C-store Retailers Hold Cautious View of Beverage Sales

NEW YORK — New research indicates beverage sales trends remained healthy and ticked up modestly in the first quarter, but convenience store retailers have a more cautious view outlook for 2023.

According to Goldman Sachs' first quarter Beverage Bytes survey, c-store retailers expect beverage sales to increase approximately 4.6 percent this year vs. the previously reported 5.9 percent. The survey represents roughly 50,000 retail locations or 30 percent of the convenience channel.

"Overall, retailers remain very positive about the growth trajectory for Constellation Brands Inc. and the energy drink category but are concerned about inflationary pressures on wallets/strengthening elasticities, unusual weather (cooler) and the broader geopolitical headwinds," said Bonnie Herzog, Goldman Sachs senior financial analyst.

Notably, survey respondents expect energy drinks to see sustained double-digit percent growth in 2023, on top of the double-digit percent growth in 2021/2022. Retailers are also upbeat about innovation with in the nonalcoholic space, specifically for innovation and limited-time offerings within the energy drink segment, she added.

Looking at the alcoholic beverage segment, beer and flavored malt beverage sales growth in convenience accelerated modestly in the first three months of 2023, up 4 percent, and retailers now expect faster category growth of approximately 6 percent this year, up from their 3 percent growth expectation in the fourth quarter survey.

Additionally, hard seltzer segment growth improved in the first quarter, although it remains pressured, retailers' outlook for segment growth this year accelerated slightly vs. the previous survey.

Other notable takeaways from the first quarter survey include:

• Shelf space: Just a few retailers have allocated or plan to allocate more shelf/cooler space for both nonalcoholic and alcoholic beverages with their spring shelf resets. Among the winners are Monster Beverage Corp., The Coca-Cola Co., Celsius Holdings Inc. and Constellation Brands, while PepsiCo appears to be losing space.
• Out-of-stocks: Out-of-stocks are still an issue in both alcoholic and nonalcoholic segments, with nonalcoholic beverage out-of-stocks getting modestly better, whereas alcoholic beverage out-of-stocks appear to be slightly worse.
• The pricing environment: Retailers are expecting incremental pricing by both nonalcoholic beverage manufacturers and brewers this year but at more modest levels.
• Promotional activity: Activity appears to be picking up a bit in nonalcoholic beverage in an attempt to stem volume declines, but retailers aren't seeing promotional activity picking up as much in alcoholic beverages — with retailers noting some concerns about manufacturer/brewers' ability to continue to push incremental pricing.