Better-for-You Beverages

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Better-for-You Beverages

By Angela Hanson, Convenience Store News - 04/06/2016

Today’s convenience store customers are interested in having more healthy fresh food options available alongside roller grill dogs, fried snacks and other c-store staples, but the growing desire for better-for-you products is affecting the cold vault as well. Packaged beverages are frequently paired with a foodservice purchase, and sales of teas, juice and bottled water are growing rapidly.

“Demand for healthier packaged beverages is accelerating at a remarkable pace. Across channels and across most key beverage segments, we see healthier options leading the pace when it comes to both innovation and growth,” Brent Guinn, vice president of marketing for good2grow, maker of licensed, healthy beverages, told Convenience Store News. “The current trend is far different than some of the health fads we’ve seen in the past, as millennials really are changing the way the world thinks about what we eat and drink.”

Millennials are also helping change the way society has traditionally thought about c-stores; that it’s a channel predominantly catering to men who are far less choosy about sticking to a healthy diet. As consumers’ perception of c-stores change and retailers target other demographics, packaged beverage sales are shifting in turn, particularly in recent months.

“We are seeing double-digit growth in ingredient-enhanced water, sparkling water and ready-to-drink (RTD) coffee, along with strong performance in RTD tea and sports drinks in c-stores,” reported Clint McKinney, director of convenience retail category advisory and space strategy for Atlanta-based beverage giant The Coca-Cola Co.

While carbonated soft drinks (CSDs) still dominate the cold vault in terms of total dollar sales, CSD growth has stalled in recent years as the popularity of better-for-you packaged beverages keeps rising. Savvy retailers must not ignore the opportunity this represents.

One convenience store chain recognizing and capitalizing on this movement is Lubbock, Texas-based United Express, which has more than 30 c-stores throughout the Lone Star State.

“This niche in healthier beverages is driven by teas (both packaged and fresh-brewed), as well as flavored waters, children’s juices, dairy products and craft sodas,” said Angelos Lambis, director of fuel and convenience for United Express, a division of The United Family. “United Express has dedicated more shelf space to these micro segments in select stores and, as a result, is seeing higher dollar sales and additional gross profit margin from them.”

Not only does this let the retailer capitalize on a growth area, but it also serves as a strategic move that enables United Express to create a point of differentiation from its competitors, many of whom remain focused on “older, declining [beverage mix] subcategories,” Lambis noted.

STOCKING YOUR SHELVES

For customers seeking to cut down on their liquid calories consumed, bottled water is an obvious choice, and sales have reflected this. Recent research from Mintel shows that bottled water sales grew 6.4 percent to reach $15 billion in 2015. That figure is only expected to grow through 2020. The research firm predicts total bottled water sales will see 34.7-percent growth, with sparkling/mineral water/seltzer in particular seeing 75.1-percent growth.

Consumers aged 18 to 34 are the most likely to consume any kind of bottled water. They are also the age group most likely to purchase flavored bottled water. Along with the product’s lack of calories, consumers have expressed an interest in the functional attributes of bottled water that is enhanced with vitamins.

Those customers in search of healthier beverages are also likely to seek out teas. There’s a number of consumers who correlate the tea segment with wellness, according to a recent Mintel/GMI (Global Market Insite Inc.) study.

“It’s important for c-stores to maintain overall balance with their products by incorporating sweet, unsweetened and diet tea beverages in order to drive growth while meeting consumers’ preferences,” advised Coca-Cola’s McKinney.

Even consumers who don’t have a specific better-for-you beverage in mind when they approach the cold vault are still interested in specific attributes.

“We know consumers want variety and choice when it comes to beverages,” McKinney said. “The biggest opportunity I continue to see with retailers in convenience retail is managing their space and assortment to meet consumers’ needs for unique offerings. With the majority of beverage sales coming from the cold vault, you have to ensure you have the right assortment to satisfy consumer demand.”

Better-for-you does not only have to be limited to the beverage itself, either. Smaller package sizes in the form of mini-cans and bottles are in growing demand. Some consumers prefer to manage their diets through portion control rather than eschewing sugar and calories altogether.

Increasingly, consumers also care about the way their beverage is sweetened as much as what type of beverage it is. Certain groups are on the lookout for natural sweeteners that don’t add empty calories, particularly the female customer base many c-store retailers are trying to build.

“We consistently hear our moms talking about two major areas that are critical signals for them in assessing the health credentials of a children’s beverage: ingredients and sugar content,” good2grow’s Guinn said. “They want to see that there’s nothing artificial and that the ingredients are things they can actually pronounce.”

After several years of hearing about the impact of sugar on children’s health, “moms are demanding products with no added sugar and low overall sugar content,” he continued.

Although better-for-you beverages are not going to overtake the Cokes, Pepsis and other longtime favorites for the foreseeable future, consumer preferences are undeniably changing. So, making the most of the cold vault will mean evolving in pace with those preferences.

“This niche in healthier beverages is driven by teas (both packaged and fresh-brewed), as well as flavored waters, children’s juices, dairy products and craft sodas. United Express has dedicated more shelf space to these micro segments in select stores and, as a result, is seeing higher dollar sales and additional gross profit margin from them.”
— Angelos Lambis, United Express