C-store Beverage Sales Weather Slow Q4

NEW YORK — The fourth quarter proved to be a little challenging for beverage sales in the convenience channel. While the category saw some growth, it was soft, according to a recent survey.

Wells Fargo Securities LLC's latest Beverage Buzz survey found that non-alcoholic beverage sales were up 3 percent and alcoholic beverage sales were up 4 percent in the last quarter of 2016.

Beverage Buzz surveys beverage retailers representing more than 15,000 convenience stores.

According to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities, the sales figures represent a sequential and year-over-year slowdown, which retailers attributed to "significantly worse weather, election hangover, higher gas prices and lower promotions."

Looking closer in the cooler, bottled waters, flavored carbonated soft drinks (CSDs), energy drinks, and craft and import beers were the top categories, she added.

"Overall we believe risk/reward for most beverage manufacturers and c-stores is slightly negative given the sequential slow down and macro factors that weighed on sales this quarter," Herzog said.

As for brands, Herzog noted that sales of Monster Energy Corp. were up "a paltry 2 percent" in the convenience channel. Overall, retailers in the Beverage Buzz survey attributed the soft results to continued slowdown in the category in the United States, with only a modestly improving future outlook; a lack of focus on core energy products; Java out of stocks; and a "disappointing" launch of Mutant.

Moving to beer, Constellation Brands Inc.'s growth decelerated slightly, but it still remains "well above" category growth, she said, adding that c-store retailers reported solid 7-percent sales growth in the fourth quarter.

"While this is slightly below recent trends given broad deceleration in foot traffic that weighed on all c-store sales, we believe Constellation Brands' outlook remains very strong, particularly given the significant incremental shelf space retailers expect to give [its brands] in 2017," Herzog explained.

Based on Beverage Buzz results, channel sales for The Coca-Cola Co. increased 1 percent during the last quarter. Overall, retailers reported strong results in Smartwater; however, some have "concerns about the impact that [PepsiCo's] LifeWtr will have on Smartwater in 2017."

She added several retailers reported a few challenges with some products' distribution as part of Coca-Cola's refranchising, which may be driving some out-of-stocks.

Dr Pepper Snapple Group's sales growth remained strong in convenience stores, driven by Allied Brands, according to the survey. Based on Beverage Buzz, Wells Fargo Securities estimates the manufacturer's retail sales in the channel increased 3 percent in the fourth quarter. Favorable pricing for CSDs helped drive the increase, Herzog added.

Pepsi saw flat results in the last quarter, according to Herzog. Retailers gave Pepsi high marks for innovation, which could help re-accelerate growth in future quarters.