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C-store Beverage Sales Strong Over Labor Day Weekend

NEW YORK -- A recent survey of retailers points to a solid Labor Day weekend for convenience store beverage sales.

According to Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities LLC, c-store beverage sales growth was up 4 percent for Labor Day, the strongest holiday weekend so far this year. Better weather across the country drove increased customer traffic, spurring the uptick.

In addition, respondents to the latest Beverage Buzz survey -- which represents more than 10,000 convenience store locations – believe that third-quarter beverage sales will be 3.1 percent better than last year.

"As we approach the final month of [the third quarter], we are encouraged that beverage trends are picking up and by this early sign of improvement," Herzog said.

Nearly 50 percent of survey respondents indicated that weather conditions improved during July and August, with only 21 percent indicating that weather was "much worse." This represents a significant change vs. Wells Fargo Securities' Memorial Day survey when nearly 60 percent indicated that weather was "much worse."

"We believe this will be key contributor to volume recovery for [the third quarter] after a particularly weak [first half]," she added.

Broken out by specific brands, The Coca-Cola Co. initiated a more aggressive promotional pricing strategy, particularly around Memorial Day and Labor Day, to capture market share during the key summer months in direct response to PepsiCo Inc.'s new hybrid pricing strategy, according the survey.

"Our Labor Day survey suggests this promotional activity has continued. However, we believe Pepsi may have been 'forced' to capitulate and respond to Coca-Cola's more aggressive pricing," Herzog explained. "Our retailers have indicated that in most markets, 'Pepsi is following Coca-Cola's hotter pricing.'"

The survey respondents also indicated that the Dr Pepper TEN platform continues to be challenged. Sixty percent of respondents said Dr Pepper TEN is generating weak repeat sales and "not performing as well as expected." There may be several causes for this, including the fact that direct-to-store suppliers (primarily Coca-Cola and Pepsi) are not necessarily behind the brand as evidenced by lack of execution at the store level, according to Herzog.

"In the past year, there has been a gradual reduction in our retailer contacts carrying Dr Pepper TEN and unfortunately, without a successful Dr Pepper TEN, we worry that the rest of the platform has little hope of long-term success," she said. "Therefore, we are increasingly fearful that TEN may follow in the footsteps of countless other brand extensions that fail to become meaningful independent brands."

Sales of energy drinks, on the other hand, are returning to double-digit growth with strong innovation and the declining impact of negative media coverage.

Negative press is affecting the sale of diet carbonated soft drinks, though. Instead, consumers are switching to energy drinks, tea and other low-calorie/better-for-you, new age products such as premium waters, Herzog said.

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