C-store Beverage Sales Head Into Summer on Strong Q1

NEW YORK — Low gas prices have led to an increase in inside sales, which has been good news for convenience store beverage sales. 

C-store beverage sales were strong in the first quarter as industry tailwinds continue and expectations are high for the peak summer selling season, according to Bonnie Herzog, managing director of managing of tobacco, beverage and convenience store research at Wells Fargo Securities LLC.

Wells Fargo Securities' recent Beverage Buzz survey found that non-alcoholic beverage sales remain strong, up 6.6 percent and alcoholic beverage sales were up 5 percent in the first quarter.

Beverage Buzz surveys beverage retailers representing more than 15,000 convenience stores across the United States.
 
Other beverage segment also saw a positive first quarter. Notably, non-carbonated beverages, sport drinks, energy drinks and craft/import beers continued to generate robust growth given lower gas prices and premiumization trends, Herzog said.

"We continue to believe the risk/reward for both beverage manufacturers and c-stores ahead of first-quarter results remains favorable given the benefit from lower gas prices/higher consumer disposable income and overall positive beverage industry trends," Herzog explained.

Looking at individual brands, sales for Monster Beverage Corp. decelerated despite transition issues being largely resolved which Wells Fargo Securities attributes to the difficult year-over-year comp. However, retailers expect Monster to return to double-digit sales growth for the balance of the year, according to Beverage Buzz.

Based on the survey, Wells Fargo Securities estimates the company's c-store sales were up 8.2 percent in the first quarter. In addition, following distribution issues last year from the transition to The Coca-Cola Co.'s system, most retailers reported that "service issues have been addressed and we are now seeing great service levels."

Retailers also project Monster will outperform the energy category this year with double-digit sales growth. 

As for Coca-Cola, Wells Fargo Securities estimates retail sales were up 5.4 percent during the first quarter, "a sequential increase from the fourth quarter and last year," Herzog explained.

Retailers reported that Coca-Cola was successful with its pricing strategies and marketing campaigns in the first quarter. Looking out to the peak summer selling season, retailers expect the new incarnation of Share a Coke, "Share a Song," to be a hit in carbonated soft drinks.

The beverage company should also benefit from solid marketing heading into the Summer Olympics this year, Herzog added.

According to Beverage Buzz results, PepsiCo Inc. saw its c-store beverage sales increase 4.6 percent bases on solid results from Gatorade, Starbucks drinks, and more aggressive pricing. 

In addition, "a majority of retailers believe Pepsi is the most innovative beverage company, and several retailers believe that the PepsiMoji promo coming this summer will be very successful," Herzog said.

Dr Pepper Snapple also saw a strong quarter, according to the survey with c-store channel sales up 5.4 percent. The beverage company benefited from strong results from Dr Pepper, Straight Up Tea, and allied brands, particularly Body Armor, which retailers believe "could explode," she said.

On the alcoholic beverage segment, Constellation Brands Inc. should continue to accelerate as retailers allocate more shelf space to the Corona and Modelo brands, she added.