C-store Retailers Take Their Expectations for Beverage Sales Down a Notch
NEW YORK — Convenience store retailers lowered their expectations for beverage sales growth this year as sales trends moderated.
According to the Goldman Sachs "Beverage Bytes" third quarter survey, retailers now expect to notch 0.7% sales growth in the category, compared to 2.6% sales growth in the second quarter survey. The quarterly survey represents approximately 28,000 retail locations, or 19% of the c-store channel.
"Retailers' subdued growth outlook this year is largely driven by expectations for declining traffic trends, which we believe reflects a pullback in discretionary spend given continued pressure on the consumer," said Bonnie Herzog, managing director at Goldman Sachs.
"However, retailers expect faster beverage growth in the c-store channel next year — driven largely by an expected return to positive traffic growth," she added.
Though a slowdown within the energy drink category "remains top of mind for investors," retailers expect the category to normalize to roughly 4% growth for energy drinks this year — lower than the previous quarter's survey findings — with similar initial category growth expectations for 2025 of approximately 4%, she said.
"That said, we came away from [the 2024 NACS Show] last week incrementally positive on the category, as all the large energy drink players indicated that there have been signs of improvement over the last few weeks, and optimism heading into 2025," Herzog explained.
Herzog also highlighted several other takeaways from the latest "Beverage Bytes" survey.
1. The pricing environment remains broadly healthy/rational with most retailers (84%/71% for nonalcohol manufacturers/brewers) still expecting incremental pricing by both nonalcoholic beverage manufacturers and brewers this year. Retailers also expect modest price increases next year as well.
2. Slightly more retailers in the third quarter vs. the second quarter (36% vs. 29%) are seeing promotional activity pick up in the nonalcohol space, but the majority of retailers expect that manufacturers will be able to push through incremental pricing in contrast — vs. the Q2 survey where more retailers expected manufacturers will have to start to promote more.
3. Fewer retailers in the third quarter vs. the second quarter (38% vs. 45%) are seeing an uptick in promotional activity in alcoholic beverages, directionally consistent with signs of reduced promotional activity seen in the Q2 survey. The majority of retailers (57%) indicated that brewers can continue to push through more pricing this year, though most (71%) still expect manufacturers to take modest additional pricing in the year.
4. Traffic expectations turned incrementally negative for this year, with traffic now expected to decline 1.3% vs. 0.3% uptick in the second quarter survey.
5. Retailers allocated more space to energy drinks this year and many expect to allocate even more space to the category in spring resets next year, while space was broadly maintained for alcoholic offerings.
6. Beer category sales held relatively stable in the third quarter, though retailers' growth outlook for the category moderated.
7. The hard seltzer category inflected positively in Q3, and retailers expect similar growth levels this year, implying further acceleration in Q4.
"With moderating total beverage category (alcoholic and nonalcoholic beverages) sales growth momentum in the c-store channel in Q3, retailers have reset their growth expectations for the broader category, with traffic declines likely to weigh on the year," Herzog said. "Ultimately, we think this is a sign of rising pressure on the consumer owing to a challenging macro backdrop that has weighed on sentiment and consumers' spending decisions."