NATIONAL REPORT — Sales in the cold vault are heating up. Following mixed results in 2020, the packaged beverages category had an improved performance the following year, with positive results extending into 2022. Convenience store retailers that lean into the category's strengths will be better able to boost basket size and overall profits.
What's behind the cold vault's current success? Consumers are turning to packaged beverages for a variety of needs, such as functional benefits, health and wellness attributes, experimentation with new flavors, and more.
"Innovation and new products are driving success in the packaged beverage segment. In the first two quarters of the year, nonalcoholic ready-to-drink beverages grew 7 percent — and 40 percent of the growth in the channel was driven by new products," Carlton Austin, director of convenience retail strategy and commercialization for The Coca-Cola Co., told Convenience Store News. "Convenience shoppers are looking to experiment; approximately 30 percent like to try something different, and 80 percent are motivated by flavors they enjoy."
Convenience is also valued by busy consumers who want to try new things, but don't have the time to look up new product introductions before they're standing at the cooler door. Packaged beverages dominated the top 10 ranking of IRI's latest New Product Pacesetters report, which highlights the most successful c-store new product launches of the year.
To keep pace, beverage companies are focusing on innovation. Kent Montgomery, PepsiCo Inc.'s senior vice president of industry relations and multicultural development, North America, cited "huge demand growth" in the energy and sports drink segments, driving how the company innovates with new methods of rehydrating and replenishing consumers.
"There is a holistic need for energy management, as well as products that rebalance macro needs," Montgomery said. "On the energy front, consumers are increasingly looking for permissible options that better serve a spectrum of needs, including mental or physical boosts, as well as help focusing. On the sports front, we're seeing demand for products with fewer calories and less sugar."
Balancing the New With the Familiar
The innovation and growth around sports and energy drinks doesn't mean there is no buzz for carbonated soft drinks (CSDs), which remain a major cold vault contributor at c-stores.
"We have seen substantial success this year with sparkling soft drink innovation. Specifically, our Coca-Cola Creations platform, which is all about meeting Gen Z's desire for discovery," Austin said. "As a truly new innovation brand and flavor, Coca-Cola Starlight drove 30 percent of sparkling soft drink category growth in the first half of the year."
He noted that 32 percent of the growth came from new category buyers, while 34 percent came from expanded category consumption. "Coca-Cola is always looking at ways to innovate while maintaining our core products within convenience, because we know consumers are looking for their favorites and wanting to discover something new," Austin explained.
Some convenience store chains are making their mark as a destination for soda brand loyalists. Earlier this year, both Laval, Quebec-based Alimentation Couche-Tard Inc.'s Circle K banner and Ankeny, Iowa-based Casey's General Stores Inc. partnered with PepsiCo to release exclusive flavors: Mtn Dew Purple Thunder, which combines blackberry and plum flavors, at Circle K; and Mtn Dew Overdrive, which features a citrus punch taste with hints of mango, raspberry and lime flavors, at Casey's. The exclusive flavors were made available both in the cold vault and at the fountain.
Tom Brennan, chief merchandising officer at Casey's, noted that as the fifth-largest pizza chain in the United States, the retailer is always looking for "the most flavorful products" to pair with its handmade pizza.
Previous chain-exclusive Mtn Dew flavors include Solar Flare at 7-Eleven Inc., Goji Citrus at Jacksons Food Stores, Atomic Blue at Sheetz Inc. and Spark at Speedway LLC.
"It's no secret that the Dew Nation is very loyal and always eager to try new, innovative offerings. And our franchise exclusive flavors have helped us fuel growth for our retail partners at restaurants, convenience and grocery stores," Montgomery said. "Data and consumer insights are behind each of these innovations, and we work with our partners to determine which will generate the most success in their specific market and format."
PepsiCo plans to continue leveraging Mtn Dew's brand equity to deliver new fan favorites.
Building Up Beverages
While the outlook for the packaged beverages category is good, as cross-channel competition increases, it's more important than ever for c-store operators to utilize research, data and analytics to understand consumer behavior and maximize share of wallet.
Coca-Cola's Austin advises retailers to focus on capturing shoppers who may not have originally intended to purchase a beverage during their c-store visit.
"It's important to find ways to interrupt their shopping trip and present an opportunity for them to leave with a beverage in hand, whether that means offering them a chance to try something new or pick up a favorite core product," he said. "To effectively capture these shoppers, operators should think about incremental placements throughout the store, including permanent coolers and open-air cooler racks. Driving multiple points of inspiration inside and outside of the store is essential, including highlighting innovation within the cold vault."
As much as retailers may want to meet the needs of every consumer and give each of them a variety of offerings to choose from, limited cold vault space means they must balance exciting new items with the longtime favorites shoppers expect to see.
"It's important for operators to understand DOS (days of supply), so they can maximize space for innovation," Austin said. "Maintaining a well-stocked cold vault that balances consumer favorites with exciting new products will maximize the space through reducing inventory cost and increasing turns."