C-store Shoppers Are Tapping Into Innovation in the Cold Vault

NATIONAL REPORT — The horizon appears bright for packaged beverages in the convenience channel, as the category turned in a solid performance for most of last year.

Convenience store retailers are also cautiously optimistic about the category's 2024 prospects. More than half of the c-store retailers surveyed for the 2024 Convenience Store News Forecast Study (52%) said they foresee their average per-store dollar sales of packaged beverages increasing in 2024, while 43% expect sales to hold steady. Just 5% expect a decrease.

In terms of unit volume, the percentage of c-store retailers who anticipate their packaged beverage volume will increase in 2024 jumped 10 points vs. last year to reach 49%, while 43% expect steady volume. Just 8% are bracing for a decrease in average per-store volume.

Innovation and limited-edition flavors are top trends for both the category and the channel — and they're things retailers and suppliers alike are seeking as they try to attract the next generation of shoppers, specifically Generation Z consumers who over-index in the convenience retail channel, according to Carlton Austin, director of convenience retail strategy for the North America Operating Unit of The Coca-Cola Co.

[Read more: Beverages, Grab & Go Expected to Drive Sales in 2024]

Coca-Cola's "2023 iSHOP Tracking Study" showed that consumers in the 16-to-24 age range shop 25% more in the convenience channel than the average shopper. "And we know that younger drinkers prioritize fun and discovery," Austin noted.

He also cited a 2022 YouGov study on packaging that revealed new and different packaging is a key purchase driver. "Snacking also is on the rise, and younger drinkers are looking for the right-size packaging for every drinking occasion," he said. "For c-store, this could take shape in the form of offering a wider variety of packaging sizes to meet the consumption preferences of Gen Z."

Coca-Cola is tapping into that push for packaging options with 12-ounce sleek cans for products including its core Coca-Cola, Sprite and Coke Zero brands, and its new Coca-Cola Spiced that is launching in February. This packaging is geared toward Gen Zers "who view 12-ounce as the ideal consumption size, and also offers additional space for marketing, allowing brands to capitalize on exciting graphics and offers that appeal to this audience," Austin said.

At PepsiCo Beverages North America, the company is seeing increased interest in better-for-you, zero-sugar offerings. Chief Commercial Officer Chad Matthews pointed to this segment as a key growth area for PepsiCo brands.

"When our flagship brand Pepsi unveiled its new logo and visual identity [last] year, the design brought in the color black, further showing the brand's commitment to Pepsi Zero Sugar," Matthews explained. "Throughout our portfolio, we're leaning into zero-sugar options, including recently launched Starry and Mug Zero Sugar launching in 2024."

Matthews also identified consumer desire for all-day hydration and for products in the functional energy space as current packaged beverage trends. Electrolyte-infused Gatorade Water — PepsiCo's first unflavored water, launching in the first quarter of 2024 — is the company's pitch to active consumers looking for all-day hydration, while Rockstar Focus — a 12-ounce subline launching nationally in Q1 2024 — meets the demand for functional energy beverages thanks to its 200 milligrams of caffeine, zero sugar, zero calories and Lion's Mane extract.

Tips on Inventory

With so many options in the packaged beverages category, knowing the best products to carry can be challenging, especially for stores with limited shelf and cold vault space. Austin and Matthews say there are several things to keep in mind when deciding on inventory.

"First and foremost, retailers should prioritize high-velocity SKUs to ensure that they are maximizing the turnover rate of products within the confined space," Austin said, noting however that it is equally important to not lose sight of emerging trends and the potential for the next big thing. "Striking the right balance between best-sellers and upcoming innovations can help maintain a competitive edge."

Keeping a keen focus on the shopper's perspective while developing the product set is crucial as well, according to Austin. By taking this step, "retailers can ensure that the selection resonates with the needs, preferences and shopping habits of their audience, thereby enhancing the chances of increased sales and customer satisfaction," he explained.

[Read more: Convenience Store Retailers Expect Beverage Sales to Tick Up in 2024]

Matthews likewise stressed the importance of employing a customer-focused approach to packaged beverage inventory, noting that "the best way to optimize growth is to leverage data to meet shoppers' specific needs."

"We've found it is important to adapt assortment based on shopper attitudes and preferences as a way to win repeat visits and increase market share, and even compete with quick-service restaurants," he added.

Tips on Merchandising & Marketing

Austin and Matthews also offered up the following suggestions for how convenience store retailers should merchandise and market packaged beverages to boost sales:

• Look for innovative, trending products. This is especially key to attracting Gen Z consumers, according to Austin, who recommends considering products with unique flavors, functional benefits and sustainable packaging.
• Refresh and diversify your range of products in-store regularly. "That can create a sense of excitement and novelty, encouraging repeat purchases and fostering brand loyalty among Gen Z consumers," Austin pointed out.
• Consider grab-and-go options along with food and beverage and snack pairings. According to Matthews, this will attract today's consumers who want their shopping experience, especially at convenience stores, to be tailored to meet the needs of their busy lifestyles. "We know 60% of c-store shoppers are looking for a meal, so it is important to make the meal experience even more complete and convenient by bundling prepared foods with the right snacks and beverages," he said.
• Merchandise relevant food and beverage items at checkout for impulse purchases. This approach, Matthews said, "is among the top drivers of choice for shoppers."
• Implement a comprehensive pump-to-purchase marketing strategy. This will allow retailers to engage customers at every stage of their shopping journey, from the moment they approach the store to when they make a purchase and leave, Austin said. "Utilize eye-catching signage, interactive displays and appealing visual merchandising both inside and outside the store to capture their attention and guide them to the beverage section," he suggested.
• Enhance omnichannel marketing. Increasing the touchpoints throughout the entire shopper journey, starting with digital communications and continuing the messaging from the curb to the cold vault, is one of the biggest ways retailers can communicate with customers to boost packaged beverage sales.

"Whether consumers are turning to grab-and-go options, curbside pickup or delivery, they want a curated experience," Matthews said.