation in the third-quarter survey.
Overall, retailers indicated that hard seltzer category sales declined 5% in the fourth quarter. Retailers expect the hard seltzer category sales to decline 4% in 2024.
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